Minnesota budget forum reveals patches of common ground, dueling analysts, no movement

Steve Sviggum
Steve Sviggum

Call me naïve, but I couldn’t help hope that a forum held Monday on Minnesota’s $5 billion budget gap would show some sign of movement toward resolution — some softening of the rigid partisan divide on taxing and spending.

After all, we’re less than six weeks away from the official end of this legislative session. Time for less posturing and more action, I thought, as top Republican legislators — Senate Majority Leader Amy Koch and House Speaker Kurt Zellers — sat down at a table with commissioners who serve as the DFL governor’s chief fiscal advisors — Myron Frans of the Revenue Department and Jim Schowalter of Minnesota Management and Budget.

Steve Sviggum didn’t boost my hope, though, as he began moderating the forum at the University of Minnesota’s Hubert H. Humphrey School of Public Affairs. The U of M regent and former Minnesota House speaker pointed out that Gov. Mark Dayton and GOP legislative leaders actually have moved in recent weeks to widen the gap between them, not close it.

Myron Frans
Myron Frans

Dayton, for example, has proposed some $3 billion in tax increases on top earners. They are rejected by the Republicans controlling the Legislature.

For their part, Republicans propose spending cuts that are denounced by DFLers. For example, the Republicans would eliminate more than $600 million in aid to cities and counties, something the DFLers insist would drive up property taxes.

Add it all together and the two sides are more like $10 billion apart, Sviggum said, not the mere $5 billion gap defined by finance experts.

Patches of common ground
Still, I wasn’t the only one looking for movement. An audience member sent a question to the podium asking whether there is any common ground on bringing more tax revenue into state coffers.

“There is common ground about the system being gamed,” Frans, the Revenue Commissioner, answered.

The complexity of the tax system has created “a lot of opportunity,” to take advantage of loopholes, he said.

I thought I saw Koch and Zellers nod their heads.

As an example, Frans described the recent New York Times story saying that General Electric reported $5.1 billion in profits from U.S. operations in 2010 and paid no federal taxes but instead claimed a $3.2 billion tax benefit.

The legal loopholes that let GE off the tax hook are similar to provisions scattered throughout Minnesota’s tax code, Frans said.

“We can agree, let’s try to make the system more fair,” he said.

With reform of the tax system, Republicans might even find room for more of the tax cuts they champion.

“If you do the right kind of base broadening, you can lower the tax rate,” Frans said.

Koch said she agreed with at least some of the commissioner’s comments on the need for tax reform.

Hope rises!

But she added that with just a little over five weeks left in this session “we don’t know if we can have that discussion in this budget cycle.”

Hope falls.

Pressing hard
Sviggum pressed hard on the panel to reveal some common ground. He instructed Frans and Koch, seated side-by-side at the table, to look each other in the eye and state what they want and what they were willing to give up. Schowalter and Zellers were to do the same.

“I want some revenue,” Frans told Koch. The state’s budget problems can’t be solved “realistically and fairly,” he said unless the Republicans give some ground on their refusal to raise more money.

What would he give up? “Maybe we don’t need as much revenue as we think we do.”

Frans outlined common ground, too. He said the Dayton administration is on board with the general Republican move for streamlining government, for “smarter, wiser and better,” approaches to serving Minnesota citizens.

“We can do better,” he said. “We will do better. … I will work with you on that.”

Amy Koch
Amy Koch

Negotiate now
Then it was Koch’s turn. She didn’t really respond to Frans’ revenue request, although she had made it clear earlier in the forum that many Republicans consider it to be it is a nonstarter for negotiations.

What Koch said she wanted is “to start negotiations and discussions now.”

Conference committees are in place to start reconciling the different versions of the many House and Senate bills that speak to the budget’s bottom line.

And some of those bills are very close to the position of the Dayton administration — for example, on funding for public safety and the judiciary — Koch said.

Both sides are close on the amount of funding for K-12 education, too, she said. But they differ on the way the money should be spent, with Dayton stressing early-childhood education and all-day kindergarten while the Republicans emphasize literacy.

“Let’s all come together now,” she said. “Let’s not wait until May.”

It was a timely call for action. And she did identify some significant islands of agreement, but she sailed past the vast territory where the two sides differ.

Finish Act Two!
Schowalter gave even less ground when it was his turn to face Zellers.

“This is a three-act play,” he said.

In the first act of the budget drama, the governor lays out his budget. The script of the second act calls for the Legislature’s full budget proposal. Finally, in tense Act Three, the two sides must come together.

“We are starting to talk about the third act, and I don’t think we have finished the second act,” Schowalter scolded.

DFLers and state fiscal analysts allege that at least $1 billion of the savings claimed in Republican bills are overstated.

Sen. Richard Cohen, DFL-St. Paul, put it this way in an opinion piece published by the Star Tribune on Monday: “The current Republican budget plan in the Senate is banking on almost $1 billion in mythical ‘savings’ and ‘reform’ that is simply based on invented money. The House plan uses even more fictional money in resolving the budget deficit of $5 billion.”

As an example, he said Republicans propose to save $46.2 million by changing the way the state buys goods and services. But state fiscal analysts say that change would save only $400,000.

Republicans have disputed the professional state analysts, and brought in their own outside consultants to come up with the numbers they are using to claim they have produced the bills necessary to balance the budget.

Schowalter is not convinced. He said at the forum that there is “at least a billion we need to nail down,” before the Legislature’s budget — Act Two of the process — truly is finished.

Dueling analysts
Finally, it was Zellers’ turn. He didn’t sound conciliatory. “We do want to bring consultants from the real world,” he told Schowalter.

He challenged Schowalter to join him in locking the state analysts in a room with the GOP’s outside consultants until they can agree on the budget impact of the various bills.   

Still, Zellers did raise hope again. He said common ground already has been established with two “landmark pieces of legislation.”

In a move that disappointed many of his supporters, Dayton agreed to a GOP bill that would streamline the permitting process for businesses seeking to expand or build new operations in Minnesota. In the second deal Zellers lauded, Dayton compromised with the GOP on alternative teacher licensing.

Zellers said Dayton’s movements on those issues are seen as “a giant step of good faith” that the two sides can negotiate on some major points.

Meeting the deadline
On one point, the two sides did agree.

Sviggum asked whether the session could finish with a budget by May 23, the constitutional deadline for the Legislature’s adjournment. If the budget isn’t produced by then, Dayton would need to call a special session in order to avoid a government shutdown after June 30, when the current fiscal year ends.

All four said yes, they could meet the May 23rd deadline.

Maybe. But one day very soon we’ll have to see a lot more real movement than we saw on Monday.  

Sharon Schmickle covers international affairs, science, the economy and other topics.

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Comments (9)

  1. Submitted by Paul Udstrand on 04/12/2011 - 10:22 am.

    So you have one side willing to compromise voluntarily, and another side that requires any compromise be extracted via whatever political force that can be brought to bear, and won’t even discuss compromise in non-binding public forum.

    This is nothing new, and no sign for hope. It means Dayton will have to veto the republican bills, shut the government down, and fight like a pit bull in order to stave off draconian service cuts and raise revenue. It means Republicans are intransigently committed to a budget non-solution that the majority of Minnesotan’s disagree with.

    By the way who’s paying for these “outside” consultants and how much? Whoever they are, they can turn their work product over to the state budget analysts any time now and we can see how they get their figures. No need to lock them in a room, unless you want to politicize… math.

  2. Submitted by Ray Schoch on 04/12/2011 - 11:15 am.

    I’m not sure about his second paragraph (If the majority of Minnesotans disagree with the Republican platform, why would they have elected the kinds of intransigent pseudo-conservatives that now hold the majority in the legislature?), but Paul’s first and third paragraphs are right on target.

    BOTH sides have to move in order for the term “compromise” to have any real meaning. Lately, I only see movement on the left. What Zellers and Koch refer to as “negotiation” smells to me a lot more like “extortion.” Let’s see what sort of “compromise” comes out of Senator Newton’s holding a gun muzzle to the temple of the state’s nonprofit entities.

    Meanwhile, I, too, would like to know A) who’s paying for the outside consultants Republicans are apparently relying on for budget numbers; and B) where/how did they get their numbers? Don’t these two items eventually have to become part of the public record?

  3. Submitted by Ralf Wyman on 04/12/2011 - 12:49 pm.

    As usual, you have Democrats willing to negotiate, and Republicans being intransigent.

    Frans was willing to shift his revenue goals. Koch? Nope, nada offered. I am so tired of the media narrative that both sides are equal in this crisis.

    The GOP has a solid decade, with Tim Pawlenty leading the way, and now a whole crop of Republicans who watched, learned, and repeat his tactic, who will dig in and never, ever blink.

    We cannot as a state – or a nation – actually be governed if this is the way from the GOP. Governing means there is a desire to seek common ground, make common cause, and work for a future together.

    Day after day, in bith St. Paul and D.C., I get the strong sense that most leading Republicans want only what’s in it for them, to hell with the common good, and this selfishness is devolving now into full-on nihilism.

    One needs look no further than the freshman GOP class in Washington who will gladly torpedo the economy with a massive government default, as they try to take a “principled” stand on the debt limit.

    Over the next 18 months, I have no idea how we’ll function as a society when one of two elected parties seems to have given up on the notion of progress, conciliation, or even a future that contains possibilities.

    All they want is sacrifice from those with little, and tax cuts for those with much. It’s a world that seems chilling and even immoral to me. But is enthralling to a certain class of GOP pols.

  4. Submitted by David Greene on 04/12/2011 - 01:27 pm.

    Commissioners should absolutely refuse to talk to the private consultants. Why should they legitimize a purely political move that goes against every budgeting process we’ve used in this state? No, there can be no compromise on the facts. The numbers are what they are, as determined by established procedure.

  5. Submitted by Harris Goldstein on 04/12/2011 - 01:29 pm.

    RE: #2

    Ray asks “who’s paying for the outside consultants Republicans are apparently relying on for budget numbers”.

    I doubt that anyone is paying. I’ve been there, done that as a consultant. It’s called marketing and those consultant’s estimates have to be placed in the context of selling. None of those consultants would put the fees at risk based on attaining savings anywhere near $46.2M.

    So here’s my guess. The $400k number is based on doing procurement largely the same way it’s currently done, but doing things better and more efficiently. The $46.2M number is based on rosy, best case scenarios and heavily reliant on assumptions that may not be achievable.

    For example, the high estimate may rely on all local governments and school districts sourcing from a single (or perhaps 2) preferred suppliers. Sounds fine until you realize that means cutting out the local hardware store on Main Street. Or it may rely on some generalized assumptions that don’t apply to major expenditures (such as capital improvements). Or it takes the savings achieved from “low hanging fruit” and extends to the entire budget.

    So, in all likelihood, we should insist on significantly more than $400k but not expect anywhere near $46.2M.

  6. Submitted by will lynott on 04/12/2011 - 06:18 pm.

    The evidence before me demonstrates that republicans view compromise as something the governor does, not them. Every example I’ve seen has the greedy old party getting everything they want and Dayton caving in. That’s got to change.

    Dayton simply cannot allow establishment of the precedent that the legislature can go out and get shysters who will tell them what they want to hear rather than the facts. There is no time now to evaluate the worth of the “private analyses.” Nor is that necessary or even desirable. The fiscal notes have to come from career public analysts whose work is available for public review and who don’t have a profit motive. The governor would be an idiot to agree to anything else.

    Actually, I’m told that, at least as far as procurement goes, many of the “consultants” are the potential bidders for the state’s procurement operations. Do I think they’d cook the books to make it look like they could do it better? Absolutely.

    Let us hope that when the DFL takes over again, their first order of business is to make reliance on the state’s professional analysts a matter of law.

  7. Submitted by Paul Udstrand on 04/12/2011 - 06:23 pm.

    //why would they have elected the kinds of intransigent pseudo-conservatives that now hold the majority in the legislature?

    Ray, we know for a fact according several surveys that the vast majority of Minnesotan’s support a combination of tax hikes and budget cuts, not a cut-only budget. As to why people would vote for Republicans, well apparently many people failed to recognize the true nature of the Republican platform and agenda. Remember, Republicans lied before the election, they told everyone they were going to be about jobs jobs jobs. It’s familiar bait and switch.

  8. Submitted by Paul Udstrand on 04/12/2011 - 06:29 pm.

    //I doubt that anyone is paying. I’ve been there, done that as a consultant. It’s called marketing and those consultant’s estimates have to be placed in the context of selling. None of those consultants would put the fees at risk based on attaining savings anywhere near $46.2M

    Yes, and well a know that sales are based on NOT giving customers what they want, so no need to worry about private sector accounting firms providing truly independent and reliable analysis. Kinda like Arthur Anderson did for Enron.

  9. Submitted by William Pappas on 04/12/2011 - 09:46 pm.

    Right on, Paul. OF course the republicans must rely on outside consultants. Their budget numbers are too outrageous for the institutional analysis that, until now, was good enough for both parties. This dramatizes just how much the new Republican Party has veered from the mainstream and now occupies a radical position not supported by known facts. If the democrats were to roll over and give republicans everything they desire the result would probably convince most of us to never vote republican again. Maybe that’s the answer.

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