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Pawlenty administration prepares for borrowing to ease state cash crunch

Update 2 p.m.

ST. PAUL - Minnesota's finance leaders are ready to take out a $600 million loan if needed to fill gaps left by a state budget deficit.

Gov. Tim Pawlenty's budget chief, Tom Hanson, told a legislative committee Monday that the state shuffled more than $1 billion from one account to another during the past fiscal year in order to pay bills. Even more shuffling is possible in the current year and he said that may not be enough to allow the state to pay off of its bills in coming months.

The state last year always had at least $830 million in the bank, Hanson said, although his testimony indicated the situation likely will get worse. That is why he proposed setting up a line of credit of up to $600 million with U.S. Bank so the state can pay bills when it runs out of flexibility to move money from one account to another.

The state's two-year budget is more than $30 billion.

Hanson said any money borrowed from the bank would be repaid by June 30, 2011, the end of the current fiscal year.

Democratic legislative leaders said they did not like the state borrowing from outside sources, and frowned on shuffling money even from state departments such as colleges and universities.

Hanson said the state takes money from various internal accounts only if the funds not needed immediately.

The House Ways and Means Committee chairman said he wanted a fully developed plan for the coming year, but did not hear one Monday.

"It is difficult to buy into a plan that does not fully exist," said Rep. Loren Solberg, DFL-Grand Rapids. "Once again the governor wants students, businesses and the sick and elderly to bail him out, but he has no idea how his actions would impact them."

Solberg said some payment delays could impact businesses. For instance, he said, if sales tax refunds are delayed as they have been in the past, it could "force small businesses to lay off workers or delay hiring new ones."

Davis reports for Forum Communications Co.

Update 1 p.m.

ST. PAUL, Minn. - Minnesota officials are on the verge of establishing a line of credit with a bank to draw on if a government cash crunch persists.

Budget chief Tom Hanson told lawmakers on Monday that the credit line should be ready by September but it won't be used immediately. Minnesota technically has a balanced budget but government spending and income for most months don't match up.

A credit line is similar to a home equity loan. The state's credit line would max out at $600 million.

Hanson says the state also plans to delay more payments to schools, colleges, health care companies and businesses owed tax refunds.

Senate Majority Leader Larry Pogemiller (accuses Gov. Tim Pawlenty's adminstration of delaying the most severe fallout until the Republican leaves office in January.

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.