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Gov. Pawlenty calls for business tax breaks to help Minnesota's Main Streets

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ST. PAUL - Gov. Tim Pawlenty today pleaded with legislators not to raise Minnesotans' taxes while he also called for more education spending, but with strings attached.

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In his annual State of the State speech, Pawlenty also said he wants to freeze all state wages.

Many of his proposals center around giving businesses tax breaks in hopes they will inspire firms to hire more Minnesotans.

Pawlenty did not lay out details of his spending plan; that will come before month's end. But the Republican governor made it clear he will rely on state government spending cuts to plug a massive state budget deficit.

Democrats appear to be leaning toward a combination of cuts and tax increases, but they don't expect to release budget proposals for several weeks.

It was Pawlenty's seventh State of the State speech and came during Minnesota's bleakest economic times since World War II.

Pawlenty and lawmakers need to fill a budget deficit of at least $4.85 billion before writing the two-year budget that begins on July 1. Many budget experts predict the deficit will grow to more than $6 billion this spring.

The governor must present legislators with his budget proposal by Jan. 27, but he will adjust that plan in March, after a new economic report updates how much money the state has available. Democrats who control the Legislature likely will wait until after that report to offer their own budget plan.

Help for businesses, likely to be opposed by many Democrats, was a centerpiece of Pawlenty's remarks.

"The job losses we see across Minnesota are related to a sea change in the national economy," Pawlenty said in prepared remarks. "Minnesota is not alone in the crisis, but we do face a unique challenge."

The unique challenge, he said, is that it "costs too much for employers to create and keep jobs in this state."

What he called the Minnesota Jobs Recover Act would provide a variety of business tax breaks, including cutting the state business tax rate in half over the next six years.

Pawlenty criticized Washington for helping Wall Street. "Here in Minnesota, I want us committed to helping Main Street."

Tax credits would help business owners to invest in their businesses, he said. He also would cut paperwork requirements facing businesses.

"These measures will have immediate impact," Pawlenty said. "They give employers a real incentive to re-invest in their companies and grow jobs."

Part of his investment proposals include so-called "green jobs," those that come from the energy industry in the areas of wind, solar, biomass, biogas, geothermal and biofuels. He already has said he wants to begin a wide variety of tax cuts for such businesses.

Education is important for Minnesotans to get new jobs, Pawlenty said. So he called for several education changes, including more money.

Per-pupil state aid would increase 2 percent under Pawlenty's plan, but only for students meeting standards "or at least showing reasonable growth towards achievement."

He did not say how he would get the additional money, but encouraged schools to work together more, sharing purchases and doing other tasks together.

Adding money to education comes with strings: "In exchange, we must expect more."

Among his education ideas are to raise academic standards and graduation requirements, adopt performance pay for teachers through an expanded Q Comp program, upgrading math and science teacher training and giving more college credit classes in high schools.

"Our K-12 system is not ready for the future," Pawlenty said. "The success of that system is critical to the future of our state."

In higher education, Pawlenty talked about Gina Drellack, a mother of two who earned a Bemidji State University degree. The governor said he met her on line.

"She was able to take classes at times and places that were convenient to her, including at her kitchen table," Pawlenty said, continuing a lobbying effort to get Minnesota colleges to offer more on-line classes.

"As a result, she was able to keep her family as a top priority and maintain employment at the same time," Pawlenty said.

While thanking state schools for their on-line initiatives, he said they also need a state-imposed limit on how much they can raise tuitions.

"Otherwise, the necessary changes in higher education that we will make this session will fall too heavily on students and their families," he said.

Pawlenty warned that without change, health and human services programs will rise 19 percent.

"We must slow down the rate of spending growth in these programs or it will eliminate our ability to fund other priorities in the future," he said.

Pawlenty gave no specifics about how he would slow the growth of spending on programs such health-care for the poor.

Also, he warned that government employees soon will face layoffs. However, he added, those could be minimized by a state government-wide wage freeze. He also wants other governments that get state money, such as cities and counties, to freeze wages.

He said he wants to combine human services programs operated by the state's 87 counties into 15 regional agencies.

To help save money, he called for eliminating mandates on local governments.

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Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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