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Olson says Pawlenty budget hurts rural Minnesota

Reductions proposed Monday by Gov. Tim Pawlenty in his supplemental budget will hurt rural Minnesota, says Sen. Mary Olson.

"I'm really concerned that between the governor's elimination of the GAMC program ... and the additional cuts he's proposing right now, we're going to have a multiplication of impacts on our health care system in rural Minnesota," Olson, DFL-Bemidji, said Tuesday in a telephone interview.

To help fill a projected $1.2 billion budget hole by the end of the current biennium, Pawlenty's proposals include cutting $347 million from health care programs that could affect 40,000 people and $387 million from other health care funding for low-income and poor people that the Republican governor says can be repaid with federal funds from the pending health care reform bill.

And scheduled to end in a month is General Assistance Medical Care for the destitute, a $400 million unallotment Pawlenty made last summer.

"The historic drop in the economy has caused an historic drop in state revenues. Government has to live within its means by setting priorities and tightening its belt just like everyone else," Pawlenty said Monday. "While this budget maintains funding for priority areas, it contains dramatic spending reductions in many programs."

"A big part of his budget assumes that we're going to get from the federal government to pay for Medicaid programming that no one has any idea whether -- if or when -- that funding will come," Olson said. "It's a long way from a guarantee."

As a result, Olson said, "he really has not proposed a balanced budget. He's proposed a budget that's close to $400 million out of balance just for the rest of this biennium."

It's not dealing with honest numbers, she said.

"That's really troubling because the longer we wait to deal with a very serious budget problem, the harder it's going to be to fix it," Olson said.

That money will have to come from somewhere, she said, alluding that schools -- the state's largest budget item -- might not be protected. She added that Pawlenty has yet to proposed how to repay the $1.8 billion in delayed payments through last year's unallotment process, which could make it a permanent cut.

And his current health care proposed cut will do more than put 40,000 Minnesotans off of health insurance, Olson said. "That's very concerning, but it's not only the number of people who will actually lose their insurance, it's the impact on our nursing homes and our hospitals and clinics when we change the reimbursement rate structure in a way that passes those costs onto those of us who depend on those hospitals."

They will either have to greatly increase their amount of uncompensated care or pass costs onto those with private pay or insurance, or both, she said.

"Just because of the fact that we have a lot more people who rely on those kind of services in our area, we already have hospitals which are struggling because the reimbursements rates under those programs are lower," she said. New reductions could mean a bigger hit.

Olson said the committee she sits on, the Senate Health and Human Services Budget Division, began hearings Tuesday on Pawlenty's supplemental budget.

Pawlenty's reductions include about a 2.5 percent cut to nursing homes, Olson said. "We have many nursing homes that basically have a zero margin already. They're losing money or they're just barely keeping their heads above water. And we've had a lot of nursing homes in rural Minnesota close for that reason."

To help offset those cuts, Pawlenty is proposing that private-pay or insurance-covered nursing home residents pay more than public subsidized residents. Current law has been to treat both types of residents equally, Olson said.

"I'm afraid that what will happen if we do that ... we're really going to accelerate the rate at which people going into nursing homes would lose their assets," Olson said. "From most people's standpoint, it only seems fair that everyone pay at the same rate."

There is a lot of shifting of costs to the private sector, through local property taxpayers through $250 million in Local Government Aid cuts, she said.

Under Pawlenty's proposal, the city of Bemidji would lose $581,323 this year, that on top of the $485,688 he unallotted. Beltrami County would lose $971,501 in County Program Aid, in addition to the $534,813 already unallotted.

"It's really very concerning for those of us with counties and cities that have been rather reliant on LGA to help maintain even the high level of property taxes we already have," Olson said. "We don't have a lot of places to go in terms of the property tax base in our communities."

The budget continues to move Minnesota into haves and have-nots, she said. "We've pulled back from that philosophy of trying to equalize the tax burden more fairly around the state geographically and across income levels."