How to refill Minnesota’s empty budget bowl?

MinnPost photo illustration by Corey Anderson

DFL state legislators spend hours doodling with huge numbers.

Like this one: Minnesota’s $4.8 billion budget deficit (not counting inflation) for the next biennium.

Subtract an across-the-board income tax surcharge from the deficit. Gain, maybe $2 billion. Deficit now $2.8 billion.

Rescind the two income tax cuts that came during the administration of Jesse Ventura. Subtract maybe $500 million from the deficit, which would be lowered to $2.3 billion.  

Add a fourth tier of 10.3 percent to the Minnesota tax code, hitting the states’s rich — those making more than $1 million a year. (This would match California for the highest rate in the land for the wealthy). Add $600 million to general fund, reduce deficit to $1.7 billion.

Fiddle with the sales tax on high-end clothes and services. Build a casino at the airport. Increase fees, dramatically, for businesses using government services. Put a nickel increase on every cocktail sold in Minnesota. Cut private school aid for such items as transportation and textbooks.

Hope that some federal bailout money can be funneled into the general fund. Pray that all these nickels, dimes and quarters add up to $500 million. Deficit now $1.2 billion.

Keep doodling.

Rep. Frank Hornstein
Rep. Frank Hornstein

For years, for example, Rep. Frank Hornstein, DFL-Minneapolis, has believed the Met Council should be an elected body. This year, he will introduce a bill calling for Met Council commissioners to be replaced by county commissioners from the counties the Met Council serves.

“That way, we’ll have an elected Met Council, but they’ll already be paid by the counties,” Hornstein said.

Savings to the state?

“Maybe a half million,” said Hornstein, laughing. “But we’d have an elected Met Council.” 

Legislative number-crunching for naught?
But after all of this adding and subtracting, erase all the doodles for two reasons:

1. Almost everyone at the state Capitol believes that when the new economic forecast numbers for the new biennium are released, either Feb. 27 or 28, the state’s deficit will soar, perhaps to as high as $7 billion.

2. And maybe more importantly, Gov. Tim Pawlenty keeps saying he’s going to balance the budget WITHOUT RAISING TAXES.

How do you doodle your way out of that? 

Pawlenty’s expected to say it again on Thursday — “no new taxes” — when he gives his State of the State Address to both bodies of the Minnesota Legislature.  

DFLers already are predicting  how Pawlenty’s speech will go.

“There’ll be a little bit of a sermon about how we all have to learn to do without,”  said Rep. Mindy Greiling, DFL-Roseville. “And he’ll also talk about how we have to deal with the budget how families do. In hard times, they have to make hard choices.”

Rep. Alice Hausman
Rep. Alice Hausman

Rep. Alice Hausman, DFL-St. Paul, predicted he’ll talk about “personal responsibility. And a lot of people who hear him will say, ‘Oh, what a reasonable person our governor is.’ He’s good at it. I’d say he’s getting as good as Ronald Reagan.”

Hornstein is certain that a section of Pawlenty’s State of the State speech will deal with “looking at the budget deficit as an opportunity to reform government.”

Next week’s budget address may offer more details
In other words, expect nothing of substance from the governor in his address. Perhaps, there’ll be a bit more meat on the bones when he delivers a major budget address on Tuesday. But even in the budget address, there likely won’t be a great deal of detail. 

Ultimately, DFL legislators believe, platitudes won’t work. Pawlenty won’t be able to talk Minnesota out of this mess. There are no one-time windfalls to turn to, such as the state’s tobacco fund, which was used up a couple of years ago. The rainy day fund went away on a snowy day in December, when the governor used the last $155 million of that fund to pay for a portion of the state’s $426 million hole in the current budget.

“There’s no way Tim Pawlenty can get out of this with no new taxes,” said Rep. Tom Rukavina, DFL-Virginia. “We have to raise taxes or he does serious damage — I mean serious damage — to the fabric of the society.”

Rukavina is an advocate of an across-the board surtax, which could, for example, be applied either to taxable income or tax liability.

Rep. Tom Rukavina
Rep. Tom Rukavina

“We’re all in this together,” he said. “A surcharge comes out of everybody’s pocket.”

Greiling agrees that Pawlenty ultimately will have to somehow get out of the no-tax corner he’s painted himself into. 

“There are going to have to be substantial cuts, substantial changes in how we do business around here AND there are going to be substantial increases in revenue (meaning tax increases),” Greiling said.

But the DFLers also believe this is going to play like a giant poker hand.

“He’s not going to show us what he’s got until much later (in the session),” predicted Sen. Dick Cohen, DFL-St. Paul.

In fact, most believe that this budget mess has multiple special sessions written all over it.

DFLers predict the machinations ahead
Hausman talked of how many in the Legislature see this going.

“There’ll be a budget [passed by the Legislature]with tax increases and he’ll veto it,” said Hausman. “And not a single Republican will side with us (the DFL). The last time, there were six people who could give each other courage. (Six Republicans voted to override the governor’s veto of a transportation bill, which included a gasoline tax increase,  in the last session.)  In this case, it would take three Republicans (to override a Pawlenty veto) and it’s hard to see just three going out on a limb.”

So that likely means an extra session. Or extra sessions. 

To date, Pawlenty and most Republican legislators are claiming they believe they can hold K-12 education “harmless” and still balance the budget with cuts. Given the fact that K-12 education is about half the state budget, that seems like an impossible dream.

Rep. Mindy Greiling
Rep. Mindy Greiling

The Health and Human Services category is the big apple the Republicans have in their eyes for cutting.  Local Government Aid  looks like a great big Republican target, too, even though the cities still are gasping from the $66 million dollar hit they took in December.

But even if you take a 20 percent hunk out of Health and Human Services, which would  put some Minnesotans out of nursing homes, and even if you all but eliminated LGA, which would take some cops off city streets, there’d still be a deep budget hole.

The political reality is Republicans can doodle with cuts as much as DFLers doodle with tax increases.  In the end, both cuts and taxes are going to be needed.

“We’re going to be here a long time,” said Greiling.

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.

Comments (14)

  1. Submitted by Ron Gotzman on 01/14/2009 - 11:05 am.

    Doug,

    It is simply amazing how you can surcharge your way out of this deficit!

    We need to ask, “How did we get in this desperate situation in the 1st place?” This happened because of spending the surplus to grow government, growing MN government faster than inflation, and big special interests (big education). Of course, you can always take the uniformed way and “blame Bush.”

    Your advocacy for a huge tax increase in a recession and few specifics concerning “cuts” is the “Star Tribune Model” for running a successful business. Look what it did for you.

  2. Submitted by Douglas Fredlund on 01/14/2009 - 12:13 pm.

    I believe, in the end, Gov. Pawlenty will have to modify his stance on tax increases to address the deficit. It was a foolish campaign promise to make in the first place, and will come back to haunt him in the same way it did for George H. W. Bush’s “read my lips” pledge.

    While everyone wants the lowest possible overhead expense from government, the reality is that every part of society is evolving and changing. That means that the tax base also needs to shift with it to insure everyone is making an equitable contribution to the costs we all share.

  3. Submitted by Craig Westover on 01/14/2009 - 12:40 pm.

    The DFL might use sarcasm to denigrate the “opportunity to reform government” message, but “reform” — real reform — is essential to the budget issue.

    The first question for policymakers, one which was ignored resolving the 2003 budget shortfall (and for which the governor can be justly criticized), is whether the objective is simply to solve a current budget deficit in the short term, or is the objective to make systemic reforms that increase the stability of the state budget in the long term.

    Most folks are taking the Kumbaya position of a “balance” between tax increases and spending cuts. “Balance” has a nice ring to it, but before we can have any discussion of “balance,” we must understand the kind of governing process we want to have going forward.

    Do Minnesotans want to trade their disposal income and freedom of choice for a plethora of monopolistic but “free” government services? Or do they want to retain the freedom of choice, manage their own lives at their own risk and cost but reap and retain the rewards of their efforts?

    We can’t keep expanding the scope of government and adding more people to government programs without raising taxes and suffering the economic consequences of damping economic growth and reducing individual choice and opportunity. We can’t arbitrarily cut spending without the guiding criterion of limiting government to its constitutional functions — no more, but no less either.

    If we don’t face those questions, we are left arguing over the price of postage.

  4. Submitted by Thomas Swift on 01/14/2009 - 12:54 pm.

    2004

    Governor: “No new taxes”

    Democrats: “We have cut all the fat, now we’re cutting into the bone”

    Public: “Huh? We don’t see that”

    2006

    Governor: “No new taxes”

    Democrats: “Now we’re *really* killing ourselves. Real people are hurting!!1!”

    Real people: “What? Where?”

    2008

    Governor: “No new taxes”

    Democrats: “The bridges are falling!!! The bridges are falling!!!”

    Public: “Why are we building bike trails and choo-choo trains no one rides, instead of fixing bridges?”

    2009

    Governor: “No new taxes”

    Democrats: “”We have to raise taxes or he does serious damage — I mean serious damage — to the fabric of the society.”

    Public: “Change? Pffft.”

    The Democrat party is really out of luck this time. Many of the “working families” they love to tout are not working, or are working reduced hours for reduced pay.

    This is a real opportunity to trim government back to what it was meant to be. If the constitution doesn’t mandate it, cut it…when the dust settles, count up the surplus (which there will be) and decide how we want to spend it.

    Problem solved.

  5. Submitted by Ginny Martin on 01/14/2009 - 01:20 pm.

    When we look at how we got into this desperate mess, we need to be sure we’re looking at the right things. When did education become a special interest? Education benefits every one of us, even if we don’t have kids. Education significantly drives the economy.
    The “uniformed” way is probably more accurate than he meant. We are in this mess because of tax rollbacks, refusal to impose new taxes on the very rich, refusal to consider anything that the no taxes league (Phil Krinkie and others) does not want.
    There is plenty of evidence. This state thrived back when taxes were higher, jobs were plentiful, education was solid, higher education was funded adequately. Guess what? Minnesota’s economy grew. (If you another piece of evidence, try looking at the national mess.) More evidence: try comparing Minnesota with states like Mississippi. Minnesota used to be the state that works, the Minnesota Miracle! We have slumped in meeting educational goals in job growth (lower than national), and many other indices that indicate a prosperous state where people want to come, start business, go to school, go to work.
    IT’S REALLY SAD.

  6. Submitted by Bernice Vetsch on 01/15/2009 - 08:40 am.

    These are the best suggestions I’ve heard. The Dems should, in my opinion, keep passing legislation based on these options. Then let Governor No veto it over and over until people realize that he is obstructing a way for the state to solve the budget problem without kicking people off health care and other assistance programs (needed desperately right now)and depriving cities and towns and the courts system and education — et cetera — of the funding they need to operate efficiently and fairly and without hurting people.

    Pawlenty’s suggestions for MORE tax cuts for the wealthy and corporations (who do not seem to be creating jobs with the state and federal breaks they’ve gotten for 8 years) will not work any better than they have for George Bush.

  7. Submitted by Paul Udstrand on 01/15/2009 - 09:09 am.

    The Republican agenda has always been to dismantle government. They haven’t been honest about it, they promise to give us better government for less money, they really give us less for less. This budget crises is a dream come true for guys like Pawlenty, they’ve been driving this state towards this crises for years with one deficit after another and Enron accounting. Now we’re gonna find out bankrupt magic plan economics (cut taxes and wait for the magic to happen)really is. We’re gonna find out what small government is really all about.

  8. Submitted by Duke Powell on 01/15/2009 - 10:11 am.

    I am in complete agreement with Craig Westover’s comments above-but guys like Craig and I have to face facts. The elections of ’04,’06, and ’08 decimated conservative Republican ranks not only in Minnesota but nationwide. Elections have consequences and we are all are going to see what those consequences are in coming months.

    The Democrats are now in charge. In Minnesota the DFL has firm control over the legislature. Anyone who thinks that the Dems won’t be able to override a Governor’s veto by buying off 3 Republican votes in the House just doesn’t understand House Republican Caucus dynamics. The DFL will get these votes just as the Republicans bought off Hortman, Ruud and Dittrich when needed during the 04-05 sessions.

    The voters have spoken loud and clear. Higher taxes and bigger government are what they want and that is what were going to get.

  9. Submitted by Vonya Ereye on 01/15/2009 - 11:54 am.

    If incomes have remained stagnant or perhaps have fallen as many claim since 2000, then why does our state budget keep going up?
    Why are we needing to spend $38 Bill in the next biennium when we were OK spending $34B in the last? How did we get to $34B when $30B was OK before that? And $27B and $24B? There was a time not too long ago when we got all the business done with $24B.

    Somehow, the state budget managed to go from $24B to $38B at a time when incomes have gone almost no where. How is this possible or even justifyable.

    Citizens are not at the mercy of government wish lists, needing to fund their projects as a measure of first priority. Citizens are at the mercy of taking care of themselves and their own personal budgets and governements are at the mercy of theier citizen’s success.

    If the tax rates are not high enough to fund your wish list, then you need to either attract more success in the economy (which you do with tax cuts) or cut your wish list to reflect the reality you find yourself in.

    It’s crazy to think that just because you need more money for your stuff, you can infringe on my rights and take more money from me leaving me with less money for my stuff. That doesn’t sound like a compassionate government to me. That’s tyranical.

  10. Submitted by Ginny Martin on 01/15/2009 - 01:16 pm.

    Ahhh change! How we resist it, and resist looking at the facts. Why is our state budget growing even though personal incomes are not? The relationship between the two questions is inverse: when incomes fall, more people need government help. More people need social services, unemployment benefits, help with health problems (which for the poor usually amounts to–as W himself memorably said–going to the emergency room, which is far more costly than treating ailments in a timely manner, and costs us, the taxpayers. Otherwise, the two questions are not related.
    Our society is growing and getting more complex, as are our needs.
    Nobody is infringing on anybody’s rights. Taxes and government are the prices we pay for a well-ordered, decent, society where people can flourish and live safely.
    As to paying more to the government: Good, and then why don’t you fund a fallen-down bridge?

  11. Submitted by Colin Lee on 01/15/2009 - 04:15 pm.

    There are plenty of good reform ideas that don’t require raising taxes which aren’t being looked at:

    1. An improved, California Prop. 36-style reform to mandate treatment instead of prison time for non-violent, drug possession convictions. Savings in CA were $200 M/yr. Guess for MN is ~$100 M/yr, $200 M/biennial budget (not counting the cost saved versus building new prisons).

    2. Enforce the state sales tax against internet businesses wishing to do significant business in MN. Not only will this raise revenue, but it will put MN businesses on a fair playing field. Revenue of at least $200 M/yr, $400 M/biennial budget.

    3. Why does Japan have the longest life expectancy, lowest infant mortality, and cheapest healthcare system? Switch our healthcare system to a more efficient single-payer system like Japan’s that will allow our businesses to compete fairly. According to 2008 Colorado Blue Ribbon Commission, their savings would be $1.4 B/yr and everyone would be covered. MN spends more on our current health system, so savings could reach $3 B/yr or $6 B/biennial budget after transition costs.

    Final savings: ~$6.6B per budget

  12. Submitted by Bernice Vetsch on 01/15/2009 - 05:47 pm.

    Mr. Lee: The Dems seem intent (only God knows why) on passing some sort of Massachusetts Pln clone instead of John Conyers’ HR 676 National Health Plan. This means that we will NOT save any money and may even spend more to cover extra layers of bureaucracy.

    I would guess it’s some sort of compromise with the Republicans, but the result is that it leaves the insurance industry firmly in charge of our health care (and with the ability to giveth and to taketh away and to raise premiums at will – although those pushing the plan say there will be some controls).

    Even Ted Kennedy is pushing the compromise. He’s sent out a health care questionnaire carefully written to make the chosen plan the only option available to fix our current system. I have complained!

  13. Submitted by Paul Udstrand on 01/15/2009 - 10:26 pm.

    Vonya E. asks:

    “If incomes have remained stagnant or perhaps have fallen as many claim since 2000, then why does our state budget keep going up?”

    It’s called inflation Vonya. If incomes have been stagnant why did the price of oil go up? Answer, income doesn’t drive inflation. Governments more expensive because the cost of doing the things the government does has gone up. People don’t seem to have difficulty understanding this when the Twins say they have to build the stadium now because costs are going up, but for some reason when it comes to government rising costs are a big mystery. By the way, who said 34B was enough last year? We’ve been running deficits almost every year T-Paw has been in office so none of the revenue numbers have been enough.

  14. Submitted by david granneman on 01/16/2009 - 10:28 am.

    hello all
    i have been reading the posts indicating raising taxes will lead to greater prosperity and job growth. if raising taxes works so well then why dont we double or even triple our taxes. this should really make the state prosper. why maybe we should really make the poor prosper and raise taxes on them.
    when companies are looking where to locate factories and create more jobs – they look for the prosperous high tax states – like michigan -dont they.

    the democrates plan will take care of all our problems.
    ONLY IT WILL COST YOU ALL YOUR MONEY, ALL YOUR PROPERTY, AND ALL YOUR LIBERTY.

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