Here’s what to expect as Minnesota’s budget debate ramps up

State economists are located down the hall from the office of James Schowalter, the new Management and Budget commissioner.

But there’s an imaginary wall that separates the economists from their boss.

The economists have their own computers, their own copiers, printers and conference room. The idea is to separate the data the economic analysts compile in coming up with their forecasts from the politics that swirl around them.

The economists will come forward with their next forecast on Feb. 28. Schowalter won’t see that forecast until late in the day on Feb. 27. Gov. Mark Dayton will receive the forecast the next morning before its public release.

Gov. Mark Dayton
Gov. Mark Dayton

Dayton budget precedes new forecast
This forecast will come two weeks after the governor has delivered his first budget proposal to the Legislature and the public. That means that Dayton is creating his first budget based on November forecast numbers, the numbers that show Minnesota has an estimated $6.2 billion deficit in the 2012-13 biennium.

That’s the deficit Republicans and DFLers have been fighting about. Should it be erased with cuts and new revenue (Dayton’s approach) or by cuts alone (the Republican idea)?

Just about the only thing the governor and legislative leaders agree on is that there will be pain.

There’s something else the new governor and new legislative leaders have in common. They’re moving past the easy part. The rhetoric of campaigns now must be replaced by reality of getting the balancing work done.

Certainly, the rhetoric will continue.

“What is daunting is the culture and the mindset that the government is the first solution to solving any problem,” said Rep. Mary Liz Holberg, R-Lakeville, who, as chairwoman of the House Ways and Means Committee, will become a major player in Republican approaches to balancing the budget.

State Rep. Mary Liz Holberg
State Rep. Mary Liz Holberg

Holberg is bright, funny and seemingly liked by her peers on both sides of the aisle. But she also is a true believer that government has grown too big for the state’s good. Minnesota, she believes, must go back to a time when the “family and the faith community” were the first line of defense in taking on social problems.

She frequently repeats the mantra of Republican gubernatorial candidate Tom Emmer that there really isn’t a deficit. That government will have more than $1 billion more to spend in the upcoming biennium than it has in the current period.

“Why has government been one of the few growth sectors in the economy?” she asks, saying that the 2012-13 out-of-balance budget shows a 28 percent growth rate over the current budget.

Although her own committee won’t begin meeting until later this month, Holberg said a number of House committees already have begun looking closely at how money is being spent by government agencies as Republican leaders begin the hard task of balancing their campaign speeches with the realities of balancing the budget.

All of this is preparation for coming up with a budget to counter the budget proposal made by Dayton.

Sometime in March, the Republican House leaders will give each of their committees budget targets.

For all her belief that government has grown at an “unsustainable” rate, there’s a pragmatic side to Holberg.

“I’m one of 201 [legislators],” she said. She predicted that by the end of the session, she’ll be less popular with her base than she is now.

Why would that be?

True believers don’t want any compromise. And, of course, there will have to be.

Pragmatic Holberg, Robling hold key posts
Earlier this year, before Republicans knew they’d hold legislative majorities, Holberg and her counterpart in the Senate, Claire Robling, R-Jordan, attended a national conference of legislators on dealing with state financial woes.

“The most comforting thing,” said Robling, who is the new chairwoman of the Senate Finance committee, “is that we’re not on an island. We’re not alone. In fact, there are other states much farther in the hole than us.”

The conference was intriguing, Robling said, because legislators from around the country learned about ideas being tried in other states to balance budgets. Idaho, for example, ordered state employees to take two unpaid furlough days a month as a money-saving measure.

But that’s throwing nickels and dimes at a multi-billion dollar problem.

State Sen. Claire Robling
State Sen. Claire Robling

Robling, who is as conservative as Holberg, is also pragmatic. Republican leadership, she said, will fight any tax increase, but there might be other ways of bringing more revenue into the system.

A potential major revenue source could be a reduction in tax credits that are handed out mostly to businesses but also to individuals.

“We will look at everything,” Robling vowed. “Maybe it [a tax credit] was put in place for all the right reasons. But did it work the way it was supposed to? There are a lot of these. JOBZ, did it work? If it didn’t, let’s move on.”

(JOBZ, the Job Opportunity Building Zone, was a pet of Gov. Tim Pawlenty. The idea was to stimulate economic development in rural areas by giving tax credits to companies willing to build or expand outside the metro area. The program was criticized by Legislative Auditor James Nobles and DFL legislators but, in the past, defended by Republican legislators.)

Robling admits that eliminating, or reducing, some tax credits might be perceived as a tax increase by some.

“But one of the problems we have is that once things are in place, they’re seen as entitlements,” she said.

What Robling’s comments would seem to show is that beyond that loud barrier of rhetoric, there is room for political movement.

Gamesmanship a near certainty on both sides
But there also will be considerable gamesmanship going on.

Last week, for example, Sen. Julianne Ortman, who heads her chamber’s tax committee, blasted Dayton’s selection of Myron Frans for state revenue commissioner because he won’t take over the duties immediately as he “transitions” away from his current private-sector business.

“This is not an appointment, it is an inaction accompanied by a press release and an IOU from the governor,” Ortman said in a press release.

DFLers, too, have been playing the noise game.

On the first, mostly ceremonial day of the new session, DFL Minority Leader Paul Thissen introduced a rules amendment that would have forestalled any effort by social conservatives to introduce state constitutional amendments until after the budget is balanced.

House Majority Leader Matt Dean urged his caucus to move that bit of theater to the rules committee, prompting DFL Rep. Ryan Winkler to blast Dean.

“Considering the severity of Minnesota’s economic and fiscal crises,” Winkler wrote in a letter to Dean, “I was disappointed that as majority leader you did not encourage all members to vote for Representative Thissen’s amendment.”

Winkler, of course, released his letter to the media.

This sort of noise will fill the air from now until the session ends.

But now that both the new governor and the new Legislature are entering their second weeks at the Capitol, the victory celebrations have ended, and some quiet work has begun.

All the while, the state’s economists are gathering data that will be the basis for an intense debate that will run deep into the spring.

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

Comments (12)

  1. Submitted by Brad Robinson on 01/10/2011 - 08:47 am.

    “Why has government been one of the few growth sectors in the economy?”

    A huge reason for the growth in government is that there is a crisis in unemployment across the state. Financial, medical, educational, and service needs increase as people’s ability to care for themselves decreases. This is not a government plan for growth, this is meeting a very real need.

    “A potential major revenue source could be a reduction in tax credits that are handed out mostly to businesses but also to individuals.”

    Didn’t I just read that the Republicans are going to propose to do away with corporate income tax? What’s the deal? Increase taxation on businesses or decrease it?

  2. Submitted by bernie hesse on 01/10/2011 - 10:24 am.

    I guess one area I would go after in MN for revenue would be the area of corporate subsidies. Corporate subsidies amount to 1.8 billion dollars a year and often don’t deliver intended job goals. Corporate subsidies perhaps should be named the job pirarcy act. For example why are we subsidizing the Timberwolves at the Target Center for around 800,000 a year(it is a TIF) I believe, and sure hasn’t helped their win/loss record.
    MN has been one big candy jar for corporations and efforts to create jobs through TIF, abatement, and outright grants has failed. Certainly corporate subsidies must be on the table this session as we solve the deficit.

  3. Submitted by Leslie Davis on 01/10/2011 - 11:45 am.

    “The Davis Money Plan” that I used in my failed run for Minnesota Governor has been modified a bit and re-named “The Minnesota Recovery Act”.
    A snapshot of this great legislation is below and if the finanical supporters of MinnPost approve it they might print it. There is nothing else that can rescue Minnesota financially unless they sell tickets to all the forthcoming budget fights.
    “The Minnesota Recovery Act”
    • Balanced budget
    • Protected environment
    • Create thousands of jobs & incomes
    • Cut fuel, axle, and registration taxes in half
    • Build and maintain safe, state-of-the-art roads and bridges

    1. FACT – Banks do not lend depositor’s money. They create new electronic digit money for loans.

    2. PLAN – Modify by law “POWERS OF MINNESOTA STATE CHARTERED BANKS”.

    3. The “modification” will require state-chartered banks to create debt-free money for the construction and maintenance of all public roads and bridges (state, county, city, township).

    4. Today, when state-chartered banks make loans they simply create the money as electronic bookkeeping entries. The money is just numbers in their computers. When you write a check or use your ATM card you put those numbers (money) into circulation and the money can then move freely through the economy.

    5. Banks will create money for roads and bridges by making electronic bookkeeping entries in their computers, just like they do now when they make loans. Except THESE WILL NOT BE LOANS but
    a final debt-free payment for approved production and does not have to be paid back to anyone.

    6. Half of the fuel, axle and registration taxes will be eliminated and half will be used to balance the state budget and reduce some property taxes. Individuals and businesses will save billions of dollars.

    7. “The Minnesota Recovery Act” creates demand for products, services and thousands of high-paying jobs. It provides desperately needed incomes, the cash flow Minnesota’s stagnant economy badly needs, and safe, state-of-the-art roads and bridges, and sustainable prosperity.

    Be a Financial Freedom Fighter
    • learn where money comes from
    • learn how money gets into circulation
    • call 612/529-5253 to arrange for a speaker

  4. Submitted by Brad Robinson on 01/10/2011 - 12:02 pm.

    I can understand about job growth and its connection to lower corporate taxes, but 1) it seems to me that the budget crisis is short-term, and the corporate tax fix is long-term, 2) the original problem was due to the stock market crash based on Wall Street gambling on increasing property values, not on government spending: so the fix is not connected to the problem (just an excuse to benefit corporations), 3) even if the corporations generate huge savings and profits from tax-cuts, there is no guarantee that that will translate into job creation. Jobs lag behind growth and sometimes are never re-hired.

  5. Submitted by Tim Walker on 01/10/2011 - 12:39 pm.

    So, Rep. Holberg believes that Minnesota ‘must go back to a time when the “family and the faith community” were the first line of defense in taking on social problems.’

    Sounds good in theory, but totally unworkable in practice.

    Should churches, mosques, and temples start tithing for mental health clinics, methadone clinics, rape-counseling centers, suicide-prevention hot-lines, etc.? (I can extend that list with dozens more items.)

    I’m not affiliated with any faith-based institutions, and hence don’t put any money in a weekly collection basket. Will I and others like me be resented for not pitching in to fund a “faith-based social safety net”?

    These questions I raise are just the tip of the proverbial iceberg when it comes to identifying the massive flaws in Rep. Holberg’s wistfully nostalgic “solution.”

  6. Submitted by Neal Rovick on 01/10/2011 - 01:37 pm.

    ….Minnesota, she believes, must go back to a time when the “family and the faith community” were the first line of defense in taking on social problems….

    What familiarity with that era does she have? Perhaps “Little House on the Prairie”? The books weren’t too unrealistic about the perils of that time, but the TV show sucked at showing the difficulties. And unfortunately, it is the TV show past that most people fondly “remember”.

    Does she go without insurance? Does her church pay for the cost of cancer treatments for anyone? Does she provide all of the support and housing for her elderly relatives? Will she volunteer to hold neighborhood watch in the overnight hours? Does she volunteer to hold prisoners in her basement? Will she go out and shovel the road in the winter and fill the potholes in the summer? Will she donate some supplies to the water treatment or sewage plant? Does she have time to go to the refinery to verify if they leaked waste into the river?

    On and on.

    There are efficiencies in professionalism, uniformity and economy of scale. Day in, day out. That is what modern government has brought.

    It’s not Ma and Pa on the prairie anymore.

  7. Submitted by Ginny Martin on 01/10/2011 - 03:02 pm.

    Neal, you are absolutely right and have stated it better than just about anyone else I’ve read. Maybe she (and others of this mindset) should answer those questions before they start hacking at the budget and the programs.

  8. Submitted by Brad Robinson on 01/10/2011 - 03:45 pm.

    I am affiliated with faith-based institutions. For the record, it would be great if families, neighbors, churches, etc. would take care of those in need. But the government stepped in the void because those institutions were not doing the job. There is no reason to think they would do so now. It needs to be done and someone has to do it.

  9. Submitted by B Maginnis on 01/10/2011 - 03:55 pm.

    No, it’s not “ma and pa” on the prairie.

    It’s 4th generation welfare cultures, mass waves of non-English speaking immigrants, and even an aging baby boom population that are breaking the backs of the social services that were once a safety net, not an entitlement.

    But thanks to the liberals like Ginny, who think the government should pay for everything cradle to grave, our country needs to face the truth:

    Liberal social policies don’t work.

    Sooner or later, you run out of other people’s money to spend.

  10. Submitted by Bernice Vetsch on 01/10/2011 - 05:04 pm.

    “…the government stepped in because those institutions were not doing the job.”

    And nor should they be asked to shoulder the burden of maintaining the common good for the whole population because government isn’t doing IT’S job.

    Churches, families and neighbors all do what they can to help the hungry, jobless, homeless and ill, but there’s no way that churches, for instance, can ever collect enough money from their members to solve the social problems faced by those whom a large and complex society has left out.

  11. Submitted by Tom Anderson on 01/10/2011 - 07:04 pm.

    Why on earth would the legislature balance the budget first? It is always done hours before the session ends although, I guess there is a new majority party now…

  12. Submitted by Sheila Ehrich on 01/11/2011 - 12:32 pm.

    I totally agree with Tim, Neal, Ginny and Brad.

    But one question that doesn’t seem to be being addressed by the “cut corporate taxes” crowd is who is going to pay to educate the employees needed to work for these companies? By basically reducing their corporate taxes and property taxes to almost zilch they no longer have any buy-in to education in Minnesota. Oh yes, they will pontificate on what needs to be done, but pay for it, no way.

    The same goes for the roads, buses and trains needed to get employees to their jobs and the Highway Patrol to see that it’s done safely. Also, it doesn’t cover the cops that protect these businesses or the fire departments or EMTs who responds in times of need.

    Again, the middle class is being asked to bear almost all of the entire burden of being responsible to see that this state keeps turning out individuals with the education needed to keep these businesses running and the community-provided services needed to maintain safety, to say nothing of those needed to maintain accountability from these businesses.

    As for you BD, if all this Social Security, Medicare, etc. is going to break our back, then we should get rid of it right away!! Tell your folks and grandma and grandpa that it’s time to go back to “pulling up their own bootstraps” if they want healthcare coverage. They may just have to go find a job with benefits or do without a few dinners to cover their prescriptions. Maybe they’ll have to join the crowd done at the food shelf at the local church to make ends meet. Or maybe they’ll all have to move in with you and your family so you can take care of them.

    Tell the vets that we will be closing their hospitals and clinics. It’s just too expensive to take care of them

    I don’t know about you, but I’ve been paying into Social Security since I started working forty some years ago and into Medicare since it was started. I don’t see it as an entitlement, but I do see it as a way to live a life barely out of poverty after I’ve worked until I’m 71 so I can max out my Social Security.

    Why haven’t we raised the rate paid into Social Security by those who make 10 to 20 times what I make? Because people like you scream, “No new taxes!!!”

    You seriously need to spend some time picturing a country without all those “entitlements” and start counting the number of people who would become homeless, sick and dying and hungry.

    Then figure out how you and the churches, etc. will take care of them. Let us know what you come up with.

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