I have a monthly budget for my family. I also have a loose budget that looks far into the future, and anticipates things like retirement, setting aside money for college, and so on. The leader of our state, on the other hand, has never looked any farther than the next budget forecast.
That’s why, in every single biennium, and sometimes even in off years like this one, we are forced to find a new budget “fix.” Those budget fixes more often than not rely on one-time funds and new accounting gimmicks, rather than real solutions. A real budget solution wouldn’t just keep us above water for 8 months; it would find the right mix of spending cuts and revenue increases to leave us with a surplus each year instead of a deficit.
Despite his complete failure to propose a responsible budget during his tenure, Pawlenty loves to chide the DFL and call them fiscally irresponsible. The most recent example of that came as Pawlenty, from a hotel in Washington, indicated he would veto the bonding bill. Pawlenty’s action will force the state to delay major projects that could create jobs immediately. More importantly, if he gets his way, we won’t spend the money when we can get good prices and when our state needs the jobs; instead, we’ll do the same projects in two or four years, but they’ll just cost more.
Citing our budget deficit for vetoing a bonding bill is, quite frankly, short-sighted. Bonding deals with improvements to our infrastructure, whose costs are spread over 15 to 20 years. It’s more fiscally responsible for us to get a good deal while it’s available.
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Commenter
SL shares a story about the impact of GAMC:
My boyfriend is a 30 year old cancer survivor. He’s on GAMC because he can’t find work and his 18 months of COBRA ended this month. He has no income, so he does not qualify for Minnesota Care. He’s a single man so he doesn’t qualify for MA. We aren’t married so he can’t get on my health insurace. If he loses coverage he may never get health coverage again because of pre-existing coverage rules as they stand. The really messed up thing? He can’t find work because GAMC was cut and local hospitals are not hiring! Yep, he works in the healthcare field and would likely be able to find a position and health insurance if the hospitals weren’t losing their GAMC funding.
Thanks for sharing, SL. I find it absolutely sickening that our governor is willing to take away the very last option of cancer survivors like your boyfriend, while he simultaneously pushes to reduce corporate income taxes.
It seems that governing the state isn’t particularly important to Tim Pawlenty; it’s more important for him to be hobnobbing at CPAC, a major conservative conference, trying to promote his presidential campaign. He did find time while he was there, though, to
veto a bill that would have preserved health care for thousands of Minnesota’s most needy citizens.
I’m sure that now that Pawlenty has cut hundreds of millions of dollars from safety-net services that help the poorest Minnesotans, as soon as he returns to Minnesota he’ll be asking our richest citizens to make some sacrifices as well. After all, as Mark Dayton has proposed, just asking the richest 10 percent to pay the same amount in taxes as the rest of Minnesota would raise $3 to $4 billion.
Stop and think about that for a moment. You and I pay roughly about 12.5 percent of our income in state and local taxes. The wealthiest 10 percent of Minnesotans — those who could afford to pay more — actually pay only 10 percent of their income in taxes. Yet instead of demanding that everyone pay their fair share, our governor is instead taking away healthcare from desperate Minnesota citizens.
State Auditor Rebecca Otto has a
very timely commentary in the Star Tribune today, in which she discusses a lot of the same things I’ve been talking about on the blog for the past couple of days. In particular, she confirms that Pawlenty’s policies have led to major increases in local property taxes:
Under Gov. Tim Pawlenty’s leadership over the last seven years, Minnesotans have experienced a fundamental shift in taxes. The governor drew a line in the sand early on in his first term with his no-new-tax pledge. But the pledge has not cured our fiscal problems; it has simply shifted the state’s fiscal mess onto local property taxes.
The governor has not held the line on taxes; he’s redistributed them.
Otto cites some fairly shocking statistics in support of her claim:
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Tim Pawlenty likes to pay lip service to the idea of making Minnesota more friendly to businesses, by which he means lowering taxes. In reality, though,
his policies have played a large role in the $3 billion increase in local property taxes we’ve seen since he’s taken office. It turns out that Pawlenty is causing increases in the most burdensome tax for small businesses, while focusing a lot of energy on ending corporate taxes, which our small businesses don’t really mind.
A source passes along some information on a survey that puts things in perspective:
A recent small business survey commissioned by the bipartisan Small Business Caucus revealed that 40% of small business owners in Minnesota cited the property tax as most burdensome, followed by income taxes at 24%, and sales taxes at 13%. Only 8% of small business owners thought corporate taxes were a problem - the focus of Pawlenty’s “jobs-focused” tax cuts.
So I’ve got an idea for Pawlenty: If he really wants to help businesses, he should stop using state aid meant to lower property taxes as if it were the state’s rainy-day fund. When Pawlenty first took office, local government aid stood at roughly $800 million. After Pawlenty’s most recent cuts, it would be about $350 million - a 56% decrease. By taking from local government aid to pretend that he can balance the budget without raising taxes, Pawlenty isn’t just hurting the poor and middle class — he’s hurting the very businesses he’s claiming to help.
Jay Kiedrowski is a public finance expert at the Humphrey Institute for Public Affairs, and a co-chair of the recent
Budget Trends Study Commission, which produced some excellent advice on creating a more sustainable long-term budget. In an article yesterday in
MinnPost, he ripped Pawlenty for his failed budgeting.
In 2012-13, when the next governor takes office, the state faces a projected budget deficit of at least $5.4 billion because Pawlenty failed to solve in real ways the current budget deficit.
Kiedrowski’s article is particularly notable because Pawlenty likes to portray himself as a fiscally responsible Governor in the midst of a bunch of fiscally irresponsible legislators. The fact is, though, that refusing to increase taxes is not necessarily the same thing as being fiscally responsible. Pawlentys’ administration has walked a tightrope to try to keep the Governor’s irresponsible no new taxes pledge, coming up with every-more complex budget gimmicks to make the budget appear balanced for a year or two. Here’s Kiedrowski’s take:
A recent national study by the National Conference of State Legislatures found that Minnesota at 41 percent of the budget was second only to Alaska of all the states in using one-time fixes (better know as accounting gimmicks) to balance the state budget last year. Because of those accounting gimmicks, the Pawlenty administration will “borrow” from local school districts and the state’s colleges and universities because the state is running out of cash
Read more here.
Minnesota has long had a system that favored statewide sales and income taxes over local property taxes for raising revenues. There are a few reasons for this. First and foremost, property taxes are unfair: communities that restrict their housing stock to only very expensive homes can raise a lot of money with rather low tax rates, while poorer cities must levy much higher taxes to receive the same revenue. For many reasons, property taxes are also immensely unpopular, so our politicians have sought to minimize their use.
Throughout his tenure, though, Tim Pawlenty has seen local government aid not as a mechanism for keeping property taxes low but as a pot of money available for him to use to pretend to balance the budget without raising taxes. The truth, though, is that he’s just replacing state taxes with local taxes. Every year, Pawlenty slashes LGA even further, and property taxes rise as a result. In the graph above, you can see that as state aid has dropped, county property taxes have risen by almost the exact same amount.
Minnesotans think their property taxes are getting out of control, but that’s not exactly true. More accurately, our property taxes are rapidly becoming normal when compared to the rest of the country. But in Minnesota, we’ve long been used to a system in which property taxes were kept low through state aid. Tim Pawlenty has dismantled that system. He has caused your property taxes to soar, while claiming he hasn’t raised taxes. I don’t know about you, but personally I’d be willing to pay a higher sales tax if it would mean my property tax bills would stop climbing.
As you are probably all aware, last year Tim Pawlenty attempted to balance the budget on the backs of the poor by cutting safety-net programs such as food aid and General Assistance Medical Care, or GAMC. At the same time, he pushed for cuts to corporate taxes, which no doubt would have been paid for by even larger cuts to programs for the poor.
Realizing that we have an obligation to help the neediest among us, and that the loss of GAMC will hurt our hospitals just as much as the people losing the coverage, the DFL has attempted to save GAMC, coming up with a program that would cobble together a few funding sources and reduced payments to providers. The end result is about a year and a half reprieve for GAMC. Hospitals will lose money, but not as much as they would if GAMC were to go away completely. According to the Star Tribune, they say it’s better than nothing.
So we shouldn’t be surprised to hear that Tim Pawlenty will veto it.
If we judge our democracy by how it treats the weakest and most vulnerable among us, then clearly Pawlenty’s administration earns failing grades. He has used a terrible economy and a budget crisis partially of his own making as opportunities to unmake our safety net and transfer that money to the wealthy and corporations instead. His vendetta against GAMC is just one more example of what has been his very consistent policy of balancing the budget on the backs of the poor.
Before I even start, let me admit that yes, I know it will never happen. The line-item veto has been with us practically since statehood, so it’s not going anywhere. Nevertheless, I have big problems with it, because it gives the Governor too much influence in the legislative process.
We may well see that influence in action next week, after the House passes the bonding bill. After all of the work legislators have done on the bonding bill, Pawlenty can, if he so chooses, simply remove hundreds of millions of dollars worth of projects from it. I really have a problem with that, and it’s disappointing to me that our executive has that sort of legislative power. I know this power is very common at the state level, but that doesn’t mean I have to like it.
I’m under no illusions that Pawlenty will sign the bonding bill the way it is. But I hope, when he decides to veto it, that he will veto it outright and get involved in negotiations with legislative leaders, rather than removing items he doesn’t like by fiat.
Tim Pawlenty has the exact same solution to every problem that all other Republicans have — tax cuts. And despite the fact that we have a $1.2 billion deficit this year, and a deficit that will be somewhere around $7 billion next year, he used today’s State of the State Address to offer yet more tax cuts.
You know, the funny thing about tax cuts is that they actually make the budget crisis worse. I find it horrifying that Pawlenty can continue to propose new tax cuts while simultaneously promising “dramatic and painful spending cuts.” Republicans like to talk about “fiscal responsibility.” Don’t they have a responsibility to help our state whether its budget crisis without systematically dismantling our entire government?
The Republicans’ favorite meme in this bonding year is that we can’t afford a large bonding bill when we’ve got a major deficit. But either they’re thinking about this wrong, or they’re not very good at running their household finances.
Our deficit is not going away anytime soon; we’ve got a major structural problem in our budget that has already led to years of deficits. Since we’re likely to have budget problems for years, we need to take advantage of times when costs are low to stock up. It’s the government equivalent of buying in bulk at a place like Sam’s Club.
When I was laid off at the beginning of 2009, my family cut way back. And obviously our state needs to do the same. At times, though, we spent extra. When there was a big sale at the grocery store, or when we had some good coupons, we’d stock up big time. Yes, it was tough on our budget with just my wife’s salary, but we knew that over the next few weeks, it would actually save us money.
That’s exactly what this bonding bill is about. Costs are low, and interest rates are down. We can get a lot of our infrastructure needs taken care of while it’s cheap. While we have the chance, let’s stock up.
Next stop, the House, which is expected to vote next week.
I have to admit, I’m pretty impressed that legislators are moving so quickly. I figured the bill would be mired for months. Of course, we’ll have to see what happens when it gets to Pawlenty’s desk. Will he sign it (unlikely), trim it with line-item vetos (possible), or veto the whole thing and send it back (most likely)? Don’t expect ground broken on any new projects quite yet.
[via Capitol Chatter]
As if our budget didn’t have serious structural problems already, Minnesota House Republicans are proposing yet another iteration of their typical solution to everything: tax cuts. This time, they want to
eliminate our corporate income tax, claiming it would create jobs. I’m going to ask, for the umpteenth time, the same question I ask every time:
If current taxes really creates jobs, then were are all the jobs Bush and Pawlenty should have created?
The facts just aren’t on the Republicans’ side on this. At some point, they have to stop just saying that tax cuts create jobs and actually prove it.
So the bottom line is this: House Republicans are proposing to increase our budget deficit by another $1.2 billion while most likely not creating new jobs. I wonder how on earth, given our current budget crisis, they think we could possibly afford that.
I know it sounds counter-intuitive to say that the bonding proposal with the higher price tag is more fiscally responsible. But it’s not nearly as simple as looking at the size of the proposal.
Over the long run, a large bonding bill this year will save us a lot of money, in addition to putting people back to work.
Because it is spread out over 15 to 20 years, the annual cost of a larger bonding bill would be relatively small. Even a very large increase in the size of the bonding bill costs relatively little on an annual basis. This isn’t just financial sleight-of-hand, though; it is a well-accepted budgeting practice to spread the cost of large infrastructure projects over many years, so they are paid for by the people who use them throughout their life span.
In addition, we’ll be getting more bang for our buck on everything we build this year. Right now, interest rates are down, making bonding cheaper, and contractors’ bids are likely to be significantly lower. We can fund critical infrastructure needs more cheaply today than we could in a couple of years. That’s why spending the money today, instead of in two years, will save us money in the long run.
Given the small difference in annual payments, we should spend more on bonding when it’s the most affordable. It would be extremely unfortunate to allow our budget deficit today to stop us from saving money over the next 20 years.
It all comes down to the next couple weeks folks. If GAMC has any shot of surviving, it has to happen in the next couple weeks. Come on down to the Capital Rotunda. I’ve been to rallies before and let me tell you, it’s much harder for a legislator to ignore a thousand people than one hundred. I know it’s a pain to head over to the capital in the middle of the day, but this really is the best shot at making your voice hear. We need you, thousands of your neighbors need you, and Minnesota needs you.
WHO: You, and hundreds of others who want to protect the poor and vulnerable
WHAT: Rally and community action to save
GAMC WHERE: The Minnesota State Capitol, St. Paul
WHEN: Thursday, February 4, 2010, 11:30 AM to 1:30 PM
Update: I’m down here and it’s packed! Get on down to the Capital if you can.
Update 2:
Everyone is taking a moment to hold up signs of those they know who will be affected by the elimination of GAMC. Quite powerful. It’s tough to see the signs in this dinky iPhone picture so I took a pic of the woman next to me as well.
Update 3:
This is my favorite sign so far. So true.
Update 4:
Yep, it’s packed in here.
Senator Marty showing his support
People Are Shouting
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