Gov. Tim Pawlenty is committed to resolving the state budget shortfall with an emphasis on cutting spending and restructuring the delivery of public services. The process will not come without pain. It requires many established practices and the people responsible for them to change.

Minnesota businesses and their employees have been doing this type of restructuring for years. With every change, we try to deliver more value to our customers without increasing prices. That is now exactly what must be done by all state and local government units and any other organization that provides services at state taxpayers’ expense.

The tough medicine is necessary if Minnesota is to prevent worse financial straits just a few years down the line.

Two principles should guide policy-makers as they seek a remedy to this fiscal crisis: No. 1, we must agree that our goal is to balance the budget by using existing resources to preserve statewide priority services. This is imperative if Minnesota is to emerge stronger and maintain a competitive business environment in our global economy. No. 2, we all must take immediate steps to reduce expenses.

The challenge is immense. State government is staring at a projected $4.8 billion shortfall for fiscal year 2010-2011, and many believe that deficit will worsen with the February financial forecast. The constitutional requirement to balance the budget means the governor and Legislature will face difficult decisions. The Minnesota Chamber stands ready to assist them in these difficult times.

The governor seeks to position Minnesota as a leader in the world marketplace. His focus is on target: workforce development and business climate.

First, we must strengthen our K-12 public education system to better compete in the global economy. Minnesota businesses are increasingly facing a shortage of skilled employees. The path to improvement begins with increased rigor in both instructor credentials and classroom instruction.

Second, Minnesota businesses must be on a competitive playing field. The governor’s recommendation to reduce the corporate income tax rate is supported by Art Rolnick, senior vice president of the Minneapolis Federal Reserve, who says, “Anytime is a good time to fix a bad policy.” Competitive business taxes are critical so Minnesota is prepared when the economy recovers.

Some accounting shifts are certain to be considered to soften the budget-cutting pain. The most significant one discussed is transferring $1.2 billion of K-12 payments into the next biennium. But accounting shifts alone cannot balance the ledger, and too many of these threaten to leave a deeper financial crisis for the 2012-2013 biennium.

Policy-makers also are looking at the proposed federal stimulus package to help soften the impact of budget cuts. The amount is yet unknown, but serious consideration should be given whether to use this money as a one-time downpayment or instead use it to replenish the state’s general fund reserves.

Balancing the budget requires a long-term view as underscored by the recent report of the Budget Trends Study Commission. Beginning in 2008, the state will see a 30-percent increase in the number of workers turning age 62. The aging population will continue to grow during the next dozen years and will “put an incredible strain on the state’s labor force, private- and public-sector employees, tax revenues and priorities for public spending moving forward.”

The first warning of the state’s changing demographics and the impact on the state budget came in 1995 when written in the Brandl-Weber report, “An Agenda for Reform.” The recommended changes to the spending and budgeting processes cannot be ignored any longer. Inherent in this alarm is a call for government to seek greater efficiencies in its operations and to focus on truly statewide priorities.

The governor has provided a very good starting point. In response, we encourage the legislators to resist knee-jerk reactions to the short-term pain of his recommendations and, instead, seize the long-term view of how they and the governor can position Minnesota as a leader in the global economy.

Minnesota businesses across the state — all sizes, all types — are taking steps to restructure and find greater efficiencies to reduce their costs. State government must partner in this effort. Balancing the budget is not enough. We have to be ready to grow.

Ginny Morris, president of Hubbard Radio in the Twin Cities, is 2008-2009 chairwoman of the Minnesota Chamber Board of Directors.