Gov. Pawlenty on How He's Closing Minnesota's Budget Gap

This is a rush transcript from "Your World With Neil Cavuto," December 4, 2009. This copy may not be in its final form and may be updated.

ERIC BOLLING, GUEST HOST: Well, a big hole and a simple plan to dig out of it, stop spending. Sounds simple enough. Hold the line on taxes, live within your means. That is how my next guest aims to close his state`s billion-dollar-plus projected budget gap. Is Washington listening, though?

Tim Pawlenty is Republican governor of Minnesota.

Governor, thank you for joining us.

OK, so, what is so hard? Cut spending. Where are you going to cut spending, sir?

(LAUGHTER)

GOV. TIM PAWLENTY (R), MINNESOTA: Well, pretty much everywhere.

We are going to protect and will protect our military and veterans programs and our core public safety services and perhaps and probably K-12 education. But everything else, most everything else, is going to have to be reduced.

BOLLING: Well, you know, a lot of people would say, does that mean teachers? Does that mean firemen, policemen, et cetera, along down the line? Is that where we`re looking?

PAWLENTY: Well, what we have said to our local government, in Minnesota, we are going to reduce probably some local government aids, but that doesn`t mean that their first and only option is to lay off police officers.

In fact, I have said to our cities here, if that is your first and only choice, and that`s your priority, of reducing police officers, then you have got misplaced priorities.

So, most of our cities have not had to go to that point.

BOLLING: Governor, what about tapping the federal government? What about tapping the administration, saying, hey, you know, there`s $550 billion in stimulus there we could sure use, about a billion now, to close that budget gap?

PAWLENTY: All that does is delay the inevitable for most states. Forty-eight of 50 states are in the red. Only North Dakota and Montana are escaping for the moment.

Just like the federal government, most states have these structural spending commitments that are not justified by the revenues. It`s just like General Motors. The management and the labor ran up the costs over time to unsustainable levels. The revenues don`t justify it, and the model is broken. And so the model has to be adjusted. It has to be reformed.

And just sending some cash out as a Band-Aid is not going to solve the problem. You are seeing that in California. What you`re seeing in California now and New York, it`s a preview of coming attractions for many states if they don`t change their ways.

BOLLING: Well, talk about that for one second, Governor. Does it make sense to give out IOUs? California said, you know, we will pay you later. In the meantime, take this IOU.

Does that work?

PAWLENTY: Well, it`s just temporary. It`s a temporary fix, and it doesn`t really work in the intermediate and long term.

The bottom line in Minnesota was this, as one example. But from the time I — well, from 1960 until the time I became governor, the average two-year increase in Minnesota spending was 21 percent. And that is ridiculous. It`s unjustifiable. And so we had to bring that down to something closer to the available revenues. And we did.

And if we can do that in a liberal place like Minnesota, most other states should be able to do that. And our federal government, by the way, is running a Ponzi scheme. They don`t have any more money. Whatever they spend is coming in from China or foreign sovereign wealth funds. They are broke. Most of their entitlement programs are on their pathway of bankruptcy.

So, just going to them for more money just makes the national debt worse.

BOLLING: Governor, real quickly, I`m here in New York, and what they like to do here is raise taxes or they do things like sin taxes, soda taxes. What about that?

PAWLENTY: Well, the answer in places like New York and Minnesota is not to raise taxes. These are already some of the highest tax states in the country. We live in a hyper-competitive global economy for jobs. We want lower taxes, not higher taxes.

So, that`s not the answer. The answer is to tighten out belts, just like everybody else, live within our means, live within the revenues we have, and quit growing government so fast.

PAWLENTY: I was at a cocktail party, and someone was with you, and they said that you whispered in their ear that you are going to run for president. Is that right, sir?

(LAUGHTER)

PAWLENTY: I think you were at the wrong cocktail party. No, I don`t think I have been saying that.

BOLLING: I tried. I tried.

(LAUGHTER)

PAWLENTY: All right, Governor Tim Pawlenty from Minnesota, thank you for very much. Thanks for joining us.

(CROSSTALK)

PAWLENTY: All right, Eric.

BOLLING: All right.

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