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Cutting through the baloney on unallotment

To hear Taxpayers League President Phil Krinkie describe it (“Stop the whining about Pawlenty’s unallotment decisions,” June 24), one would think that the state budget had been on an unbridled growth course for years.

To hear Taxpayers League President Phil Krinkie describe it (“Stop the whining about Pawlenty’s unallotment decisions,” June 24), one would think that the state budget had been on an unbridled growth course for years. The fact of the matter is that real (i.e., inflation-adjusted) per capita state general-fund spending has fallen 9 percent from fiscal year 2002-03 to FY 2008-09. It is in this context that Gov. Tim Pawlenty’s $2.7 billion unallotment needs to be considered.

More facts to consider: Real per capita state tax revenue has fallen by 5.2 percent from 2003 to 2008; with the national economic collapse, taxes are expected to fall by another 8.8 percent in 2009. Minnesota is no longer a high tax state; a recent Revenue Department analysis concluded that total taxes in Minnesota are “just about average.” The policies of Pawlenty and Krinkie have clearly prevailed in recent years.

Because their policies have prevailed, Pawlenty and Krinkie now own the results: Relative to the national average, Minnesota’s unemployment and poverty rates have risen while our median income and rate of job growth have fallen. Their plan to stimulate Minnesota’s economy through reducing taxes and public investment has been a flop. Minnesota’s deteriorating performance relative to other states has coincided with their policies of disinvestment in education, infrastructure and public services. To the victors go the accountability.

Pawlenty and Krinkie also own the results of the recently announced unallotments. As reported in MinnPost, the administration has already conceded the loss of approximately 3,100 jobs; other estimates place the total job losses from unallotment at 11,000.  This is the Pawlenty stimulus package.

13.8 percent LGA cut in next biennium
Krinkie’s defense of the unallotments is based on erroneous claims. For example, Krinkie attacks city officials for “complaining about a 3.3 percent reduction in Local Government Aid.” In fact, the unallotments result is a 13.8 percent LGA cut in the next biennium. Krinkie also claims that the $300 million cut in aid to local governments will affect only half of the state’s population; in reality, over 99 percent of the state’s population resides in jurisdictions affected by the cuts. It is distortions like these that have earned the Taxpayers League the moniker “fact slayers’ league.”

Krinkie’s criticism of local governments is misplaced. Based on data from the state’s Office of Management & Budget, the real per capita revenue of counties and cities has fallen more rapidly than that of state government. There is no way that local governments can deal with another $300 million funding cut without resorting to more cuts to public services and more property tax increases.

He attempts to pooh-pooh the human-service funding cuts as “small reductions.” One such “small reduction” is a 29 percent cut in funding for Children and Community Service grants, which fund child protective services for abused and neglected kids. Programs to prevent fetal alcohol syndrome are also cut. For the sake of keeping a “no new tax” pledge, Pawlenty has cut funding for initiatives that would have reduced state costs down the road.

A shift with a difference
Krinkie defends Pawlenty’s massive $1.8 billion education funding shift on the grounds that “it has been used several times in the past.” However, past uses of education funding shifts have generally included new revenue to restore solvency to the state’s budget in the long term.  Pawlenty’s shift merely swells the deficit in the subsequent biennium, kicking the problem down the road for future officeholders and future taxpayers to deal with. This is not fiscal conservatism.

Krinkie complains that legitimate criticism of the unallotment is “whining.” However, Krinkie is OK with whining about taxes. Growth & Justice President Dane Smith notes that “As of now, of those 20 states with the worst budget problems, only Louisiana, Georgia and Minnesota have failed to raise revenues to meet their budget-balancing obligation.” Minnesota is among a handful of states that would not increase taxes despite the most obvious and profound need for revenue.

Knee-jerk opposition to any tax increase flies in the face of common sense. Nobel laureate economist Joseph Stiglitz notes that during a recession cuts in direct government spending do more harm to a state’s economy than tax increases. The fact that Pawlenty and Krinkie cannot even consider a tax increase truly represents the triumph of ideology over reason.

Designed as an emergency authority
Krinkie argues that the “governor made his intentions clear” to use his unallotment authority if the Legislature did not kowtow to his demands, as if this somehow justifies Pawlenty’s actions. Unallotment was designed as an emergency authority to address unforeseen state budget deficits, not as a way of concentrating all budget authority in the hands of one obdurate leader. As a co-equal branch, the Legislature was right to pursue a budget solution that involved a balanced mix of spending cuts and tax increases. 

At the end of his current term, Pawlenty will skip off, leaving Minnesota with diminished public investment, a gargantuan budget mess, and an economy less competitive with other states than when he took over. We can only hope Minnesotans will have learned what happens when we place a “no new tax” ideologue in the state’s highest office.

Jeff Van Wychen is a research fellow at Minnesota 2020, a St. Paul think tank; his focus is primarily on property tax and state and local budget issues.