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Minnesota 2020 Journal: Borrow & Starve

July 22, 2011 By John R. Van Hecke, Executive Director & Fellow

Minnesota has a new state budget, a reopened state government, fewer services, higher property taxes and the promise of repeating this depressing stand-off/shutdown experience in two years. What we lack is a path forward towards prosperity.

Facing a $6.2 billion projected state budget deficit, state elected officials contemplated three policy options: cutting programs, raising revenue or some combination of the two.

Governor Dayton was elected in 2010, winning an open seat. He advocated tax increases on Minnesota’s highest income earners. He had the advantage of not being Governor Tim Pawlenty, who was not standing for re-election and had worn out his welcome.

Conservative majorities in the State House and State Senate were also elected in 2010, campaigning on a job-creation and spending cuts platform. Conservative legislators had the advantage of not being either legislative chamber’s incumbent majority, facing a dissatisfied and dispirited public.

As session opened, Conservative legislative leaders quickly discarded their job creation rhetoric for a conventional, if somewhat rigid version of “no new taxes.” They pursued a wholly-anticipated social and fiscal conservative agenda, only sending Governor Dayton bills reflecting their right-wing perspective. Dayton, in turn, vetoed them.

What both sides imagined would be their version of the 1967 Six-Day War’s swift Israeli victory, turned into the public policy equivalent of World War I’s never-ending trench warfare horror.

This year’s legislative resolution is largely a one-sided outcome. Minnesota’s projected budget deficit is balanced by slashing state spending, continuing to shift costs to communities, delaying $700 million of K12 educational allocations, and borrowing $700 million against anticipated tobacco settlement payment bonds.

The Fitch bond rating agency, earlier this month, lowered Minnesota’s bond rating, entirely because Minnesota’s elected leaders used budget shifts and other one-time accounting gimmicks to balance past budgets. Fitch’s, evaluating the likelihood that Minnesota could be counted on to pay its state debt obligations, reflected growing doubt that, no, perhaps Minnesota might not be completely trustworthy in this regard. Accordingly, they lowered our bond rating and, in doing so, raised state borrowing costs.

Rather than use this signal as the opportunity to choose a balanced approach, pairing program cuts with modest revenue increases, conservative legislative leaders proposed extending the Minnesota legislature’s budget-balancing pattern. Last week, Governor Dayton conceded to their demand, choosing the bad borrowing gimmick to prevent $1.4 billion in further state program cuts.

I am disappointed on many levels. Minnesota’s conservative legislators traded tough but responsible policy creation for continuing a harmful borrow-and-spend pattern. They chose to favor Minnesota’s highest income earners—7700 millionaires in Governor Dayton’s final tax increase proposal—over approximately 5.3 million other Minnesotans.

Rather than invest in Minnesota’s future, Minnesota’s conservative public policy leaders are electing to not pay 40 percent of the fall school payment transfer. That’s called a “funding shift” and it’s a bad idea because it places policymakers’ political needs ahead of kids’ education. Schools must absorb the funding discount, borrow money to make up the short term loss while hoping that the legislature doesn’t make the shift permanent, and explain to school families that there’s going to be a lot less of everything yet again.

It gets me down because borrow and spend becomes borrow and starve.

I’m reminded of Walt Whitman’s, “The Wound Dresser.” It’s a gruesome free-verse poem, based on Whitman’s experience nursing wounded and dying Civil War soldiers. “I resigned myself to sit by the wounded,” he writes, recalling war’s cost, “and sooth them, or silently watch the dead.” It’s an elegiac lament, both resigned and frustrated in retelling his actions and sharing his observations.

As I contemplate the past six and a half months of conservative policy making, I understand Whitman’s perspective, at least a little better. We could surrender, permanently ceding the ground to conservative policy advocates and hope that Minnesota isn’t hurt too badly. Or, we could spend the next sixteen months doing something to change Minnesota’s policy direction.

Minnesota doesn’t have to be like this. We can raise revenue through modest tax increases, asking Minnesota’s highest income earners to simply pay the same rate as the rest of us. We can deliver property tax relief by returning to a progressive state tax policy. We can put Minnesota on the path to prosperity, rejecting the slow slide to mediocrity.

Minnesota’s conservative legislative leaders are foreclosing on Minnesota’s future. They’ve chosen to borrow and starve Minnesota rather than move our state forward. We can still reverse the situation but only if we focus on what really matters: education, healthcare, transportation and jobs. We have sixteen months to convince Minnesota that it’s time for a change.

What are you waiting for?

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