News
Editorial, Post Bulletin, May 31, 2011
Sen. Carla Nelson, a Republican from Rochester, handed out an interesting and enlightening document during Thursday's Eggs and Issues event sponsored by the Rochester Area Chamber of Commerce.
Under the headline "Here are the actual budget numbers for your consideration," she provided the following figures:
• $30.2 billion — current budget for this biennium (fiscal year 2010-11)
• $34.5 billion spent — includes onetime federal stimulus money and shifts (fiscal year 2010-11)
• $34 billion of revenue projected for next biennium (fiscal year 2012-13)
• $34 billion — Legislature's budget sent to Gov. Dayton for the next biennium
• $37 billion — Dayton's budget for next biennnium.
• $39 billion in projected spending for next biennium.
Let's, as the saying goes, "unpack" some of those numbers.
Start with the last figure. That $39 billion is a pipe dream, the "government-growth-on-autopilot" budget that everyone knows won't happen. Minnesota needs to become more efficient, and spending can't expand at this rate when the economy is struggling.
Working our way down, consider the $37 billion Dayton budget. That figure was accurate for much of the session, but during the last week the governor adjusted his proposal. It now stands at about $35.8 billion in spending over the next two-year cycle.
Keep that in mind as we jump to the top two figures on Nelson's list. Minnesota used $30.2 billion of its own money in the current two-year cycle, but we actually spent $34.5 billion. To make the books balance, we didn't pay schools $1.9 billion that they're owed, and we used $2.3 billion in federal stimulus funds.
As far as we know, Minnesota didn't spend those federal dollars on a statewide pizza party. We spent them on education, transportation and health care, and without that money, we would have been in a world of hurt.
Yet, when some Republicans talk about the size of Dayton's proposed budget increase, they use $30.2 billion as the baseline of "current state spending," and compare it to Dayton's outdated $37 billion proposal.
By doing so, the GOP can claim that Dayton seeks a 22 percent spending increase. That's the figure that was cited by Rep. Mike Benson during Thursday's Eggs and Issues meeting. Nelson reported the same figure on her handout.
But if we compare what Minnesota actually spent in the past two years to the latest offer that Dayton has put on the table, spending would increase by 3.7 percent. Or, put another way, the annual increase would be less than 2 percent
If we can’t agree on how to do the math, we’re going to have a hard time reaching a deal.
So here's a hard fact: Dayton's proposal would exceed projected revenues by $1.8 billion. The GOP plan, on the other hand, has a certain cleanness and simplicity, in that it bases the budget on projected revenue and not a penny more.
"Need-based budgeting" that the DFL supports is much more complicated and messy, but simplicity isn't always a virtue. After hearing endless comparisons to households and businesses that "tighten their belts" and "learn to live within their means," we'd hasten to point out that when times get tough, businesses and households don't merely cut costs. They also look for ways to increase their income.
We believe Minnesota should do the same.
Should this new revenue be entirely through a new tax on our wealthiest citizens? Probably not. All avenues need to be explored.
Ideas include an expansion of gambling, a sales tax on clothing, new fees on tobacco and alcohol and increases in the price of hunting licenses, fishing licenses, boat registrations and state park permits. Other fees might also need to increase.
We need this revenue because Minnesota's population is growing — nearly 8 percent over the past decade. We have more kids to educate, and as baby boomers retire, we'll have more seniors who need long-term care. By 2030, one-fourth of our population will be 65 or older, twice the current figure.
We have more disabled and low-income people who require medical assistance, and inflation is affecting the cost of almost everything, including gasoline, food, medicine and skilled professional services.
Could those needs be met with the GOP's budget, which would spend $500 million less in the next two years than we spent in the previous two? On paper, it's almost certainly possible — almost anything is when you're just crunching numbers, trying to hit a certain figure.
But we're deeply afraid that when such a "solution" trickles down to our classrooms, our grandparents, our college students and our unemployed or disabled neighbor, Minnesota will cease to be recognizable as the state which once was known for innovation, education and compassion.
http://www.postbulletin.com/news/stories/display.php?id=1456320
Sharon Schmickle, MinnPost.com, April 15, 2011
A common theme in the state's tax-and-spend debate is that other states are balancing their budgets without raising taxes. In a fiercely competitive business climate, standing out in that regard is the last thing Minnesota needs, the argument goes.
Sen. Majority Leader Amy Koch, R-Buffalo, put it this way during a recent forum at the University of Minnesota's Humphrey Institute: "If you look at all of the states across the country that are doing some of the same things and facing some of the same budget difficulties...most are achieving their budget targets through reductions and reforms not through raising taxes. In this economy, for Minnesota to be raising taxes at this time makes us an outlier — and, I believe, sends a bad signal."
Combo approach
I'd heard this theme repeated often enough to make me want to check the record. So I contacted the National Conference of State Legislatures in Colorado, which tracks state budget action. The record is not complete for this year because many states, like Minnesota, still are wrestling their budgets to the bottom line.
What is clear is that most states struggling in the aftermath of the Great Recession took steps in 2009 and 2010 to significantly boost taxes and other revenue while Minnesota did not.
In other words, those states built themselves some cushion early in this bout of hard time, and that is a factor in their ability to tighten spending this year.
Call it the combo approach.
2009: billions in new taxes
The key year was 2009 when states took their first hard hits from the triple whammy of the burst of the housing bubble, the near collapse of the financial system and the massive layoffs that followed.
The National Conference of State Legislatures reports that states passed a net tax increase of $28.6 billion that year to ease their budgets for 2010. That added up to a 3.7 percent overall tax hike, the largest increase since 1991.
The personal income tax went up the most, jumping in 15 states by a total of $11.4 billion.
"States relied heavily on it to raise new revenue, an event not observed in years," the Conference researchers said in their report. "Many of the income tax raising states targeted higher-income earners."
Further, 17 states increased or expanded sales taxes to generate another $7.2 billion. Twenty states raised business taxes. Taxes also went up for tobacco, alcoholic beverages, gasoline and certain health industry transactions.
Here are a few particulars from legislation passed in 2009 to shore up state treasuries for 2010:
• The biggest personal income tax bites came in California and New York, some $9.2 billion of the total increase.
• Delaware raised taxes on incomes above $60,000.
• Oregon added new top rates of 10.8 percent and 11 percent to bring in $243 million.
• Wisconsin increased income taxes on top earners by 1 percent. It also scaled back capital gains preferences and increased certain telephone taxes as well as tipping fees at landfills.
Minnesota's tight hold
Wisconsin's overall tax package represented a 5.8 percent increase over the previous year. The net effect was to relieve Wisconsin's budget deficit by $870.5 million for 2010.
Minnesota, by comparison, scored a net gain of $28.6 million in revenue for that year, mostly by terminating income-tax reciprocity with Wisconsin.
Minnesota is listed among six states that actually reduced income taxes slightly for 2010, mostly through adjustments made to conform corporate income taxes to federal changes.
Only 15 other states held the line against overall taxes as tightly as Minnesota did that year. And eight of those states came back in 2010 with substantial revenue increases.
More increases in 2010
By 2010, legislatures across the country were better prepared to hold the line on taxes. Still, many of them "increased taxes and fees for the ninth consecutive year as they worked to shore up state budgets," the Conference reported.
Overall, states enacted a net tax increase of nearly $4 billion. Add spikes in fees and other revenue, and the total came to $5.5 billion. Sales and use taxes were raised the most, increasing by $1.7 billion. Also up were taxes on businesses, tobacco, the health care industry, alcoholic beverages and motor fuel.
Minnesota is listed as having increased taxes slightly (about 0.4 percent) that year, chiefly by reducing property tax aid to local governments and the renters' property tax refund. It also delayed payments of sales and corporate tax refunds.
By comparison, here's a sampling from other states:
• Arizona enacted a three-year sales tax rate increase from 5.6 percent to 6.6 percent.
• New York raised its cigarette tax from $2.75 a pack to $4.35, extended the sales tax on clothing and limited personal income tax deductions for charitable donations for taxpayers who earn more than $10 million a year.
• Ohio delayed a scheduled income tax reduction for two years.
• New Mexico increased the sales tax by 0.125 percent, increased cigarette tax by $0.75 a pack and eliminated a tax deduction.
Taxing yoga and more in 2011
While all of this taxing helped cushion dozens of states, it didn't save them from another round of budget battles this year. With a few exceptions — like North Dakota where agriculture and energy industries are prospering — states are crawling back slowly from the ravages of the recession.
Many states have considered even more tax increases — on everything from yoga services (Missouri) to sales by Internet retailers like Amazon.com (California, Minnesota and others).
Illinois already has passed whopping tax rate increases: 66.7 percent on personal income and 48 percent on corporate income.
In California, Democratic Gov. Jerry Brown proposes to extend 2009 increases on income, vehicle and sales taxes. Republican legislators are trying to block his bid to seek voter approval for the taxes in a June election.
Governors tackle thorny issues
But many other states realize they can't go back to the tax well year after year. Thus, they are suffering the political and fiscal pain of serious spending cuts.
"The dismal fiscal situation in many states is forcing governors, despite their party affiliation, toward a consensus on what medicine is needed going forward," The New York Times reported in January after examining the inaugural addresses of more than two dozen incoming governors.
The prescription, according to the Times, has been to "Slash spending. Avoid tax increases. Tear up regulations that might drive away business and jobs. Shrink government, even if that means tackling the thorny issues of public employees and their pensions."
New York in particular has signaled it's at the end of the line on tax increases. To the dismay of many of his fellow Democrats, Gov. Andrew Cuomo, declared that New York's government "spends too much money, and has for too long with too little performance for the taxpayer."
The recently passed New York budget slashes spending by about 2 percent, rather than impose new tax increases. Targets for cuts include health care and education, two big-ticket spending items that previously had been deemed untouchable.
No padding for Minnesota
So both sides in the Minnesota debate can hold up valid examples to prove their points.
But context is relevant too.
In that light, it's important to note that some prominent new champions of fiscal austerity — most notably Wisconsin and New York — are tightening their belts against the padding of recent tax increases.
Minnesota doesn't have that padding.
By Sharon Rolenc, Minnesota News Connection, Twin Cities Daily Planet, March 31, 2011
Minnesota lawmakers are trying to get a state budget to Gov. Mark Dayton's desk by the Easter break, and so far GOP leaders have justified a cuts-only approach, citing "out-of-control spending" they say is not sustainable.
But how much does government actually cost Minnesotans? The answer may be surprising.
For much of the 1990s, the average share of a household's income for state and local government hovered around 17.6 percent, peaking at nearly 18 percent in 1993. Nan Madden, director of the Minnesota Budget Project, says today that number has dropped to 15.2 percent.
"When we look at the data about the size of state and local government in Minnesota over time, we do see that government has been downsized from where it was for much of the '90s."
The economic downturn, not overspending, has led to the state's budget deficit, Madden says, because less income- and sales-tax revenue is coming in to cover state operations, programs and services. Spending down reserves or delaying public-school payments are some examples of short-term solutions she says may have offered temporary fixes, but later became problems when the bills came due.
It's true that health care is one area of the budget that has grown, Madden says, but that's not unique to government. It's happening in the private sector as well, she says, adding that cutting thousands of vulnerable Minnesotans off medical assistance isn't going to make the problem go away.
"We don't bring down the cost of health care simply by government saying we are going to buy less of it. It really needs some system-wide changes in the health-care system to bring those costs down, both in the public and the private sector."
A cuts-only approach to balancing the state budget isn't the best solution, Madden says, because services need to be paid for one way or another.
"Over time, we've seen cuts to state funding for cities and counties that has led to upward pressure on property taxes. We've cut state funding to our public colleges and universities, and as a result we've seen some dramatic increases in tuition. So we are raising revenues, we just have tended to do them in ways that are not as in sync with people's ability to pay."
With differing House and Senate budget bills on the table, Madden says, the real work begins with making concrete choices about what's truly important to the state and the quality of life for Minnesotans.
"When we take a look at the budget choices that have been made in this decade, we have largely relied on short-term solutions and cuts to services as a way to balance our budget. The easy solutions are well behind us. Now, we're looking at much more severe reductions to services that really bring into question what kind of state we're going to have in the future."
The Minnesota Budget Project has data on the price of government online at mnbudgetproject.org/resources.
Copyright: © 2011 Minnesota News Connection
The Rev. Kathy Larson and the Rev. Lon Weaver, Duluth News Tribune, March 27, 2011
We are writing on behalf of faith communities rooted in rich traditions and with special sensitivity to the vulnerable in our society. The book of Isaiah calls us to become “repairers of the breach” by building a society that responds to the needs of the poor and the broken. It is part of the fiber of who we are. When we fail in this, Isaiah teaches that we are presumptuous to call ourselves “a nation that practices righteousness.” When we neglect to do this, we are maintaining the chasm described in Jesus’ parable in the gospel of Luke about the separation between the “Rich One” and his neighbor, Lazarus, who lay wounded outside the gate — a harrowing fact in which the breach in this life stretched into one that existed in the life to come.
The message of the prophets is directed not at faith communities in particular but at the nation as a whole.
A growing chasm exists in Minnesota. We see evidence of this in the budget decisions our local school district has to make. Because the state has withheld 30 percent of its promised money to the Duluth school district, the School Board has been forced to make painful cuts. Among these are $1 million from special education; $110,000 through the elimination of the Habitat program; $135,000 from the English-as-a-second-language program; and the elimination of teaching, maintenance and administrative positions.
Churches United in Ministry, or CHUM, has seen further evidence of this chasm in the greatly increased numbers of people using its services. There are not enough beds in its shelter to give refuge to the homeless. Food shelf use is significantly higher: 13,892 individuals received help in 2010, 35 percent of them children.
There is another path, a way to repair the breach and cross the chasm. We can take a balanced approach that includes increasing revenue instead of just cutting services to our kids and our most vulnerable. We should tax based on ability to pay. As confirmed in a recent News Tribune article, the percentage of taxes paid by the wealthiest is less than that paid by those in the middle-income and lower-income brackets. The poorest 10 percent pay more than 20 percent of their income in taxes compared to the wealthiest 1 percent who pay 8.8 percent of their income in taxes.
The Legislature is facing hard decisions. The budget is a concrete expression of our values and commitments as a community. Who are we as Minnesotans and who do we care about? We are at a crossroads. We can and must change this picture. Together we can have the courage and compassion to do so.
The Rev. Kathy Nelson is pastor at Peace United Church of Christ in Duluth and the Rev. Lon Weaver is pastor at Glen Avon Presbyterian Church, both of Duluth. They wrote this on behalf of CHUM, or Churches United in Ministry, a clergy group.
Susan Brown and Brian Rusche, Winona Daily News, Friday, March 11, 2011
Minnesota families, just like our Minnesota state government, have been hit hard by the recession and its aftermath.
In times like these we do what it takes to persevere - provide for our loved ones, look out for our neighbors, and make wise decisions to pave the way for a better tomorrow.
Thousands of us have not yet felt the benefits of a fledgling recovery. Having lost a job or housing, nearly half a million Minnesotans are still face-to-face with hunger or homelessness, and turn to both nonprofits and public services to provide a temporary helping hand.
Unfortunately, just when neighbors still need a hand, state resources for providing this help are down. Like in most other states, the recent recession has caused Minnesota state revenues to fall far and fast. And so this is the challenge facing our elected officials: Do we rely solely on expenditure cuts inflicting real pain on nearly everyone, including those least able to shoulder new burdens, or do we favor a balanced approach that includes revenues, preserves some semblance of a safety net, and allows for strategic investments to accelerate economic recovery?
So far this legislative session, we've seen Minnesota's legislature embrace a cuts-only philosophy that would inflict real pain, reduce public services, reduce money in the economy, and cost many people their jobs. This approach would create a downward spiral, making the economy worse. If government reduces spending too much while families and businesses are also cutting back, it only makes times tougher and delays the much-needed recovery.
We can keep Minnesota competitive by producing a well-educated workforce, building an infrastructure that meets our growing demands and preserving a clean environment for future generations. This ought to also involve common sense improvements to our tax system - a system where today the wealthiest pay a smaller share of their income in state and local taxes than other Minnesotans.
During this time, the worst national economic crisis since the Great Depression, most states have recognized the logic of a balanced approach that includes revenues to address the growing gap between needs and resources. Yes, they all cut spending but they didn't only cut spending. To remain competitive, Minnesota must do the same.
We have already endured a decade of deep cuts, and we have watched our quality of life suffer as a result. It's time to lay the foundation for Minnesota to thrive when the economy rebounds.
If we continue to borrow from our schools and make higher education unaffordable, we deprive tomorrow's workforce of the next generation of Minnesota leaders. If we take our police officers and firefighters off the job and close our parks and libraries, we will no longer have safe, attractive communities for people who want to start careers, raise families, and begin new businesses. If we stop caring for our neighbors with affordable health services, decent housing and adequate food, we will hold people back as they work to recover from the recession and reach their full potential.
All of these items are so much more than lines in a budget; they are essential elements to our quality of life today and far into the future.
As our elected officials continue to grapple with a serious decline in revenues - caused not by overspending but by the national recession - we must not lose sight of the fact that this is much more than a math problem. We are talking about preserving the things that make Minnesota a great place to live. As leaders of the Invest in Minnesota coalition, we urge lawmakers to keep all of our options on the table and use a balanced approach that includes revenues. Let's pull together and reclaim our reputation as a high quality-of-life state.
Susan Brown is the public policy director of the Minnesota Council of Nonprofits and Brian Rusche is the executive director of the Joint Religious Legislative Coalition. Invest in Minnesota unites over 200 faith, labor and nonprofit organizations from around the state in a call for revenues raised fairly to address budget shortfalls.
Katherine Wagoner, ABC Newspapers, February 16, 2011
Balanced approach
To the Editor:
As I’ve been listening to our elected officials debate how to address the budget shortfall, the severity of what’s at stake is becoming clear. It’s more than a math problem, it’s about whether or not we will continue to invest in education, health care, roads, and care for veterans, the elderly and people experiencing poverty.
So far this year our representatives have proposed a cuts-only approach that would jeopardize the future of our state and our many citizens.
To address the $6.2 billion shortfall with cuts alone, we will see consequences that cause real pain to real people.
I work first-hand with people struggling to find work in this economy and cuts to supported employment programs, subsidized childcare and transportation assistance will hurt unemployed people as they fight to get back on their feet.
It is wrong to balance the budget on the backs of the vulnerable – Minnesota is better than that.
Fortunately, we have another choice. We can take a balanced approach that includes raising revenues, and at the same time we can create fairness in our tax system. High-income earners should be paying the same percentage of their income in state and local taxes as those of us in the low-income and middle-income brackets.
I hope that is the kind of solution we see when Gov. Dayton releases his budget. It’s the right thing for working families, for unemployed and low-income and for all of us working to recover from the recession.
That’s why I’m involved with the Invest in Minnesota coalition uniting faith, labor and nonprofit organizations in our call for a balanced approach.
Katherine Wagoner
Coon Rapids
Christina Wessel, Minnesota Budget Project, December 2, 2010
K, now we know the numbers. But as we consider the figures that were thrown out at today’s release of the November Forecast, let’s not lose sight of the fact that we aren’t just fixing a budget, we are responding to prolonged economic troubles. As we mentioned yesterday in our press release, the challenge facing policymakers is to approach the situation with bifocals – crafting a budget that recognizes the immediate needs of residents still struggling in a weak economy and makes the investments critical to the state’s economic future.
So what are the numbers?
- There is a $399 million surplus for the current biennium, FY 2010-11. That’s good news – no unallotment or short-term borrowing will be necessary.
- There is a $6.2 billion deficit for the next biennium, FY 2012-13 (up from the $5.8 billion projected at the end of the 2010 Legislative Session). That equates to about 16 percent of the state’s total general fund budget. If we add the cost of inflation, the size of the deficit increases by an additional $1 billion.
On a positive note, the state’s economist Tom Stinson pointed out that employment growth in Minnesota is above the U.S. average and is expected to stay strong. However, even at this rate it will still take another two years for the state to return to pre-recession employment levels. Economic growth projections have been lowered, and that will mean lower than expected revenues from income, sales, and corporate taxes for the foreseeable future. And it also means that many Minnesota families will continue to face hardships.
Despite the delayed economic recovery, the Forecast still projects that general fund revenues will grow by five percent from FY 2010-11 to FY 2012-13. General fund spending, on the other hand, is projected to grow by 27.5 percent. But before anyone jumps on that number, it’s important to understand most of that figure isn’t new spending. Here’s what I mean:
- In FY 2010-11, we received $2.3 billion from the federal government that temporarily replaced state funding for education and health care services in Minnesota. That federal stimulus money won’t be there in FY 2012-13.
- The state shifted $1.9 billion in K-12 education payments from FY 2010-11 into the FY 2012-13 biennium.
- There were $660 million in one-time reductions (ratified unallotments) made just for FY 2010-11 that don’t continue in FY 2012-13.
When all is said and done, the true growth in spending from this biennium to the next is 6.6 percent - much closer to the projected five percent growth in revenues.
The issues facing the state are significant. For example, there are at least two decisions facing policymakers that will have an impact on the state’s budget situation.
- The November Forecast assumes the state will repay most of the K-12 payment shift in FY 2012 at a cost of $1.4 billion. Delaying that repayment, or a portion of that repayment, would reduce the size of the deficit. However, it would also continue to cause hardship for many school districts waiting for those dollars.
- The next Governor can “opt-in” to early expansion of Medical Assistance by January 15. which would provide health care coverage for low-income adults without children that lost their coverage earlier this year and bring in more than $1 billion in federal resources. Opting-in would also reduce the financial pressures on MinnesotaCare, which offers affordable health insurance for working Minnesotans. If the state fails to opt-in to early expansion of Medical Assistance, MinnesotaCare faces a large deficit which could trigger cuts in eligibility for the program. Not opting in would also reduce the general fund deficit by approximately $384 million.
If policymakers are going to successfully meet the challenges ahead, they’ll have to find a way to cooperate and compromise. As the experts pointed out at today’s press conference, all the easy cards have been played (one-time resources, reserves, budget shifts, etc). Now what’s left are the hard decisions. We’ll be working to make sure they are wise decisions.
If you want to read the Forecast documents for yourself, they are available on the Minnesota Management & Budget website.
-Christina Wessel
Jeff Van Wychen. Minnesota 2020, December 3, 2010
While the November budget forecast revealed good news in the short term, the long-term outlook is somewhat worse than previously anticipated. The bottom line: eight years of “no new tax” leadership has left state finances in bad shape.
The good news is during the current biennium, ending June 30, 2011, state finances have improved by $399 million due to savings on the expenditure side of the state budget, including $231 million resulting from a six month extension of a higher federal matching rate for the Minnesota’s Medical Assistance program. Revenue for the current biennium is down slightly relative to previous projections, with a decline in income tax collections being mostly offset by growth in other state taxes.
The improvement in the current biennium is important because it eliminates the chance for Governor Pawlenty to unallot December aid payments to local governments and mitigates the need for short-term borrowing.
The long-term outlook has deteriorated somewhat. The projected state deficit for the next biennium (FY 2012-13) has expanded from $5.8 billion to $6.2 billion. To make matters worse, the official state budget forecast ignores the impact of inflation on state expenditures. A more realistic measurement would yield an anticipated deficit that is about $1 billion greater than the official projection.
The increase in the size of the FY 2012-13 deficit relative to what was previously forecast is primarily the result of a decline in projected state revenues. Projected state income and sales tax revenue for the next biennium have both dropped significantly relative to what was anticipated at the end of the 2010 legislative session. According to State Economist Tom Stinson, the decline in projected state revenue is the result of less optimistic projections of economic growth over the next two years.
A casual glance at the general fund spreadsheet indicates a massive $8.3 billion (27.5%) growth in projected state spending from the current FY 2010-11 biennium to the upcoming FY 2012-13 biennium. However, the November forecast summary document notes that three-quarters of this growth ($6.3 billion) is not true spending growth, but rather is the result of:
- One-time federal stimulus dollars that were used to reduce general fund spending in FY 2010-11 by $2.3 billion,
- K-12 education funding shifts that further reduced FY 2010-11 spending by $1.9 billion,
- Repayment of a portion of the K-12 funding shift that increases state general fund spending in FY 2012 13 by $1.4 billion, and
- One time spending reductions of $660 million in FY 2010-11 that are restored in FY 2012-13 under current law. When you consider the following factors, the actual deficit is much higher.
The FY 2012-13 “structural deficit”—i.e., the gap between revenue entering the state general fund and expenditures made from the general fund over the course of the biennium—is projected to be $6.6 billion. The structural deficit is somewhat larger than the “budgetary balance” (i.e., the $6.2 billion deficit) because it excludes balances carried forward from the previous biennium as well as the cash flow and budget reserves. Realistically measured to include the impact of inflation, the projected deficit is actually closer to $7.6 billion.
The November forecast also provides grim news for future years. Based on planning estimates, the structural budget deficit for the FY 2014-15 biennium, which begins July 1, 2013, will be approximately $5 billion. However, a more realistic projection of the FY 2014-15 deficit that includes the impact of inflation is about $8 billion.
In addressing past deficits, the state has largely exhausted the easy and painless solutions. State budget reserves have been depleted, tobacco settlement dollars have been liquidated, and school aid payments have been shifted forward; all of these measures provide a one-time infusion of dollars, but do not address the long-term structural gap between state revenues and expenditures.
The state has also made significant budget cuts. Real (i.e., inflation-adjusted) state general fund spending for the next biennium is projected to be about seven percent less than it was in FY 2002-03, after adjusting for shifts, takeovers, and other one-time budget fixes. A large share of previous state budget cuts came in the form of reductions in state aid to schools, counties, cities, and towns, which lead to property tax increases and cuts in funding for K-12 education, public safety, human service programs, and roads and other infrastructure.
However, there is one budget alternative that has been underutilized over the last eight years. State tax revenues have come no where near keeping pace with inflation and population growth since FY 2002-03. Increases in progressive state tax revenue need to part of a balanced solution to the state budget deficit during the 2011 legislative session.
The following November forecast budget documents from Minnesota Management & Budget can be found on-line:
The forecast summary [ http://www.mmb.state.mn.us/doc/fu/10/summary-nov10.pdf ]
The complete forecast document [ http://www.mmb.state.mn.us/doc/fu/10/complete-nov10.pdf ]
The general fund spreadsheet, which lists all actual and projected general fund revenues and expenditure for FY 2010-11, FY 2012-13, and FY 2014-15 [ http://www.mmb.state.mn.us/doc/budget/report-fba/nov10-detail.pdf ].
Editorial, Star Tribune, June 28, 2010
Changes of a different scale are now on the horizon.
If a new Humphrey Institute analysis is correct, Minnesota's next governor won't be able to justify cuts in aid to cities by pointing at positive city fund balances, as the last two governors have done. In cities large and small throughout the state, those balances are on the verge of depletion.
A budget deficit is in store for virtually every Minnesota city by 2015, warned the new analysis, commissioned by the League of Minnesota Cities. If spending and taxing patterns are left unchanged, deficits will swell on average to 35 percent of city budgets by 2025, it said.
Of course, spending and taxing trends in Minnesota's 854 cities will not go unchanged. When city costs exceed revenues, an adjustment is mandatory. State law does not permit cities to carry deficits on their books from one year to the next.
What the HHH Institute analysis really says is that the spending cuts and property tax increases that cities imposed over the past decade have not been sufficient to stabilize city finances. More drastic cost-saving and revenue-raising changes are unavoidably ahead.
That's so despite a doubling of city property-tax levies in the past decade, with a growth rate far exceeding the rate of inflation, while virtually every city has reduced government services and cut staff. Many cities have frozen employee wages. Mayors around the state came to the Capitol last month to report that cuts are now taking a toll on police and fire services -- the last things local elected officials want to put on the chopping block.
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Tim Pugmire, Minnesota Public Radio, June 9, 2010
St. Paul, Minn. — Margaret Anderson Kelliher, Mark Dayton and Matt Entenza all agree taxes should be raised, but they recently started arguing over the scope and the amount of those tax increases.
Mark Dayton has been campaigning for months on a "tax the rich" message. Lately, he's been adding new details to the proposal to increase the income tax rate for wealthy Minnesotans. During a recent gubernatorial forum in St. Paul, Dayton declared that he was the only DFL candidate willing to raise $5 billion through tax increases and tax compliance.
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