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Pawlenty criticizes federal aid to states

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ST. PAUL - The financial industry, retailers, car makers and the average American are among those hurt by what now officially is a recession, and want federal help -- and many governors joined the chorus Tuesday by asking the in-coming president not to forget them.

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Not Minnesota Gov. Tim Pawlenty.

"The states should substantially fix their own problems," the Republican governor said after most governors met with president-elect Barack Obama to discuss an economic recovery package.

Pawlenty complained that from what he knows about federal aid proposals, states would be required to maintain current spending levels if federal money came their way.

"The bottom line is many states have spending patters that are unsustainable and growing faster than the economy," Pawlenty said.

Regardless of Pawlenty's position, Obama promised help.

"This administration does not intent to delay in getting you the help you really need," Obama told governors Tuesday, before shutting the doors on the media.

Obama predicted Congress will pass a $500 billion economic recover project next month, and governors meeting with him said they want a piece of it.

Federal aid takes on new importance this year as most states face the likelihood of large budget deficits.

Minnesota officials are braced for a two-year deficit predicted to be $4 billion to $6 billion. The Minnesota Management and Budget Department on Thursday announces the size of the deficit lawmakers and Pawlenty must battle in the two-year budget that begins July 1.

The current state budget tops $34 billion, but Pawlenty has ordered his agency heads to give him budget plans for the next two years with less money than they now spend. His full budget proposal is due next month.

The state Minnesota officials often say is most similar to their own, Wisconsin, faces a $5.4 bill deficit in its own two-year budget and $500 million in the few months remaining in the current budget.

Wisconsin Gov. Jim Doyle said there could be further decreases in revenues through 2010 before there is a "modest" turnaround in the state's fiscal situation. He said for state agencies a "flat line is an increase" in appropriations.

Doyle said preliminary figures show the 1.5 percent increase in state revenues projected in February for the current fiscal year are now a negative 2.5 percent, resulting in about a $500 million blow to the general fund.

He said there is "no doubt there will be reductions in jobs."

Doyle has said he does not favor increasing income or sales taxes, but has yet to provide a plan for balancing the budget.

This is the first time in decades that Wisconsin revenues are expected to drop in two consecutive years.

The story is similar in many states.

"Over the next two years, $140 billion of deficits will be facing state governments and that is a conservative estimate. We believe the number could go as high as $200 billion," said Democratic Pennsylvania Gov. Ed Rendell, who heads the National Governors' Association.

Rendell stressed that states are not looking for a $200 billion bailout from the federal government, but financial help as growing unemployment increases demand for state services. But states are clearly looking for more than the $20 billion that Congress gave states in 2003 to help patch budget gaps after the 2001 downturn. Half of that amount was in federal funds to cover Medicaid costs.

Governors also want $136 billion for infrastructure projects, such as highway construction, that are ready to begin within months.

Sen. Amy Klobuchar, D-Minn., said that should be part of an Obama economy recovery plan.

She said that bipartisan support should come for Obama's state aid plan, especially from states like Minnesota and North Dakota.

Upper Midwestern states that have emerging clean energy-related industries should benefit, she said, because Obama would send billions of dollars into increasing energy production.

Also good for Minnesota is Obama's desire to pass a bill requiring raw materials such as steel and iron ore used in those projects to come from the United States, Klobuchar said.

The senator said that while Obama said during the campaign that he had ways to fund all of his proposals, the economy is such an emergency that funding decisions can come later.

Wheeler News Service and Stateline.org contributed to this story.

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