CHICAGO - Each facing multibillion-dollar budget deficits, Minnesota Gov. Tim Pawlenty and Wisconsin Gov. Jim Doyle yesterday announced a new partnership between the two states to identify areas in which they can trim costs by sharing services.
The two governors, who represent neighboring states, signed executive orders at news conferences, first in St. Paul and later in Madison, directing their agency heads to look for areas in which the two states could enter into cooperative service agreements.
"We're not proposing to merge the Vikings and the Packers, but we are going to seek out every area where we can save money and improve services by working together across state lines," Pawlenty said, referring to National Football League divisional rivals the Green Bay Packers and the Minnesota Vikings. "This is an historic agreement between our two states that can serve as a model for the rest of the country."
Doyle said: "The people of our states are used to seeing neighbors cooperate to get through challenging times ... This is a common-sense way to cut government spending while protecting essential services during a tough economic time for our country."
Doyle is a Democrat and Pawlenty is a Republican.
The two said potential areas where the states could operate more efficiently together include procurement activities. The states could join together on purchasing efforts such as for pharmaceutical products or road salt and lower costs by leveraging the combined purchasing power of the two.
In the area of facilities, vehicles, and heavy equipment, the two states could share the use of similar equipment. Software license agreements could be combined and institutional food purchases made in bulk. The two will examine their fixed assets, such as real estate, for possible opportunities to save costs. For example, Wisconsin's Department of Natural Resources may be able to rent helicopter services from Minnesota in order to save Wisconsin money and generate revenue for Minnesota.
The states will also review opportunities to consolidate specialty functions or swap services. The managers of state agencies are expected to report back to the governors by Feb. 27. The two did not say specifically how much they hoped to save, although Pawlenty said the hope was that it would be "millions" or "maybe more."
The effort comes as both governors are struggling to craft new two-year budgets for the fiscal biennium that begins July 1 amid a gloomy economic picture. Minnesota's November revenue forecast warned that the state faces a record $5.2 billion deficit in its current budget and through the next two-year spending cycle, including a $426 million shortfall in the current budget and $4.8 billion deficit in the next.
Pawlenty has ordered government agencies to cut spending to save $25 million to $50 million. Minnesota also will tap the $155 million that remains in its once flush reserve and cut local government aid by $110 million.
Fitch Ratings last week revised its outlook on its AAA rating assigned to Minnesota's $4.3 billion of general obligation debt to negative from stable while Moody's Investors Service revised its outlook to stable from positive on the state's Aa1 rating. Standard & Poor's rates the state AAA with a stable outlook.
Doyle faces a record $5.4 billion deficit through the next two-year budget cycle. The deficit raises the specter of steep cuts and tax increases. The administration is expected to also resurrect a hospital assessment tax aimed at leveraging additional federal Medicaid funds.
The deficit includes a $300 million to $400 million shortfall in the current budget due to a drop in collections. Doyle has frozen hiring on 3,500 vacant positions, suspended some pay increases and bonuses, and ordered the sale of 500 state vehicles.
Wisconsin's $5.8 billion of GOs are rated AA by Standard & Poor's, AA-minus by Fitch, and Aa3 with a negative outlook by Moody's.