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California budget crisis a glimpse of Minnesota two years from now

The following is an editorial from the Ely/Cook/Tower Timberjay.

Minnesotans shouldn’t feel too smug as they ponder the unprecedented state budget disaster being faced by California. Our time may well be coming soon.

To date, most Minnesotans have been relatively sheltered from the full dimensions of our own fiscal disaster. Two billion dollars in federal stimulus funding helped backfill one-third of our projected $6 billion shortfall in the current biennium. Gov. Tim Pawlenty’s delay in payments of $1.8 billion in K-12 funding eliminated another third, while cuts in other government programs, from local government aid to higher education, to health insurance for indigent adults, accounted for the final third.

As far as most Minnesotans appear to be concerned, problem solved. But anyone paying attention to this year’s “solution” quickly realizes that our shortfall was plugged largely with one-time money or one-time accounting gimmicks that won’t be repeatable when the Legislature and a new governor craft our next biennial budget.

State finance officials are projecting another $6 billion budget gap in the upcoming biennium, and that assumes a reasonably robust economic recovery starting later this year. Yet even if the economy strengthens as expected, the state’s budget situation will continue to worsen, and the state will likely have far fewer tools available to fix the problems without inflicting real pain, on the residents of Minnesota.

Consider the following:

• Federal stimulus funding likely won’t be available in 2011. With Washington already awash in talk of taming deficits, the prospect for a second round of federal pump-priming looks increasingly unlikely. So don’t look to fill one-third of our budget gap with federal money.

• Most one-time accounting shifts have already been used. Gov. Pawlenty’s education funding shift solved nothing, but simply kicked the can down the road for the next governor. Indeed, the funding shift makes the state’s fiscal situation even worse by adding another $1.8 billion in obligations to the budget in 2011. Of course, given the realities of our budget mess, the Legislature isn’t likely to restore the shift, which will leave schools facing a funding cut of historic proportions. If so, it will push both the Ely and St. Louis County school districts into statutory operating debt. And they’ll have plenty of company.

The reality is that our state’s fiscal situation is a mess, with big deficits as far as the eye can see. Like California, our condition is the direct result of an anti-tax philosophy that has created budget deficits in Washington as well as in state capitols across the country. If we want to understand the impact here in Minnesota, we need only look to California, where a school system that was once held up as a model has disintegrated into one of the worst in the nation, with huge class sizes and plummeting test scores.

In California’s case, it was Proposition 13 back in 1978 that has proven the death of good schools and other public services. In our case, it was the no-new-taxes pledge of Tim Pawlenty and others that has created a similar set of circumstances. Like California, schools in Minnesota can anticipate real cuts in funding for the first time in years. It shows up this biennium in the governor’s holdback of 27 percent of school funding. Two years from now, when the state can’t afford to reimburse school districts, the real pain will begin.

And it won’t be just schools. From cities to counties, to highways, to nursing homes, the impact of our failure to invest in our state is just beginning to be felt by Minnesotans. The worst, unfortunately, is yet to come.

This Timberjay editorial was published July 15. It is reprinted with permission.

Comments (8)

  1. Submitted by Richard Schulze on 07/16/2009 - 07:25 am.

    In his quest to starve the beast, the governor forgot that he had to make huge meaningful cuts to full fill the mission.

    Instead all he have to show for it will be the future deficits left for someone else to deal with.

  2. Submitted by Thomas Swift on 07/16/2009 - 11:31 am.

    California has some of the highest tax rates in the country:

    8.25% sales tax (although when added to some municipal sales tax (like SF) it is as hogh as 10.25 %

    48.7 cents/gal tax

    Max. personal income tax- 10.3%

    Property tax 1% of 100% cash value assessed.

    The people of California are wandering in the ruins of 30 years of an unrestrained, leftist government. Businesses have left the state in droves. Silicon Valley, once the crown jewel of Northern California has been renamed Death Valley by the companies that have re-located to Austin Texas.

    Minnesota’s spending has held relatively steady, thanks to the voter’s wisdom in keeping the Democrat party at arm’s length from the Governor’s office. Governor Pawlenty took necessary, bold steps to rein in spending this year, but, as the author correctly points out, he left the black hole of public education untouched.

    The top to bottom overhaul of that insatiable behemoth must be a top priority of the next Republican Governor.

    The voters of Minnesota hold our destiny in our hands. We can follow California’s path to financial ruin and social chaos, or we can prove that Midwestern common sense is not just a cliché.

  3. Submitted by Richard Schulze on 07/16/2009 - 12:04 pm.

    With regards to the “black hole of public education”.

    With your use of data, statistics and “facts” that you so eloquently use in your comments regarding education.

    I wonder why you were not able to convince a majority of the voters in St Paul during your 2002 school board campaign, that your use of facts and statistics were both credible and meaningful when used to advance your cause?

    With the passion and zeal that you exhibit in your comments, one would think that you would be a natural to attract a simple majority to your platform.

    Or was there a tipping point that allowed for a few of the other thoughtful, well informed candidates to move ahead and succeed where you failed?

  4. Submitted by Karen Sandness on 07/16/2009 - 02:30 pm.

    A huge factor in California’s bankruptcy was the collapse of the housing market. If you think the housing bubble was bad here, it was absolutely absurd in California.

    Lower-income people were moving 50 miles or more from their workplace to afford a house, two-career couples were spending one spouse’s entire paycheck on the mortgage, and some people were paying half a million for a small 1950s rambler in a marginal neighborhood. For years while I lived in Oregon, people were selling modest houses in California and using the proceeds to buy trophy houses in Oregon, which drove up prices there, too.

    When the housing market collapsed (as all bubbles must), it dragged everything else down with it.

  5. Submitted by Thomas Swift on 07/16/2009 - 03:49 pm.

    Richard, I learned, the hard way, that the stakeholders of the Saint Paul Public School district are made up of four groups.

    1. Committed leftists who vote the Democrat ticket without even bothering to look at the name attached to it. These are the people that make the SPPS system’s continuing failure possible.

    2. Parents that believe the classrooms they send their kids off to everyday are just like the ones they sat in the 60’s and 70’s. Most of these folks have never set foot in the schools their kids attend, don’t have a clue and don’t want one until Jr. tanks his ACT.

    These are the folks who suddenly wake up one day, and, to paraphrase one of my favorite movie lines “Call the schools a cloud over the land. But they made the weather and then they stand in the rain and say ‘Oh, no! It’s raining!'”

    3. Parents that are wholly committed to providing their kids with a top notch education. These are the people that volunteer to grade tests and assignments, go over homework with their kids, and are in frequent contact with their kids’ teachers.

    4. Parents that send their kids out the door every morning and could care less what happens as long as they return home eventually.

    I was in group #3 until the wife and I finally realized that we were fighting a losing battle, sold our house and bought another 1/2 the size to pay for private schools.

    Group 3 is a shrinking demographic, and the districts pathetic BST and MCT test scores, and rapidly dwindling attendance numbers prove it.

    Those “group 3ers” who haven’t given up yet voted for me, the rest were too busy making arrangements to move their kids to alternative educational opportunities to care.

    Toss in the fact that I was the recipient of one of the nastiest smear campaigns the St. Paul Federation of Teachers, and the DFL has ever undertaken, and you end up with the status quo.

    I continue to put the facts out there because every once in a while a “group 3er” happens to read them and sends a note of thanks.

  6. Submitted by Richard Schulze on 07/16/2009 - 07:17 pm.

    I kind of hope they don’t reach a budget deal in CA (although I love northern CA – formerly from SF), before Oct. I want to see those conservatives get what they wanted, a drowned government that can’t be revived.

    Part of the problem is also a constitutional amendment requiring a 2/3 majority to pass a budget. That requirement makes it virtually impossible for the legislature to tackle any controversial budget issue including the budget cuts or the tax increases that will be required to deal with this problem.

    The best thing would be two or three states replacing the golden state (the lines would be fairly easy to draw based on party voting majorities), and see which new states can pay their bills and stay livable. My money is on the coastal counties from Santa Barbara north to OR. The GOP can have the rest, excluding probably the libertarian northern-central/east counties.

    As for the old debt, write it off through default, and start over.

  7. Submitted by Eric Ferguson on 07/17/2009 - 04:03 pm.

    I hesitate to say “bail out California” because, well, I have to pay for it. Then again, I’m affected by the national economy, which is unlikely to escape recession if California plunges into depression. For any state, schools are a massive part of their expenditures, and the condition of California’s schools shows they’ve cut spending past the fat and deep into muscle.

    Besides, given that Minnesota is moving the same direction for similar reasons, with the same problems, just not as far along yet, we might need a bailout ourselves. So complaining about California won’t help.

    The problem in both states is the need for a two-thirds majority to raise taxes, and the taxophobic Republican minority has just a coupe votes enough in one house to prevent anything reasonable from being done. Therefore, some tough love is required.

    I’ll say yes to a bailout as a federal taxpayer, with a couple condition. They need a long term fix to their budgeting problems, and that means repealing the two-thirds requirement for a tax increase. They’ll then have to make whatever tax increases and budget cuts it takes to balance the books. Also, maybe we should require an end to that ballot proposition system that got them in this trouble in the first place.

    Not only would that make California fix their problems, but those onerous conditions imposed on a state by the federal government should alert the other 49 to the price that comes with letting things get to the point of a bailout: not just might you have to do what you don’t want to, but the other states can and will dictate to you.

  8. Submitted by Karen Sandness on 07/19/2009 - 08:33 pm.

    I agree with ending the ballot initiative system.

    It sounds so democratic and populist on paper, a way to get things done that the legislature refuses to do.

    However, here’s how it works in practice, at least as I saw it in Oregon:

    1. A rich crackpot (or a group of such crackpots) gets angry about something, usually having to do with taxes.

    2. Said rich crackpot hires lawyers to draft an initiative for a state Constitutional amendment that will fulfill his wishes.

    3. Said rich crackpot hires paid petition gatherers (paid by the signature until the practice was banned) to gain signatures by any means necessary. This includes outright lying about the effects of the measure.

    4. If the initiative reaches the number of signatures, it becomes the subject of hysterical television ads.

    5. If it becomes law, the legislature is obligated to implement it, even though these petitions never contain requirements for financing.

    This is the greatest weakness of the initiative system.

    For example, one initiative in Oregon instituted mandatory minimum sentences for several major and minor crimes, which necessitated the building of more prisons, but there was no provision for financing these new prisons, and since the anti-tax fanatics are strong in Oregon, everything else had to be cut to pay for prisons.

    I would be in favor of introducing initiatives in Minnesota only if the following conditions were met:

    1. Volunteer petition gatherers only. If an initiative cannot attract sufficient volunteers, then it is not the will of the people.

    2. All petitions that would require the state to expend money must specify a funding mechanism, either specific taxes or specific budget cuts.

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