Minnesota's House and Senate leaders, along with its incoming governor, discussed Tuesday how the state was going to dig itself out of a $4.56 billion budget hole.

And all discussion had a common theme.

"State government does not have the option to remain the same," said Gov.-elect Tim Pawlenty. "It cannot and we cannot. The world has changed."

House Speaker Steve Sviggum (R-Kenyon) was a bit more succinct.

"This is the equivalent of a fiscal tornado, of a fiscal flood, of a fiscal blizzard," he said. "It could get worse."

The two, plus Senate Majority Leader John Hottinger (DFL-Mankato), spoke at an Associated Press-sponsored forum at the State Office Building in St. Paul, discussing how the legislature was going to get itself out of a fiscal mess once it reconvenes next month.

And although the three leaders had ideas, each admitted they didn't have concrete answers.

"I'll be very honest with you … I'm not exactly sure," how to erase the deficit, Sviggum said. "But there's certain things we're going to be looking at."

One of those items is reducing the amount of local government aid (LGA) that is doled out each year. That could put a financial crimp on cities like Austin, who heavily depend on LGA.

Pawlenty said the issue of LGA "will be on the table in some form" and that the distribution of monies to counties that are "prospering" will be reviewed.

"The reason LGA exists … is to provide financial assistance to communities who don't have a sufficient tax base," Pawlenty said. "We will be looking at it not so much as a random and arbitrary reduction … but more for those communities who need it the most."

Sviggum agreed.

"What we need to do is not scrap government aid, but not embrace it," he said. "We need to look at a needs-based formula. We will continue LGA, but will continue based on needs, not what has been grandfathered," in for needs over the years.

Hottinger said cutting LGA doesn't make sense, as it only "masquerades" as a tax increase.

"It puts it back on the property taxpayers," he said. "We need to evaluate the needs of those communities."

When asked if the legislature may be looking at taking away funds from excess county reserves, Sviggum balked at the response.

"We have not talked about that, at least in a negative fashion," he said.

However, Sviggum said he was aware that Mower County's fund reserve balance was hovering around 130 percent, much higher than the state auditor's recommended 45 percent.

With that, Sviggum spoke bluntly about Mower County's fund balance situation in front of a room packed with media from throughout the state.

"We are somewhat concerned … anytime we hear about excessive fund balances," said Sviggum, before specifically addressing Mower County's excess reserves. "That's inappropriate, folks. That's just plain wrong."

Sviggum said that state and local governments will have to adjust their spending habits in the coming years, if there are going to be any fiscal improvements.

And he admitted it won't be easy.

"Change is difficult," Sviggum said. "We all get in our comfort zone. It doesn't matter if you're in Austin or Moorhead."

Hottinger said taxpayers should expect to pay the same amount of taxes, if not more. However, they shouldn't expect state-supported services to remain at current levels.

"It's going to be very difficult," he said. "There are things that you rely on government to do that probably won't get done. I know that without a tax increase, it will amount to a large difference in the way government is run."

Dan Fields can be reached at 434-2230 or by e-mail at dan.fields@austindailyherald.com