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MN shortfalls: We can’t go on like this

Think of Minnesota as suffering from a vitamin deficiency, growing weaker and unhealthy, and still resisting a balanced diet. And think of taxes as spinach, broccoli and peas, not exactly everybody’s first choice on the buffet table, but the stuff we need to reinvigorate our state.

One month from legislative adjournment, all indications are that election-year pressures will deny Minnesota the state revenue “vegetables” and the responsible, long-term budget solutions it needs.

Time is running out in the face of projected chronic shortfalls — as much as $1.7 billion in the red a year from now — and so are the accounting gimmicks and the reserves. So voters choosing leaders this fall for 2009 and beyond need to ask them to face up to a glaring fiscal reality: We can’t go on like this. Our experiment with tax cuts and short-changing vital public-sector investment is not working.

More than a decade of tax rebates and tax cuts during good times, and the no-new-(state)-taxes straitjacket of the last six years, have left our communities and our economy in worse shape than they have been in decades. (The 2008 Legislature deserves credit for overriding a veto and pushing through a modest gas-tax increase, but that’s a dedicated tax that only begins to address two decades of deterioration in our transportation infrastructure.)

Diminished standing, real pain
Cumulative cuts to our public schools, transportation and other public works, early childhood programs, job training, higher education and health care have diminished Minnesota’s standing in the nation and caused real pain to all but the most affluent of our citizens. And their enterprises are beginning to suffer, too.

That’s because this disinvestment has been accomplished by a gradual slide into economic mediocrity in the private sector. The scrimping and corner-cutting, the idea that draining our common pool of resources will benefit everybody, is most assuredly NOT producing the general prosperity that was promised when tax cuts were enacted. For the first time in decades, Minnesota’s key economic indicators— on job growth, long-term unemployment and average income— are trending toward or below the national average.

Minnesota’s distinctive place as a high-quality place to live was achieved through innovation and private enterprise, to be sure. But it also came through investment in human capital, education at the forefront, but also in essentials ranging from public-works infrastructure to caring for the elderly and poor, and amenities such as park systems and libraries.

Respected nonpartisan state experts such as State Economist Tom Stinson and Federal Reserve Senior Vice-President Art Rolnick have pinpointed investment, particularly in education, as a crucial ingredient for Minnesota’s past success and as a strategy for recovery. And by the way, every living former governor of Minnesota has expressed public disapproval in some way of the cuts-only course for achieving fiscal balance.

High-income earners benefited most
The notions that revenue sources are nowhere to be found and that the state is tapped out are simply not true. A welter of statistics show that Minnesota’s overall effective tax rate is down significantly from a decade ago, that high-income earners benefited the most from deep income-tax cuts, and that the same top-enders have a greater share of wealth and income than at any time in recent history. The bottom-line effective tax rate for those at the top is considerably smaller than for those in the middle, and this disparity is projected to worsen.

Moreover, prestigious national experts have made the case for protecting states’ public-sector investment and targeting tax increases to those who can most afford it.

Nobel Prize-winning economist Joseph Stiglitz and Congressional Budget Office Director Peter Orzsag wrote recently that if the goal during a recession is to keep money flowing in the economy, protecting state spending is a pretty sure bet. And they argue that a better option is to raise taxes, particularly on higher-income households. They conclude that “reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short-run than tax increases focused on higher-income families.”

We can begin addressing our revenue problem by reversing the income-tax reductions that were afforded to those at the top earlier in the decade. We can consider reforming the sales taxes to reflect the reality that we have a service economy. We can look more broadly for ways to expand revenues progressively, so that those at the top at least pay a more equal percentage.

As citizens, we need to make room for elected leaders to do what many of them know to be right for Minnesota. We need to declare the “no new taxes” strategy (that’s state taxes, see your tuition or property tax bill) a failure.

We need to invest smartly in education, job training, transportation and human capital. To do this we need to think again, as the generation before us did, as well-rounded citizens willing to invest in and nourish the common good.

Marcia Avner is public policy director of the Minnesota Council of Nonprofits; Brian Rusche is executive director of the Joint Religious Legislative Coalition; Dane Smith is president of the Growth & Justice think tank; and Ray Waldron is president of the Minnesota AFL-CIO. They have combined efforts to form the Invest in Minnesota Campaign.

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Comments (7)

  1. Submitted by Joe Musich on 04/23/2008 - 07:24 am.

    For what reason do we need to continue this asinine discussion about what constitutes a cut ? It’s an idiotic diversion. At the end of the month there is not enough cheese as my students say. So cut no pun intended the erudite nonsense and start with that issue. A huge contributing reason are tax cuts to the upper class. While were talking about schools I will not stray away from mentioning class. These tax cuts were granted under the premise that money was to be reinvested. So as a classroom teacher that’s where I think the examination needs to start. While the weakness in the reinvestment theory is that schools are nor corporations. There are zero stocks issued. Any match to inflation for schools will never happen through investment. Over the last 10 years my classroom budget as descended into an area of needing to be fresh started as have the budgets of my school building and of course my personal income growth. So let’s catch up with reality people and roll up the sleeves and get the job done.

    joe musich

  2. Submitted by Thomas Swift on 04/22/2008 - 12:58 pm.

    I had the pleasure of speaking with Dane last Saturday during his appearance on AM1280 “The Patriot”.

    We spoke specifically about the false claim that funding for public schools had been cut, and I recited the numbers from the MN Department of Education that proved that claim to be false.

    The fact of the matter is that, with the exception of one year, for the last 10 years funding for K-12 education in this state has led inflation by an average of 1.5%; the single exception was 2006 when revenue was flat.

    Funding for K-12 education has never been cut.

    I agree with the statement that we should be investing wisely in education, and suggest we start with the 39% of the state budget that is already in play before tossing in more.

    I must say that I’m a bit dissapointed to see that Dane would allow his name to be put to information he knows to be false.

  3. Submitted by Mary Treacy on 04/22/2008 - 11:23 am.

    This is a essential and cogent analysis of the common good and our individual responsibility. You have provided a framework and perspective seldom expressed in the media. You also represent the interests of a very wide cross section of Minnesotans. Thank you for your collaborative impetus to informed public discourse. I hope and even trust it is not too late.

  4. Submitted by Tony Wagner on 04/22/2008 - 06:19 pm.

    Thomas: I don’t see a claim here that public school funding has been cut by a specific amount, or for a specific duration, so I’m not sure what is demonstrably false. The only mention I see is a reference to “cumulative cuts” to a variety of programs, including public schools, which is admittedly an odd way of stating the point.

    Also, does your funding data refer only to state school funding? Or is it a combination of all school funding sources (state, local, referendum, etc.)? And is statewide K-12 funding the best measure? I imagine different districts would have different abilities to raise/sustain funds in the local/referendum categories, which could favor some schools as others get left behind.

    Is this the DoE document where you got your numbers? I just want to confirm before I try to dive in:
    http://education.state.mn.us/mdeprod/groups/Finance/documents/Publication/031642.pdf

  5. Submitted by Thomas Swift on 04/23/2008 - 04:16 pm.

    Tony, the way in which the point was stated is very familiar to anyone that follows public education. It follows the “this is a very complicated issue” school of non-responsive answers.

    The statistics I quoted (which come from a spreadsheet I received in response to a request for information from the DOE) are just for the state government’s piece of the funding pie.

    If you add in such things as fees, lease payments, excess levy referendums, grants, to say nothing of federal monies it is true to say that not only has public education seen a cut, the average increase in funding exceeds the inflation index by an average of 7% (this from my own calculation of the DOE figures).

    I must say that I’m all in favor of healthy investments in public education, but as for any investment I expect a ‘return’; and we simply are not getting it.

    All to often when asked to explain why, for instance 42% of the students in the Saint Paul school district (Mpls is worse) fail to graduate, despite one of the highest rates of ‘investment’ of any district in the state one receives meaningless platitudes instead of answers.

    If the public system as it exists today cannot teach kids that receive “free and reduced lunches” or students that are mobile, perhaps it’s time to take a look at a wholesale overhaul. That because, according to a growing majority of failing districts these are the prime movers behind the dismal success rates we see.

    But no one want to have those kinds of discussions; at least not those who have a vested interest in maintaining the status quo. Instead of honest dialogue, and with all due respect to joe musich, his ‘shut up and hand it over’ response is a near boiler plate example of the kinds of non-discussions that are taking place.

  6. Submitted by Tony Wagner on 04/23/2008 - 06:08 pm.

    Thanks Thomas. I’ll see if I can get my hands on that spreadsheet too.

    One thing you didn’t address was whether statewide K-12 revenue was the best measure; surely not all districts have equal ability to generate revenue. Plus, even if revenue outpaces inflation, there are some cost increases to schools that have also outpaced inflation: fuel prices, for example, which would hit districts hard in bus transportation and building heating/cooling. We’re already spending (on average) around 70% of school revenue in the classroom, which is right around Gov. Pawlenty’s target, and some of the worst-performing schools are well above that level. So it’s not as if this money is being flushed away.

    I agree that some changes need to be made, and I’d like to hear some of your ideas on the subject. One of the best ideas, in my opinion, was alluded to in this piece, the mention of Art Rolnick and his push for greater pre-school “early childhood” education. That would require some new money, but it could mean better results for the money we’re already spending on K-12.

  7. Submitted by Dane Smith on 04/24/2008 - 02:26 pm.

    Tom, I also enjoyed talking to you also on 1280AM last weekend. And the face-to-face conversation with the conservative hosts (Mitch Berg and Ed Morrissey) and callers was constructive and refreshing, and I hope for more of it. I want to assure you: that I do believe that state funding of public schools has been cut, also that I would not sign my name to something I knew to be false, and also that I strongly disagree with your assertion that we are not getting an overall return for our investments in public education. The cuts or not-cuts verdict does depend on whether, and which, inflation adjustors are used and whether you account for enrollment growth. And I do believe that the widely used index for public-sector costs is appropriate. A recent analysis by veteran budget expert Jeff Van Wychen for Minnesota 2020 found that inflation-adjusted total state aid revenues per pupil are more than 10 percent lower in 2008 than they were in 2003, while total revenues were down about about 4 percent. Van Wychen used a comprehensive measure of school funding from the Minnesota Finance Department’s annual Price of Government study. And for a fuller discussion of the impact of the 2003 cuts, from which our schools have never really recovered, I’d suggest this report by the Minneapolis Foundation at:
    http://www.minneapolisfoundation.org/minnesota/Education.pdf

    The other commenter in this string, classroom teacher Joe Musich, expresses the overwhelmingly prevalent opinion of front-line educators that when you slice through the fiscal complexities, there’s simply less “cheese’’ on the table. Mary Cecconi, executive director of Parents United for Public Schools, offers this list of specific real-world effects in many or most districts since 2003.

     Fewer Art/Music programs
     Fewer Gifted/Talented programs
     Greater reliance on local levies, higher property taxes
     Books older than the kids
     Cutting or charging for transportation
     Higher fees for curriculum and extra curriculum
     Larger class sizes
     Fewer enrichment programs
     Fewer intervention programs
     Deferring maintenance to facilities
     Greater reliance on parent fund raising
     Greater reliance on the classroom teacher
     Smaller fund balances; higher cost for districts to borrow money

    What we spend relative to other states is also significant. According to the Minnesota Taxpayers Association annual “How Does Minnesota Compare’’ report, we dropped from 18th to 28th in total state-local spending on public schools, as a percentage of income, between 1998 and 2004.

    I’m encouraged to see that Tom does think that we should invest wisely in education, and I do agree that some of our schools have serious problems, especially those serving large concentrations of poor and immigrant households. Growth & Justice is developing a proposal for specific improvements in how we invest those dollars for real results This initiative has an ambitious goal of dramatically improving our graduation rate and boosting Minnesota’s higher education attainment rate by 50 percent.

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