North Star Fading?

Dave Beal, former Saint Paul Pioneer Press business editor and columnist reports, at MinnPost.com, on efforts by Minnesota economists and analysts to solve the mystery: Why has the state's role as a shining star of the U.S. economy dimmed in recent years? Click here to read.

Without public investment, Minnesota will continue its slide toward mediocrity

By Dane Smith, president, Growth & Justice

Recently, representatives from the Invest in Minnesota Campaign, a coalition of faith, nonprofit, and labor groups, visited communities across the state to talk about how the inadequate level of investment, both in terms of human capital and infrastructure, is threatening our state’s economic future and our quality of life.

We heard stories about how residents in one community complained about the poor condition of their city street, but it was not fixed until the city’s emergency vehicles could not longer use it, young people graduating from Minnesota’s four-year colleges and universities with enormous amounts of debt, and, in every community, worries about the cost of and access to quality health care. And we’ve all heard about the cuts to the state’s district courts and public defenders and most likely stories will soon surface about delays in our justice system.

As investment in the public sector declines, we’re starting to see Minnesota drop in its national standing on livability measures and underperform the nation’s economy for the first time in 30 years. Traveling to communities helped us to hear first-hand what this means to Minnesotans and to talk about how we got here.

From 1997 to 2001, state policy makers made decisions about state budget surpluses. In that time $13 billion was spent on permanent tax cuts (including income, property and auto tab taxes) and rebates. But in the 2002 through 2005 legislative sessions, partly because of those huge and unsustainable cuts, the state faced deficits. The economic downturn meant things were tough for all states, but Minnesota’s deficit was made larger because of the permanent income tax cuts during the surplus years.

In response to these deficits, legislators and governor relied on reserves, fund balances, budget gimmicks, and deep cuts to services. A no-new-taxes mentality held sway from 2003 on. There were no broad-based revenue increases to address the crisis, and the revenues that were raised through increases in tobacco and property taxes, as well as fees, were regressive. These short-term fixes continue to leave long-term problems unresolved.

In 2006 and 2007 there was a little turn around that allowed policymakers to restore some of the 2003 cuts. In the 2008 session the Legislature faced yet another budget deficit, the primary response to which was one-time measures and $268 million more in cuts.

And while early reports are that Minnesota will face another $1 billion budget deficit in 2009, some are now predicating that the figure may be as high as the 2003 deficit of $4 billion.
Regardless of the size of the deficit our state leaders will have tough decisions to make in 2009. And if recent history teaches us anything, unless we speak up and join a movement to change the state’s course and put more revenue on the table (yes, this means tax increases for those who can afford it), the disinvestment for the common good will continue in our state. With more cuts to education, health care, infrastructure, and economic development, Minnesota will not be competitive in this global economy, families will lack financial security, and the state will continue its slide to mediocrity.

Minnesota some day might no longer be known for the qualities Garrison Keillor celebrates, as the place were women are strong, the men are good looking, and all the children are above average. Imagine, instead, a Minnesota where young couples cannot afford a home because of college debt, where more people are tapping out food shelves, waiting for economic opportunity and justice, and the children cannot compete in a global economy.
We don’t have to let this happen. Our distinctive Minnesota formula of investing for the common good has worked for decades and we know it will lead to a brighter future.

The column was written by Growth & Justice President Dane Smith on behalf of the Invest in Minnesota Campaign. The other leaders of the Invest in Minnesota Campaign are: Marcia Avner, public policy director, Minnesota Council of Nonprofits; Brian Rusche, executive director, Joint Religious Legislative Coalition; and Ray Waldron, president, AFL-CIO. They 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

Minnesota slipping toward mediocrity report finds

The think tank Minnesota 2020 has published a report documenting that Minnesota's national ranking on key performance indicators has declined in recent years at the same time that our state has decreased its public investment relative to other states. Click here to read "Minnesota's Slip Toward Mediocrity: Less Investment, Less Return,", by Minnesota 2020 Fellow Jeff Van Wychen.

'We're in kind of a fragile position'

Read Lori Sturdevant's interview with state economist Tom Stinson, published in the May 20th Star Tribune.

Come to a Brown Bag Lunch

In June, the Invest in Minnesota Campaign will be holding brown bag
lunch discussions in several Minnesota communities to review
our state’s persistent revenue shortfall and focus on what we can do
together to promote smart investment in Minnesota and
renewed prosperity for Minnesotans.

Bring your lunch and participate! To register (cost: free), click here.

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.

Civic Groups Say Governor’s Budget Bad for People and Economy

Gov. Tim Pawlenty's proposed budget is bad for people, bad for the economy and fails to stabilize state revenues according to leaders of the recently launched "Invest in Minnesota Campaign."

The Invest in Minnesota Campaign is supported by leading labor, faith and nonprofit organizations. The group outlined the following flaws in the Governor's proposed budget:

The Governor's proposal:

• Makes real cuts causing real pain to real people by reneging on the state's commitment to extend health insurance to over 20,000 children
• Hurts the state's ailing economy by cutting thousands of jobs and disinvesting in higher education and core services
• Fails as a real solution to the state's budget problems because it leaves a $1.7 billion projected deficit into the next biennium when real costs of services are included

 

"Ordinarily in a recession, the state extends its help to those hardest hit," said Brian Rusche, executive director of the Joint Religious Legislative Coalition. "This plan does the opposite. Reducing access to children's health care, job training, and transportation hurts the very families most affected by the downturn. Why cut the building blocks to success for children and the future workforce?"

"Minnesota is losing jobs and the Governor proposes to cut jobs with his budget proposal," said Steve Hunter, secretary-treasurer of the Minnesota AFL-CIO. "The Governor's budget proposal is flat out irresponsible. It hurts people, hurts the economy and does not address the revenue shortfall with a revenue solution."

"We don't need to take more families off the track to success," said Marcia Avner, public policy director of the Minnesota Council of Nonprofits. "Our elected officials need to find real solutions to the revenue shortfall. The Invest in Minnesota Campaign will engage the public in a search for solutions to the revenue shortfall during this Legislative Session and the months ahead. Our goal: to solve the revenue shortfall and get Minnesota back on the right track."

"Minnesota should be looking for fair ways to raise more revenue instead of cutting and disinvesting," said Dane Smith, president of Growth & Justice. "There are reasonable and fair revenue options for preserving and even expanding the vital public investments that have always provided a foundation for shared prosperity.  The legislature should not give up on those options."

Invest in Minnesota cited these additional flaws in the Governor's plan:

• Lowering the sales tax rate adds to Minnesota's revenue shortfall.
• Removing the "foreign operation" tax avoidance loophole helps, but ineffective tax breaks such as those in JOBZ and in income tax cuts for high income households would remain unchanged.
• The 16 percent cut in the renters' credit raises taxes on hundreds of thousands of renters.
• Raiding the Health Care Access Fund reduces future access to health care and violates the premise of the fund.

 

Key members of the Invest in Minnesota Campaign include:

• The Minnesota AFL-CIO with its 350,000 union families statewide.
• The Minnesota Council of Nonprofits with more than 2,000 member organizations.