Time to return to healthier fiscal diet; more vegetables (yes, taxes) fairly raised

By Marcia Avner, public policy director,
Minnesota Council of Nonprofits
Brian Rusche, executive director, Joint Religious Legislative Coalition
Dane Smith, president, Growth & Justice
Ray Waldron, president, Minnesota AFL-CIO

Think of Minnesota as suffering from a vitamin deficiency, growing weaker and unhealthy, and still resisting a balanced diet. And think of taxes as spinach, broccoli and peas, not exactly everybody’s first choice on the buffet table, but the stuff we need to reinvigorate our state.

One month from legislative adjournment, all indications are that election-year pressures will deny Minnesota the state revenue “vegetables” and the responsible, long-term budget solutions it needs.

Time is running out in the face of projected chronic shortfalls – as much as $1.7 billion in the red a year from now – and so are the accounting gimmicks and the reserves. So voters choosing leaders this fall for 2009 and beyond need to ask them to face up to a glaring fiscal reality: We can’t go on like this. Our experiment with tax cuts and short-changing vital public-sector investment is not working.

More than a decade of tax rebates and tax cuts during good times, and the no-new-(state)-taxes straitjacket of the last six years, have left our communities and our economy in worse shape than they have been in decades. (The 2008 Legislature deserves credit for overriding a veto and pushing through a modest gas-tax increase, but that’s a dedicated tax that only begins to address two decades of deterioration in our transportation infrastructure.)

Cumulative cuts to our public schools, transportation and other public works, early childhood programs, job training and higher education, and health care have diminished Minnesota’s standing in the nation and caused real pain to all but the most affluent of our citizens. And their enterprises are beginning to suffer, too.

That’s because this disinvestment has been accomplished by a gradual slide into economic mediocrity in the private sector. The scrimping and corner-cutting, the idea that draining our common pool of resources will benefit everybody, is most assuredly NOT producing the general prosperity that was promised when tax cuts were enacted. For the first time in decades, Minnesota’s key economic indicators – on job growth, long-term unemployment, and average income – are trending toward or below the national average.

Minnesota’s distinctive place as a high-quality place to live was achieved through innovation and private enterprise, to be sure. But it also came through investment in human capital, education at the forefront, but also in essentials ranging from public works infrastructure, to care for the elderly and poor, and amenities such as park systems and libraries.

Respected non-partisan state experts such as State Economist Tom Stinson and Federal Reserve Senior Vice-President Art Rolnick have pinpointed investment, particularly in education, as crucial ingredients for Minnesota’s past success and as a strategy for recovery. And by the way, every living former governor of Minnesota has expressed public disapproval in some way of the cuts-only course for achieving fiscal balance.

The notions that revenue sources are nowhere to be found or that the state is tapped out are simply not true. A welter of statistics show that Minnesota’s overall effective tax rate is down significantly from a decade ago, that high-income earners benefited the most from deep income-tax cuts, and that the same top-enders have a greater share of wealth and income than at any time in recent history. The bottom-line effective tax rate for those at the top is considerably smaller than for those in the middle, and this disparity is projected to worsen.

Moreover, prestigious national experts have made the case for protecting states’ public sector investment and targeting tax increases to those who can most afford it.

Nobel Prize-winning economist Joseph Stiglitz and Congressional Budget Office Director Peter Orzsag wrote recently that if the goal during a recession is to keep money flowing in the economy, protecting state spending is a pretty sure bet. And they argue that a better option is to raise taxes, particularly on higher-income households. They conclude that, “reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short-run than tax increases focused on higher-income families.”

We can begin addressing our revenue problem by reversing the income tax reductions that were afforded to those at the top earlier in the decade. We can consider reforming the sales taxes to reflect the reality that we have a service economy. We can look more broadly for ways to expand revenues progressively, so that those at the top at least pay a more equal percentage.

As citizens, we need to make room for elected leaders to do what many of them know to be right for Minnesota. We need to declare the “no new taxes” strategy (that’s state taxes; see your tuition or property tax bill) a failure.

We need to invest smartly in education, job training, transportation, and human capital. To do this we need to think again, as the generation before us did, as well-rounded citizens willing to invest in and nourish the common good.

The authors of this column have combined efforts to form the Invest in Minnesota Campaign because they believe that Minnesota’s fiscal course in recent years is diminishing the quality of life in our state and that we need more revenue, we need to raise it fairly and we need to invest in Minnesota.

For information:
Dane Smith, Growth & Justice
651-251-0728 – work
651-675-6360 - cell

Revenue shortfalls mean long-term budget deficits Minnesota Budget Project finds.

See analysis by the Minnesota Budget Project.

Minnesota’s revenue shortfall: Continued sacrifice or responsible solutions?

Background: Minnesota has a revenue shortfall and it’s time for responsible solutions. Since 2003, Gov. Tim Pawlenty has called on Minnesotans to sacrifice to resolve the state’s ongoing budget crisis. The sacrifices have not been shared equally by all Minnesotans and have fallen disproportionately on middle-class, working people. The governor’s continued budget cuts and disinvestments are eroding our once highly regarded education, transportation and health-care systems.

With yet another budget deficit, the governor is calling for another round of sacrifices. The Invest in Minnesota Campaign will highlight what these continued sacrifices mean to Minnesotans and how they are roadblocks on the way to shared prosperity.

Is cutting health care funding for 30,000 uninsured kids
really how we want to balance our budget?

There are 85,000 children in Minnesota living without health coverage. Fortunately for Twin Cities resident Cheri Jelatis, her one-year-old daughter isn’t one of them. Because Cheri’s two young children were enrolled in the state’s Medical Assistance (MA) program, a doctor diagnosed her daughter’s malformed vertebrae and has begun treatment.

“I don’t know what we would have done without coverage,” Cheri said. “My baby had to have an MRI done for one of her vertebrae that’s not formed. The problem was found at her one-year checkup, which we wouldn’t have been able to afford without coverage.”

Health coverage is a key indicator of child well-being. Children with health insurance get key check ups and immunizations, do better in school, have fewer long-term health problems and are more productive in the future work force. Without coverage, children often have to wait until medical problems worsen before they get treatment. Many times, that treatment is delivered in more-costly emergency rooms, which increases health costs for all Minnesotans.

Other Minnesota families may not be so lucky.

While Cheri feels fortunate to have coverage, other families may not be so lucky.
Gov. Pawlenty’s recently-proposed cuts in children’s health care funding would mean almost 30,000 Minnesota children who would have gained access to health coverage in the coming years will now remain uninsured.

The governor’s cuts would almost completely eliminate the gains he signed into law just last year, after state lawmakers passed legislation to cover an estimated 37,000 of the state’s 85,000 uninsured children by 2011.

• Almost 20,000 children will not get coverage because of the Governor’s plan to eliminate the funding to increase enrollment during the transition from the Medical Assistance program to MinnesotaCare.This funding scheduled to go into effect Oct 1, 2008 – would be eliminated under the Governor’s budget proposal.

• Up to 10,000 will not get coverage because of the Governor’s plan to cut health care outreach funding designed to help enroll Minnesotans in public health programs. An estimated 75 percent of uninsured children are believed to be eligible for public health coverage but not enrolled.

This month Cheri’s kids are transitioning from MA to the MinnesotaCare program.
The change was necessitated when Cheri’s husband found new employment after losing his previous job last year. That transition has been helped by her relationship with St. Paul-based Portico Healthnet, which does outreach to eligible families like Cheri’s to help them enroll in state health programs.

Cheri’s family got much-needed health coverage because of state investments in outreach and efforts to help with the transition from MA to MinnesotaCare. During this time of economic downturn, when thousands of families are already facing job loss and unaffordable health coverage, preventing almost 30,000 children from getting health coverage with budget cuts is not the right solution.

It’s time to address the revenue shortfall with fair revenue solutions: We need more revenue, we need to raise it fairly, and we need to invest in Minnesota. Only by returning to our tradition of public investment will we get Minnesota back on track and regain its standing as one of the healthiest, wealthiest and wisest of states.

We need more revenue. We need to raise it fairly. Invest in Minnesota.