Contact: Bob Carney Jr. -- (612)-824-4479 (home and business)

                                          (612)-710-2212 (cell)

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Minneapolis, MN, July 30, 2010 -- Moderate Progressive Republican candidate for Governor (and journalist) Bob Carney Jr. has released his comprehensive budget for the coming biennium. Carney is the first Republican candidate for Governor to release a comprehensive budget. Carney's budget plan fully accounts for the current projected deficit of $5.8 billion, through a combination of tax increases, spending cuts, and bonding.

Carney's primary opponent, the Republican endorsed candidate Tom Emmer, has not offered a comprehensive budget. During the endorsement campaign Mr. Emmer has said on Minnesota Public Radio that it would be "easy" to cut about one third from total State and Local government spending. Beyond his asserted determination to "shrink" government, Mr. Emmer has refused to offer a comprehensive proposed budget during the primary campaign.

"My cards are on the table. Minnesota primary voters deserve to know what's up Mr. Emmer's sleeve... besides their tip money... before we allow this Public Server in Training to serve up a half-baked budget crow pie with three missing pieces that no one ordered," Carney said. "If Mr. Emmer can't stand the budget heat, he should go back to the kitchen. That's not just my two cents worth... that's the tip," Carney said.

Carney is emerging as "the reasonable alternative" to Emmer in the GOP primary

The Star Tribune published an op-ed article by Carney in the Saturday, July 24th and Early Sunday editions. Carney has been on the road some days this week, and will be back on the road next week -- giving interviews with newspapers in about fifteen of Minnesota's largest cities outside the Twin Cities.

"I believe the up-coming Star Tribune pre-primary editorial endorsements will make it clear the Republican primary is a two man race, between Mr. Emmer and myself," Carney said. "I am the only Republican candidate for Governor who has offered a clear and comprehensive budget for Minnesota. While I think it's very unfortunate the Money Media have ignored the Republican primary, it's not too late for them to do some real news reporting on this primary. Minnesota voters have a right to know about the choice available to them in this year's Republican primary for Governor," Carney said.

Highlights of Carney's comprehensive budget

First, a revenue (tax) increase is necessary -- Carney starts with the appropriations Governor Pawlenty signed before undertaking his illegal unallotments at the end of the 2009 Session. This is annualized and adjusted up 2%, to give proper weight to the second year. The result is the annual baseline budget for the current biennium. Carney then increases that annual amount 4% for FY 2012, and another 4% for FY 2013 -- representing assumed inflation of 2%, and a willingness to accept increases up to 2% above inflation. He then adjusts the current Minnesota Management and Budget projection for revenue in FY 2012-13 to match this projected level of spending.

"The result is a tax increase of $3.1 billion for the next biennium. I am willing to accept this level of increase, knowing that it will be hard on many Minnesotans. However, in our very difficult state and federal economic situation, we must all share the pain. Minnesotans who are working are better able to do this than those that aren't. I am willing to negotiate 'sunset' provisions for some or all of the revenue increase," Carney said.

Second, restore some operating cash flow flexibility -- Carney proposes a special bonding program, to be put to the voters of Minnesota on the 2012 general election ballot, that would do two things:

• Increase the balance for the cash flow account (not the budget reserve!) to $1 billion.

• Fully repay schools for the $1.37 billion of K-12 money illegally unallotted and deferred.

Carney's bonding proposal would fund these amounts immediately on passage (in January of 2013), with only a minimal impact on FY 2012-13, and a manageable impact going forward.

"Minnesota has a relatively low debt level for all levels of Government, and our Constitution makes provision for securing this debt with mandatory property tax levies if necessary. Of course, no one wants to go there -- but this additional provision for security is something the rating companies and financial sector will take into account," Carney said.

Towards the end of the last regular session, House Finance Chairman Lyndon Carlson told Carney the General Fund has been overdrawn by as much as $1.5 billion. In Carney's view, when organizations are squeezed for cash, an enormous amount of management's time and effort is directed to juggling. The management and policy making people throughout all of Minnesota's governmental and non-profit entities need to focus on how to streamline and improve processes.

Carney said: "We simply can't afford to have working cash drained down everywhere to the point where short term cash flow becomes a consuming issue for managers throughout the system. I also budget $250 million for the budget reserve account -- we need to start rebuilding this."

There is also a technical legal issue regarding the current unallotment law that in Carney's judgment requires rebuilding the budget reserve at least to a minimal level. He is willing to discuss this issue further if anyone has questions.

Third, choose early opt-in to MA -- While Governor Pawlenty and Tom Emmer both insist they won't do this, the cost of doing so is already built in to the MMB projections for FY 2012-13. Because this will bring in significant new Federal dollars into the general HHS area (about $1.4 billion according to Speaker Kelliher,) Carney favor targeted cuts and/or surcharges in the HHS area totaling $500 million.

Fourth, some serious cutting by the Legislature, beyond the $500 million in targeted HHS cuts or surcharges -- Carney insists on a minimum of $1.18 billion in additional cuts -- and surcharges will not be acceptable in this category. Because Carney's baseline budget is the one Governor Pawlenty signed before undertaking illegal unallotments, the $1.18 billion is actually close to the total dollar amount of Governor Pawlenty's illegal unallotments, after backing out the K-12 shift and the property tax recognition shift. The Legislature's special session omnibus budget bill effectively ratified those spending cuts for the current biennium. Carney is challenging that bill in court for the Political Contribution Refund program. However, because the constitutional prohibition against Ex Post Facto laws applies only to criminal law, any effect of Carney's legal challenge on the rest of the omnibus budget bill can be reversed by the Legislature during the next regular session.

Carney said: "I strongly believe the Legislature has the primary responsibility for policy and priorities. If the Legislature can achieve this level of cuts, I may offer suggestions on how the cuts are distributed, but I won't threaten the use of a veto to promote any particular economic priority."

Governor Pawlenty's legacy

In Carney's view, the reduction in the increase of state spending is Governor Pawlenty's legacy -- for good or ill. Governor Pawlenty has correctly pointed out that state spending increased at 10% a year for forty years -- from 1960 to 2000 -- and that this rate of increase is unsustainable. However, over four biennial budgets, the average annual increase in state spending has been 2% a year during Governor Pawlenty's two terms. That is half a point below inflation, and less than the average annual increase for Texas during the same time frame. That rate is also unsustainable -- it's an over correction.

"Unfortunately, I think our current economic conditions -- closer to a depression than a recession for small business -- won't improve significantly any time soon. Sustained budget cutting is necessary. In recent years, both compensation and benefits in the public sector have grown faster than in the private sector. It is fundamentally unjust for people in the public sector to have better compensation, better benefits, and more job security than in the private sector," Carney said.

In Carney's view, Minnesota needs both sustained cuts in compensation and benefits, and a flattening of public and non-profit organizations (more line workers, fewer managers with lower pay.) Minnesota doesn't need cuts in the total number of firefighters or police -- but they, along with everyone else in the public and non profit sectors, must be prepared for painful fiscal adjustments, as problems in our national economy are corrected over a long time frame. However, the cutting must be done through the Legislative process. Carney will of course advocate for Republican Legislators who have the background and temperament to persist in prudent, carefully considered cuts, on an on-going basis. But more generally, Carney will advocate for and promote all Legislators who are willing and able to do this. Carney will oppose Legislators who refuse to acknowledge that the rate of compensation growth for the public and non-profit sectors is unsustainable.

Carney said: "My proposed combination of revenue increases, bonding, and cuts, will both balance the FY 2012-13 budget, and will significantly improve the cash flow and operational cash management position of the State and our K-12 system. Under the present very difficult circumstances, I think it's both the best we can do, and the minimum that we must do."

Unallotment -- and "... a republican form of government"

Carney recently filed his Reply Brief in the Court of Appeals, in his legal case challenging Governor Pawlenty's illegal unallotment of the Political Contribution Refund program. According to Carney, the ill-conceived and illegal use of unallotment by Governor Pawlenty at the start of the current biennium has been a huge contributing factor to the present budget mess. The unallotment law is designed as a "mid course" correction for "normal" economic downturns.  It was never intended to be the first budget weapon of choice during something that is closer to a depression. It is legally possible to cancel unallotments -- the prohibition against ex post facto laws applies only to criminal law. "But we've really hit the dregs when we found Minnesota's public policy process on the legal power of the State Government to cancel statutory obligations -- based on a Governor's unreviewable decisions on priorities -- made behind closed doors," Carney said.

Carney continued: "I've been fighting Governor Pawlenty's illegal unallotments since July of 2009, when I filed the first unallotment lawsuit. I am an expert on unallotment. Please see my recent op-ed, published July 24th by the Star Tribune (and the 7/25 Early Sunday edition,) for a preview of what (in my assessment) we should expect if Tom Emmer is elected Governor. It isn't pretty. I see Tom Emmer launching an across the board attack on the very foundations of what '... a republican form of government' is, and how it is designed to function."

Details on Carney's budget are available online

Carney's news website is: www.republicancontract.com. From that site, click on the "Carney/McGaughey for Governor" business card image to go to the campaign site. The Media Center has two .doc files available for download:

• Editorial Board pre-primary endorsement packet (.doc file)

• Editorial Board pre-primary endorsement packet -- supplement (.doc file)

The second file (... -- supplement) has three spreadsheets providing detail on Carney's proposed comprehensive budget.

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