Saint Paul – Governor Tim Pawlenty today unveiled a balanced budget that “sets priorities for a better future.” The Governor’s plan focuses on strategic investments to spur job growth and improve K-12 education.

The Governor’s budget proposal for FY 2010-11 would spend $33.61 billion, a 2.2% reduction from current FY 2008-09 general fund expenditures of $34.36 billion.

The budget proposal erases a projected budget shortfall of $4.8 billion. Spending reductions and other savings total $2.5 billion while the use of federal stimulus funding and other resources provides $3.2 billion. New spending initiatives, tax cuts, and placing $250 million in the budget reserve totals $860 million.

“The upcoming budget debate should not just be about where we are now. It should be about where we’re headed,” Governor Pawlenty said. “That means looking forward, not back, and setting priorities that will deliver a better future. This is a plan that doesn’t increase tax burdens on struggling families and job providers, lives within our means, and positions Minnesota for growth.”

Highlights of Governor Pawlenty’s budget include:

• K-12 Education: The Governor’s plan includes $41.45 million in FY10-11 to expand the state’s nation-leading pay for performance program, Q Comp, to every school in the state. Q Comp funding would be comparable to a 5 percent increase in the general education formula for districts not currently in the program. The Governor also recommends $91 million in FY10-11 for “Pay for Progress,” a new initiative that links increases in education funding to student achievement.

• Minnesota Jobs Recovery Act: The Governor’s plan to retain and grow jobs in Minnesota includes a package of tax cuts and incentives. This includes reducing the business tax rate from 9.8 percent to 4.8 percent over six years, providing an upfront exemption of the sales tax for purchases of capital equipment, a new Reinvestment Tax Credit for small businesses that reinvest in assets such as machinery and equipment, and other incentives.

• Health and Human Services: The Governor’s plan slows down the rate of spending growth in these programs while preserving core services for children and the most vulnerable. Reforms will simplify the delivery and financing of safety net coverage.

• State/Local Reform: Governor Pawlenty is proposing a new collaboration between the state and counties to improve the delivery of human service programs. A portion of proposed county aid reductions can be recovered if counties comply with proposed service reforms. The Governor is also proposing to allow counties to opt-out of some mandates to provide flexibility without adding state costs.

• Improved State Services: To provide government services effectively, efficiently and conveniently, Governor Pawlenty is recommending improving state services. This includes an updated information technology platform that will enhance information access and transparency, and consolidation of data centers.

• Constitutional Amendment – Clean Water/Parks & Trails: Governor Pawlenty is recommending a $118 million package to protect and enhance water in Minnesota. These funds come from the new sales tax revenues authorized by the constitutional amendment passed in November. The package was developed by the Governor’s Clean Water Cabinet. The Governor also recommends a $53 million package for parks and trails from the constitutional amendment. For both clean water and parks and trails, funds are focused on strategic, long-term investments.

Full details of Governor Pawlenty’s budget plan are available at www.mmb.state.mn.us