In assessing elected officials, a wise political observer once said, “Watch what they do, not what they say.” What Gov. Tim Pawlenty has proposed for Minnesota is far different from what he has been promoting for the nation.
Gov. Pawlenty, in a recent Weekly Republican Address responding to President Obama, stated, “And let’s get control of our national debt, so future generations aren’t burdened with unbearable taxes.” In Minnesota, unfortunately, the governor has proposed just the opposite.
Part of Gov. Pawlenty’s proposed budget for the next two years calls for selling more than $1 billion of “tobacco bonds” to offset the budget deficit. The bond proceeds would be used to pay for current operating expenses of the state but would be paid for from future tobacco settlement payments.
In essence, the governor wants to increase current debt that will have to be paid by future generations. It is like taking out a second mortgage to pay for groceries. If the bonding proposal becomes law, the state likely will lose its highest AAA credit rating when it tries to sell the bonds. Both the Minnesota House and Senate have rejected the tobacco bonds in their budget proposals as bad public policy.
The governor also is proposing other generational cost-shifting ideas. One is his proposal to transfer currently excess dollars in the Health Care Access Fund to pay for general operating expenses, instead of reserving the fund balances to offset future health care costs, as was legislatively intended.
A careful review of the governor’s budget reveals that he is really only proposing actual expenditure cuts for less than half of the problem. The remainder of his solution includes the tobacco bonds, the health fund transfer and a gimmicky shift of more than $1 billion in school aid payments. This leads to a deficit in the next budget of upward of $6 billion if public employees get wage increases in 2012 and 2013.
In January, the Minnesota Budget Trends Study Commission recommended to the governor and Legislature that current expenditures should always equal current revenues to reduce budget volatility. The governor has ignored the commission’s recommendation, while the Senate has followed it, and the House has partially followed it.
The Minnesota Senate and House provide more in current revenue (i.e., tax increases) so they don’t have to use the tobacco bonds, while reducing the deficit for the future. Therein lies the dilemma for this legislative session: raise taxes or burden future citizens with some of today’s expenses.
Gov. Pawlenty rejects increasing taxes but also speaks out against shifting the burden. The rejection of tobacco bonds is central to resolving this dichotomy. Will the governor ultimately accept tax increases sufficient to drop his bond proposal so that current revenues are more equal to current expenditures?
Doing so is the only way the governor’s local actions can be consistent with his national words.
Jay Kiedrowski is a senior fellow at the Humphrey Institute of Public Affairs, where he teaches public finance. He served as co-chair of the Minnesota Budget Trends Study Commission and as Minnesota Gov. Rudy Perpich’s commissioner of finance.