Republicans Take Note - This is How It's Done

In California we have a massive budget deficit and a Republican (sort of) governor with line item veto power. To my knowledge the governor has been content to sit back and let the legislature raise taxes massively while cutting education and other priorities. He has not wielded the pen in the way it was intended to end spending on stupid things.

Not so in Minnesota where Gov. Tim Pawlenty has created "pawlenty" of heartburn for the liberal Democrats (sorry, couldn't resist the pun).

'Minnesota nice" comes in two forms: the first, gracious hospitality; the second, smiling stubbornness. Republican Gov. Tim Pawlenty this week delivered his spendthrift legislature a humiliating taste of the latter. You betcha.

If Republicans are looking to get back their conservative groove, they could do worse than study Minnesota's budget brawl. Mr. Pawlenty deftly (and amusingly) outmaneuvered his Democratic opposition, not only saving his state from huge tax increases but clearing the way to cut government spending. Call it a refreshing break from the financial-crisis norm.

Like most states, Minnesota has been facing a huge budget shortfall -- an estimated $4.6 billion over two years. These dire financial straits didn't deter the DFL-controlled legislature (the DFL is Minnesota's chapter of the Democratic Party), which got to work on big new spending bills. Included were not just the usual increases in appropriations but gems like $1.2 million in grants for TV and film producers and $200,000 for a youth environmental education program. Recession? What recession?

To fill in the hole they'd blown in the upcoming fiscal budget the DFL then proceeded to float every tax hike known to Garrison Keillor. A short list: A new top income tax rate of 9% (the fourth highest in the nation); across-the-board income tax increases; sales taxes on Internet downloads; the end of the local property tax cap (enacted only last year); alcohol taxes; cigarette taxes; eliminating the deduction for an organ donation (no joke); and killing the home mortgage interest deduction.

Throughout this spectacle, Mr. Pawlenty kept voicing three simple principles. "Number one, we must have [because of the constitution] and should have a balanced budget," he told me. "Number two, the state government needs to live within its means, just like everybody else. Number three, we shouldn't raise taxes in the worst recession in 60 years." Minnesota already has one of the highest tax burdens in the nation.

The DFL wasn't listening. As the clock wound down (the session ended at midnight this past Monday), the legislature sent Mr. Pawlenty one large spending bill after another. The assumption was he'd veto them, be forced to call a special session, and then be negotiated into tax hikes. That's when the governor got Minnesota nice.

Upon receiving the last spending bill, he announced that he would exercise the power of "unallotment," which has been on the books since 1939 and which has been used four times. Under it, the governor is allowed to "unallot" (take away) any state spending for which there is no money to pay. Panicked, the DFL passed tax legislation to cover its blowout spending bills, 10 minutes before the session's end. Too late. The governor said he'd veto the bill and would not be calling back the legislature to do any more mischief.

Mr. Pawlenty is now free to strip $2.7 billion from state spending to balance the budget. Tax hikes are dead. He tells me this will be one of the first times in modern Minnesota history that the state will reduce the size of government in real terms, not just slow its rate of growth. "The correlation in recent history has been between job growth and states that have reasonable government cost structures," he says. These cuts, he says, will position Minnesota to take advantage of the recovery when it comes.

A red-faced DFL is lecturing the public to be angry at the governor -- and the governor alone -- for any cuts in government services. Pawlenty critics have accused the governor of grandstanding, readying for a possible presidential run.

This is exactly what Schwarzenegger should have been doing in California, but he was so intent on "working together" he forgot that his first allegiance was to the taxpayers.

Well done, Governor Pawlenty. I'll keep this story in mind should you throw your hat in the ring in 2012.