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Unallotment 101

May 27th, 2009 by Kevin

Since the Minnesota DFL is incapable of acting like adults and spending within their means like real Minnesotans, Pawlenty has been forced into having to use unallotment to balance our state budget. Because it is a relatively rare process not generally used in this fashion, few people know how it works. Citizens may have questions and this FAQ is designed to help. Of course none of this would be necessary if Democrats hadn\’t put the state in this position. Had they been able to make government live within its means, unallotment would be unnecessary.

What is unallotment?
Unallotment is a tool given to governors that allows them to reduce spending in the current budget in order to prevent a deficit. One technical but important distinction is that a governor can only unallot from funds that have a deficit, which in this case is the state’s General Fund, where most spending takes place. Other funds, such as the
Health Care Access Fund or the Game & Fish Fund, would not be subject to unallotment unless they also have an expected deficit.

(From here on in this article, everything refers to the General Fund unless otherwise noted.)

When can a governor use unallotment?
The governor can use unallotment when the state’s revenues cannot keep up with the spending approved by the Legislature. For example, last December revenues were $426 million short, so Governor Pawlenty used unallotment to reduce spending and keep the budget balanced.

As a technicality, the Commissioner of Finance has to determine that spending will outpace revenues before any unallotment can take place. With the economy in a recession and Democrats having passed a budget that outspends itself by $2.7 billion, this determination will not be
difficult.

When will unallotment happen?
Governor Pawlenty indicated that he will announce what spending he plans to unallot sometime in June. However, that does not mean spending will immediately go away. No unallotment can take place prior to July 1, 2009. The governor can also choose to delay unallotments until 2010. For example, he can choose to keep spending on a certain program in 2009, but eliminate it in 2010.

Can unallotments be undone?
The Legislature will reconvene on February 4, 2010. Any unallotment scheduled and carried out prior to then can be restored if the Legislature chooses to fund it. For example, Democrats in the Legislature could have restored LGA unallotments from 2008, but chose not to. The Legislature can also prevent future scheduled unallotments
by passing a new budget that is balanced. Again, it is important to remember that an unallotment does not necessarily take place when it is announced. An unallotment may be announced in June 2009, but not actually take place until June 2010. In that case, if the Legislature can work out a balanced budget next session it may serve to prevent a June 2010 scheduled unallotment.

Why is unallotment necessary now?
The Democrat-controlled Legislature failed in its responsibility to reach a balanced budget agreement. Their misguided desire to raise taxes during the worst recession in the last 60 years left a $2.7 billion hole in the state’s budget. Because they could not do their job, Governor Pawelenty will have to step in and use unallotment to
bring spending back to reasonable levels.

Will there be public input?
Yes. Minnesotans can email the governor with their input at budgetideas@state.mn.us. The governor also asked all legislators for their suggestions. Balancing the budget through unallotment is not anyone’s preferred situation, but it is reality because of Democrats’ failure to reach a balanced budget agreement. The governor committed to keeping the media informed throughout the process so they can report information to the public.

The Commissioner of Finance will also consult with the Legislative Advisory Commission (LAC) in public and notify it of what spending the governor intends to reduce. The LAC does not have to approve or deny any unallotments, its role is purely informative.

The LAC consists of Senate Majority Leader Larry Pogemiller (DFL-Minneapolis), House Speaker Margaret Anderson Kelliher (DFL-Minneapolis), Sen. Dick Cohen (DFL-St. Paul), Rep. Loren Solberg (DFL-Grand Rapids) and the chairs of the finance committees that oversee the budget areas being reduced. Minority party members are also
included.

Because the LAC is mostly made up of Democrats, and because they have not yet come to terms with their failure, Minnesotans can expect much
grandstanding and Pawlenty-bashing from Democrats the public meeting of the LAC. During that time, it is important to keep in mind that the only reason unallotment is necessary is because those same Democrats could not pass a budget that made government live within its means.

What can or cannot be unalloted?
No spending is exempt from a potential unallotment, but Governor Pawlenty indicated that he intends to stay true to his budget priorities of K-12 education, public safety and veterans. According to nonpartisan House Research, it does not appear that the governor can unallot spending on the legislative or judicial branches of government because doing so would violate the separation of powers clause. However, those branches can voluntarily offer to reduce their own budgets and have done
so in the past, most recently last December.

Can the governor unallot the Health Care Access Fund?
Not likely. The Health Care Access Fund is funded with dedicated revenues from the sick tax, and the fund is actually running a surplus. Because this is separate from the General Fund and because there is no expected deficit, the governor cannot use it to unallot and balance a General Fund deficit.

[Crossposted at True North]

[Most of the information provided here was courtesy of the folk at the House GOP Caucus]

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Posted in Minnesota Legislature, True North | 2 Comments »

2 Responses

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