Editor’s Note: Matt Martin writes a column twice monthly on the 1st and 15th (he’s 2 days early) for Minnesota Monitor. This article is cross-posted at Minnesota Monitor.
With this session’s most politically tenuous piece of major legislation finally hitting the Governor’s desk, political observers are waiting with bated breath to see
In the final hours of the session, the state legislature painfully birthed bill after bill, each born of some gubernatorial compromise. With the exception of a few line items, each of the major bills have survived the ever looming threat of the veto pen but that could all change in the next few days: All indications are that the Governor will lay the red ink on the tax bill. Why? Well, it certainly isn’t because of the check made out to the RNC to help with preparations for the 2008 convention…
more inside
Let me explain. The tax bill once again returns Minnesota to the fiscally responsible practice of taking into account inflation when projecting future spending (which we did before 2002). The practice is not only universally applied in the business world, but states across the nation also seem to be pretty fond of the idea:
Minnesota is believed to be the only state that does not tally expected inflation when estimating future spending . “If I’d tried to do that, I think I would have been put in jail,” Richard Sims, former state economist for Arkansas and Kentucky, said in an interview when he visited the Minnesota Legislature, Feb. 6. [Star Tribune, 5/30/07]
That’s right, the only state…
By his own words, Pawlenty has mentioned only this inflation provision among the reasons to veto the bill; for some reason ignoring the many items he finds agreeable in the extensive bill. To veto the entire bill just because of a single provision that the vast majority of states have already enacted seems, well, odd. Indeed, the same editorial piece had the following to say about the tax bill:
It’s such a solid piece of lawmaking workmanship that if Pawlenty vetoes it — and we urge him not to — he should feel obliged to help rebuild the bulk of it as soon as possible, by calling a special session.This bill isn’t a tax-increase bill. If it were, it would not have received 10 Republican votes in the Senate. Rather, it’s a tax-exchange bill, raising a modest sum by closing an unintended corporate tax loophole, and using that money to pay for property tax relief and a break to Minnesota-based corporations. [Star Tribune, 5/30/07]
In short, if the Governor vetoes this bill it will not due to his oft-cited excuse of a tax-hungry legislature;
If the Governor vetoes this bill it will solely be about his opposition to fiscally responsible governance. To the Governor, and to many of his uber-conservative allies, extricating inflation from spending projections
Moreover, refusing to include inflation allows the Governor to trump out relatively minuscule increases in dollar amount spending and bill them as “spending increases.” In fact, the Governor has done just that during his tenure. For example, education spending levels have not yet reached the 2003 levels when inflation is taken into account, but the Governor still maintains that he has “increased” education spending during his time at the capitol. This is technically true only because inflation was removed from projections;
These may seem like silly sticking points but they are changes in wording that can swing elections (especially when they are as close as the last Gubernatorial election). After all, what seems more honest: claiming that you increased spending when the real-world spending capacity of a department has decreased, or admitting to budget cuts under that same real-world situation? Perhaps I’m delusional, but I would guess that the majority of Minnesotans are on my side here.
Even outside the political considerations (where all true policy decisions would be made in a perfect world) adjusting for inflation just makes sense. To my knowledge we’re the only state in the nation that fails to adjust for inflation, but just to cover my own behind, let’s merely say that the vast majority of states do so. Why would we allow the partisan agenda of a handful of people get in the way of a fiscally responsible policy that the whole of the business community abides by and the “vast majority” of states, Republican and Democratically controlled alike, have enacted? The only answer can be blind allegiance to a mistaken few.
Make no mistake,
The tax bill has scores of financially responsible measures that will benefit scores of real Minnesotans. To veto this bill would be to sacrifice the sincere interests of millions of Minnesotans at the altar of blind ideological adherence (not to mention national political ambitions).
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If the DFL gave a damn about inflation, they would have passed his transportation plan that would have built $1.7 billion in roads this year. How much will it cost to build those same roads in three, five, or even ten years? I had to throw that in since your title has to do with the gas tax.
The whole premise of the automatic inflation increases is to push for tax increases down the road. It’s really nothing but a shell game because it assumes that all programs continue into perpetuity. It assumes that the same state employees we have today will be working next year. If you like automatic inflationary increases so well, let’s do away with the budget altogether and just adopt a let’s increase every program by inflation forever.
Couple of observations.
First..”In short, if the Governor vetoes this bill it will not due to his oft-cited excuse of a tax-hungry legislature; taxes are not raised under this bill”..is disingenuous at best.
Figuring inflation into budget forecasts puts the tax-hungry legislature on increase autopilot…and you know it.
Fiscally responsible usage of inflation forecasts would put them at the other end of the pipeline where they can be used to beat back new spending.
Second… well, help me out here.
When I travel through St. Paul and Mpls, I see lots of signs on people’s lawns proclaiming their joy to pay for a better Minnesota. Also, since the citizens of those cities have voted in people who LOVE taxes, I think it is entirely reasonable to conclude that the majority of citizens in those cities LOVE taxes too..the fact that they constantly say so not withstanding.
So what is the problem with cutting LGA in those cities?
It encourages the people who govern the people living there to tax the living crap out of them which should make everyone happy.
MMMMmmm, sweet, sweet taxes…right?
Look guys (ignoring the second part of swiftee’s comment which was completely nonsensical), two things:
1) This does not raise taxes! I already laid it out in the post, but here we go again. Revenue stays roughly the same (i.e. increases in dollar amount, but stays the same in inflation adjusted dollars) year after year because we’re taxed by percentages. Therefore, there are more revenue dollars every year. All this does is make sure that the other side of the equation (spending) balances by including inflation so that SPENDING POWER REMAINS THE SAME.
2) Every other state does this! Know why? Because every single economist in the world knows that inflation is a factor in figuring out budgets. We’re talking Louisiana, Florida, Alabama, Texas, you name it!
3) (yeah, you get a bonus point) Every single business with a decent sized budget does this too! Would you please explain why we as a state wouldn’t also do this?
Honestly guys, I respect your conservative viewpoint, but this isn’t a conservative issue. Honestly, this is smart vs. moronic, educated vs. idiot, reality vs. imaginary; every other state guys, every other state.
Chris:
That’s a great philosophy. Because something will cost more in the future, buy it now and put it on the credit card and pay interest.
Republicanism 101: Borrow borrow borrow, Spend spend spend. Your kids get the bill.
Tom,
I really can’t believe you’re this dumb. You cannot raise taxes enough to pay for $1.7 billion in roads. It would take a sixty cent a gallon increase just to pay for those roads in one year. How much will those roads cost in five or ten years when the DFL finally gets around to budgeting for them? Also, I don’t hear you complaining about the $1 billion bonding bill passed by the legislature last year. We bond all the time for infrastructure. Roads should be no different. It’s no different than borrowing for your mortgage. Or are you afraid your kids will have to pay for your house if you die.
Matt,
I’d like to know why you are so hung up on adding inflation to budget forecasts. What is your end game? Because I know that you’re interested in raising taxes and if you play with inflation numbers enough, you can turn any surplus into a deficit. Answer my question: if inflation is the be all to end all, why not just increase our budget to inflation forever and let all the legislators can stay home?
“Look guys (ignoring the second part of swiftee’s comment which was completely nonsensical)”
So you agree with me that people who put signs on their lawns proclaiming their joy in paying taxes while complaining about paying taxes are either morons or bald faced liars?
Or are you ignoring my comment because *you* have one of those signs on your lawn and just don’t want to face the reality of such hypocricy?
You know, it’s funny.
The tax and spend left always likes to relate the state’s budgeting with “the kitchen table” that those “real Minnesotan’s” always gather around to balance their checkbooks (makes ‘em seem more normal I guess); but I’ll be damned if I know any Minnesotans, “real” or otherwise that add inflation into their family budget to come up with next years plan…in fact, every “real” person I know *subtracts* inflationary increases from what they will have *to spend*.
BTW..about those “real Minesotans”; are they friends with the “working families” that we used to hear about?
Okay, first of all Chris: using inflation doesn’t equate with cruise control. And the mere notion that adjusting for inflation would allow for the legislators to go home indicates that you have a sincere lack of knowledge about how government work. Just because budgets would actually maintain funding levels, doesn’t mean the legislators would have no work. They would still have to evaluate the merits of a program, reallocate revenue, investigate into constituent complaints; basically everything legislators are meant to do. What they wouldn’t have to do is waste time reallocating an artificial surplus so that funding levels are actually maintained at consistent inflation-adjusted levels. Think of the real work that could get done if legislators didn’t have to readjust for inflation manually everytime a budget comes around. Just ask the legislators in EVERY OTHER STATE and they’ll probably tell you that NOT automatically adjusting for inflation is ridiculous.
Swiftee: First of all, out of the trolls, I like Chris better; he actually puts forth decipherable statements that allow me to respond. The reason I didn’t respond to you because I had no idea what you were talking about! Please, for the sake of all my readers, learn how to put a thought into words. And no, I don’t have one of the signs, I have no clue what you’re talking about.
Secondly, I would love for you to point me to a household that has a budget in the tens of billions. If you want to draw comparisons, please draw them in a relevant fashion. Lucky for you, I did: every single business with a decent sized budget factors inflation into spending projections. That’s reality, you’re welcome to come join us all there whenever you’re ready.
matt,
Troll reference aside, I understand state government very well. I understand state government probably better than you because I look at it from a legal background and understand how our laws work, which I will explain in a moment.
First, you just proved my point about inflation. There is no need to account for inflation in revenue forecasts because the legislature and the governor propose budgets that allocate monies whether or not inflation exists. Some programs have no increases. Some programs have small inflationary increases and some programs have double digit increases. What is the point of counting inflation when looking at revenue forecasts?
The dirty little secret, which you do not acknowledge, is that the State of Minnesota has a law requiring a balanced budget. Therefore if inflation is counted in revenue forecasts, and the revenue doesn’t keep up with however the legislature accounts for inflation, we will be in deficit spending whether in actuality (as in 2003) or on paper. If we are in a deficit, we need to either cut spending or raise taxes. We already know, which you fail to admit, that the DFL is itching to raise taxes. Using inflation gimmicks was just the ticket to try to force Pawlenty into raising taxes.
The point of considering inflation is that is a fact of economic life. Wishing it away in state budgets is ingenuous, at best. Inflation is figured into revenue forecasts, meaning it is a factor in estimating projected tax revenues. Why should it not be figured as a part of spending forecasts? This is how we got this year’s illusory “surplus” — remember that?
I find it telling that Governor Pawlenty has been the only Governor (at least in recent years) who does not have to include inflation in his budget figures (yes, I know that the Legislature removed that requirement). The Pawlenty budgets are also notorious for using accounting tricks and one-time windfalls, not to mention the semantic joke of increasing “fees” but not taxes, in order to reach a balance.
It is also telling that one of the Governor’s supporters on this point — the Mayor of St. Cloud — was quoted as saying that the “autopilot” argument is about perception, rather than reality. Not a bad metaphor for the Pawlenty years.
Swiftee’s point about managing the state budget like one’s personal budget is well taken: it would be foolish for me as a homeowner to lock myself into spending a set amount of money on certain services, e.g. heating expenses, when the vicissitudes of my life or the market might dictate I spend more or less money on a certain service in the following year, e.g. a need to spend more money on medical care because of an illness or a need to spend less money on heating because the price of gas decreased. Likewise, the Legislature would be foolish to adopt a fiscal policy that essentially removes its discretionary spending powers based on the assumption it needs to spend a set amount of money on a specific program or area of the budget in the following year. To do so would be to assume that revenue is not a finite resource, which, I believe, underscores the fundamental difference between the two parties.
Randy,
Pawlenty should be praised for the creative way he has run state government over the last four years. If the state were a corporation, they would have done the same things to get through a recession and deficit period. Pawlenty eliminated our $4 billion deficit without raising taxes while keeping our state economy strong. That’s leadership. The same old raising taxes and raising spending without regard to economic impact or impact on average people is the status quo of the dinosaur DFL.
Chris — You overlook the basic fact that the state is not a corporation, and has different goals and purposes. Corporate leadership does not need to concern itself with the next generation, or with fairness or justice (although yes, many do). It is a question of maximizing profit or minimizing loss for the owners. Business leadership does not translate well into government.
The deficit that was eliminated is largely a holdover form the ill-considered tax cuts in the lasat years of the Ventura administration (pushed by House Republicans, who were lead by Speaker Tim Pawlenty). Governor Pawlenty’s “leadership” as Governor has consisted largely of following instructions from the Taxpayers’ League. He knows the political value of proposing spending projects, while getting a little vague on how to fund them (I’m still waiting to hear how high-school graduates are going to get their colelge tuition paid by the state — remmeber that proclamation?). “Creative” is the last word that can be applied to his administration. He is way out of his depth as Governor.
I’m embarrassed to be from Minnesota. Texas, Alabama, Florida; those are states that should be making totally stupid budgetary decisions. Not Minnesota!
Chris:
Please get over yourself and your law degree. You try to use it as a trump-card in all your arguments. Lawyers are a dime-a-dozen. A law degree doesn’t make you any more knowledgeable about the state budget. You just know that a “tort” isn’t a dessert.
Get out of your parents basement, find a job if you have that great law degree.
I would post more often, but I have two jobs and a life.
“The deficit that was eliminated is largely a holdover form the ill-considered tax cuts in the lasat years of the Ventura administration..”
No it wasn’t. It was caused by spend happy Democrats spending more than the state could afford.
tom,
“Sticks and stones may break my bones, but you are still a meathead.”
Archie Bunker circa 1977