A year ago this week, state finance officials broke the news to lawmakers about a projected $426 million budget deficit facing the state. The report set the table for a round of controversial budget cuts by Gov. Tim Pawlenty, who used a once-obscure administrative power called unallotment to take back millions of dollars previously promised to state programs and local governments.

Today, the state’s budget office released this year’s edition of its fall budget forecast, and it showed another looming deficit, $1.2 billion for the current budget cycle. Early this afternoon, Pawlenty confirmed the worst fears of cities and counties, saying that he would prefer to work with the Legislature but that he may need to address the deficit problem this month by unalloting local government aid again.

“The worry is that it will be very large again,” said Steve Peterson, senior policy analyst for the Coalition of Greater Minnesota Cities.

Pawlenty cited the deficit projected in last year’s report as justification for $271 million in unallotment, an emergency budget-balancing power given to the governor under state law. Much of the spending reduction came from local government aid, which accounted for about 2.7 percent of that year’s state’s budget but made up nearly a quarter of the governor’s unallotment cuts.

“There wasn’t a lot of other places to take the money from, because by that point a lot of money was already out the door,” Peterson said. Another round of cuts by the governor in June trimmed the budget for local government aid by nearly $193 million. The rural cities coalition didn’t wait for governor to announce his plans this year before saying enough is enough.

“Repeated cuts to LGA have pushed our communities to the edge, and our ability to provide public safety, libraries, parks and other essential services at an affordable price to property taxpayers is suffering,” St. Peter Mayor Timothy Strand, president of the Coalition of Greater Minnesota Cities, told Forum Communications this week.

The cities’ concerns about unallotment are probably legitimate, said David Schultz, a professor at Hamline University’s School of Law.

Schultz predicts Pawlenty’s presidential aspirations will trump any desire to cooperate with the Legislature.

“It may be foolish, but he’ll do it,” Schultz said. “I can literally see him going around the country, puffing his chest up saying: I will do [the same thing] as president to that huge deficit that Obama created. I think the temptation is going to be too powerful.”

Pawlenty’s office did not return a phone call Tuesday, but in previous reports he hasn’t ruled out the use of unallotment. Pawlenty has used unallotment three times, and twice in the past year alone. Before he took office, the power had only been used two times in the state’s history.

Whether or not the governor could legally use unilateral budget cuts to solve the projected deficit is an open question.

“Under the statute you can’t just snap your fingers and unallot,” said attorney David Lillehaug, who has counseled clients about unallotment issues.

Lillehaug declined to speculate on whether the governor legally could use unallotment in these circumstances, but he said Pawlenty has plenty of other tools. They include waiting for the Legislature to convene early next year, or, if cash flow problems are imminent, calling a special session or exploring short-term borrowing to cover bills until the regular session.

Jay Kiedrowski, a senior fellow at the University of Minnesota’s Humphrey Institute of Public Affairs who was also the state’s finance commissioner under Gov. Rudy Perpich, said based on the governor’s previous interpretation of the unallotment statute, it’s likely that he can and will use it again if he can’t come to an agreement with the Legislature.

The courts, however, have yet to rule on whether Pawlenty’s interpretation of the rule is correct. The governor faces two lawsuits over his use of unallotment. One of them was filed by Legal Aid and the other is a class-action lawsuit in Ramsey County related to the state’s political contribution refund, which was cut in Pawlenty’s unallotment.

One question the courts will likely address is when, during the state’s two-year budget cycles, the governor is allowed to use the power, Kiedrowski said.

“If he were to use unallotment, we are just less than one quarter into the biennium, so he’d be unalloting a fairly substantial amount with three quarters of the biennium remaining,” Kiedrowski said. “There are observers who believe that unallotment was intended for use with far less of the biennium remaining, say the last six months of the biennium.”

Unalloting funding so early in a budget cycle raises other potential issues, Schultz said. For example, what happens if the economy improves or a new federal stimulus bill injects money into the state budget to the point that a surplus is available. “Do we now go back and say we ought to unallot the unallotement?”

Schultz suspects cities and counties will once again bear the brunt of the governor’s budget cuts. Pawlenty has proven himself to be unsympathetic to the concerns of local governments, Schultz said, and slashing local funds also forces the difficult and unpopular decisions about specific program and service cuts onto local officials.

Other constituencies that should be worried this month about having state funds taken back include school districts and health-care programs, Schultz said. A significant portion of the state’s budget goes to health programs, and the people served by them are generally fairly weak and powerless people who aren’t likely to stage a major objection, he said.

“I don’t think that he should be able to use it,” Schultz said. “But having said that, my suspicion is that he might be tempted to do it because, effectively, he’s running for president. What better way to look tough on taxes as you’re running for president than to say, I will do to the federal deficit what I did to the state deficit in Minnesota.”

Originally published Dec. 2, 2009, on BringMeTheNews.com.