Governor Tim Pawlenty

Governor Tim Pawlenty announced his unallotment plan at a press conference on Tuesday. The process of unallotment is in the governor’s power when the state’s budget is out of balance and the legislature is not in session.

The governor’s unallotment plan doesn’t require legislative approval, but he has weighed the budget cuts most heavily to the 2011 side of the next biennium to give the legislature an opportunity next session to provide their input and take another shot at balancing the budget. Most affected agencies will also have extra time to adjust for the pending reductions in their expected budgets.

Although the governor’s plan didn’t go nearly as far as the budget solution policy brief, “Real State Budget Reform,” the public input gathered and assembled by the Minnesota Budget Solutions Coalition has clearly made an impression.

The Coalition recommended $146 million in Higher education cuts in targeted areas of the MNSCU and U of M budgets. We suggested pay cuts for top-paid staff, employee wage freezes and closing MNSCU campuses with very low enrollment. The unallotment process can’t be that specific, but the governor unalloted $100 million from higher education budgets, split evenly between the U and state colleges. It will be up to the Higher education boards to decide where to make the specific cuts, but it’s likely they will reach some of the same conclusions.

We recommended $595 million in spending reductions in the area of property tax aids and credits. The governor’s plan cuts $535.4 million and takes a more moderate road to get there. Where we suggested replacing capital equipment refunds with an up-front exemption (something that couldn’t be accomplished by unallotment), the governor instead realized the same savings (temporarily) by delaying the refund payments up to three months.

The coalition also advocated for a change in renters’ tax refund calculations to more accurately reflect the actual property taxes paid by the renter. We concluded that this would save $60 million. The governor’s staff concluded that the formula change would accommodate unalloting $50.8 million. We advocated an end to the Political Contribution Refund (PCR) program for biennial savings of $12.5 million. The governor essentially accomplished this for one cycle by unalloting $10.4 million from the program’s budget through June of 2011.

The governor didn’t tackle any of the bolder health and human services initiatives advocated by the Minnesota Budget Solutions Coalition, opting instead to play around the edges with micro cuts in several areas of the HHS budget and rely on over a billion in federal money to shore up failing budgets. $236 million will be unallotted across various HHS programs. A far cry from our recommendations which totaled over $4 billion in cuts, but which would mostly have required legislative action to implement.

The governor was also reticent to dig in to the K-12 education budget mess, instead relying on accounting shifts of $1.71 billion, essentially delaying some payments for short-term budget relief.

In all, the governor’s unallotment plan will save the state of Minnesota $2.6 billion in the 2010-2011 biennium.

Critics will argue that the governor’s strict adherence to “no new taxes” will force counties to drive up property taxes to compensate for lost transfers, which is a fallacy on at least two levels. First, the counties aren’t responsible for most of the departments that have been cut. Local aid cuts across the state account for only $535 million of the governor’s cuts – a far cry from the whole package of $2.6 billion that would have had to be raised in new taxes. Even if the counties were allowed to raise taxes enough to fully compensate for (temporarily) lost state assistance, the governor will still have prevented $2.06 billion in new taxes. Second, there is no reason that while families, businesses and state government are tightening their belts we shouldn’t expect county governments to do the same.

We have succeeded in preventing higher state taxes. For the first time in Minnesota’s history, the state government will spend less money in the next biennium than in the present. Now we must turn our attention to our local governments and hold our officials’ feet to the fire to ensure that they don’t see these hard financial times as a golden excuse to raise our taxes in perpetuity exponentially bloating future budgets when things start to turn around. It’s time for local governments to reevaluate priorities. For example, St. Paul has threatened to cut police and fire services in order to build a new ice hockey rink downtown. “Nice to have” frivolities can wait for a boom year. Right now we’re bust and we all have to put essentials first.

Governor Pawlenty’s Unallotment Plan

Budget Solutions Policy Brief: Real State Budget Reform

The Jason Lewis Tax Cut Rally takes place at the State Capitol today from 11:00 to 4:00. Free copies of the Budget Solution proposal created by the Budget Solutions Coalition will be available at the rally.

Most coalition member organizations will have a presence at this free, family-friendly event. Food and beverages will be available, as well as activities like the Freedom Shrine ehxibit, a tour of Capitol memorials and a great line up of speakers in two programs. See TaxCutRally.com for more details and parking information.

The Tax Man

Racing in on the heels of last year’s $11 billion in state tax hikes, another $2 billion in new taxes were proposed yesterday by DFLers in the state House of Representatives. Not to be outdone, DFLers in the Senate unveiled their even-bigger tax-raising plan this morning.

Democrats in the House have proposed a package of tax hikes and changes in the state’s tax system they term “structural reform.” By reform, they mean some people should pay more, not that the budget itself is being reformed.

In either plan, a big part of the money will come from an income tax hike. A new top tax rate of 9% - 9.25% for people earning $169,000 a year or more, or - under the Senate plan - $250,000 for married joint-filers will be created. This is anticipated to raise $467 million in new tax revenue.

In the House plan, another $1.5 billion will come from changes in the tax code like eliminating tax credits for education expenses, the gas tax credit (that was supposed to insulate the poor from last-year’s $6 billion tax hike), itemized deductions for property taxes, and deductions for mortgage interest and charitable contributions. The Senate took a more direct path: Raise income taxes in all income brackets for another $2.2 billion.

The plan will allow counties to permanently increase their local sales tax by an additional .5%, add a tax on gifts and tax digital music downloads.

Watch out, sinners. They’re coming to pass judgment and make you pay. Cigarette taxes, increased 75 cents a pack two years ago by the so-called “health impact fee,” and just boosted nearly $1 per pack by the federal government would get another hike of 54 cents per pack. Alcohol will get a tax-boost of a nickel per drink and a doubling of the receipt tax.

Outdoorsmen: get ready to pay more for your boats, ATVs and snowmobiles. The House DFL plan will charge a new sales tax on these purchases in hopes of raising another $10 million for the state’s coffers.

Everyone will be impacted in some way by the tax-hikes proposed by the spend-and-tax politicians in the legislature. The Minnesota Budget Solutions Coalition has produced a plan that could solve the state’s deficit while cutting taxes and creating a budget surplus, but our elected officials don’t seem interested in doing the work of real budget reform. It’s Far easier to reach into our wallets again to solve their overspending problem.

ST. PAUL – A group of nine non-partisan, non-profit organizations that formed an informal coalition earlier this year to solve the state’s $6.4 billion state budget deficit has produced a plan that closes the funding gap without raising taxes – in fact, it actually eliminates some taxes. The group’s proposal was introduced at a press conference at the Capitol today.

Lasting Reforms and Tax Breaks Instead of Hikes

The coalition gathered proposals from policy experts and ordinary taxpayers to help identify opportunities to restructure state spending, and then collaborated to put the ideas into practical solutions. The result is a16-page document that solves the budget deficit using existing resources and doesn’t require federal “bailout” money or new taxes.

The budget solution document, titled “Real State Budget Reform” includes recommendations to save the state $6.6 billion through restructuring and greater efficiencies. It also suggests “revenue-neutral” reforms that the group believe will improve Minnesota’s overall economic situation, resulting in more revenue for the state in coming biennia. 

“This is more than just a band-aid,” said Phil Krinkie of the Taxpayers League of Minnesota, “this is budgeting reform that will have a lasting positive impact on the state’s economics.”  The budget solution document is being distributed to all state legislators and to the governor.

“Minnesotans are outraged that their elected officials are once again contemplating raising their taxes,” said Jeff Davis, president of Minnesota Majority.  “It seems some lawmakers just aren’t getting the message.”  The organization announced that it will be delivering an audio CD each week from now until the end of session with voice mail messages from angry taxpayers demanding cuts in government spending.

All state legislators are also being invited to sign a form stating that they will put spending cuts ahead of tax increases in the effort of balancing the state’s budget.  “We are going to make sure that voters know which lawmakers refuse to make this simple commitment to their constituents,” said Davis.

Members of the coalition include: Associated Builders and Contractors, Minnesota Family Council, Minnesota Free Market Institute, Minnesota Majority, Freedom Foundation, the Minnesota chapter of the National Federation of Independent Businesses, Taxpayers League of Minnesota, and Campaign for Liberty.

Join in the fight to protect our wallets and reduce state government spending. The Minnesota Budget Solutions Coalition is sponsoring the 2nd Budget Hawk’s Jam & Bash at Trocadero’s Night Club in Minneapolis on Thursday, April 2nd from 5:00 - 8:00p.m.

The first Budget Hawks Jam & Bash in February was wildly successful, with hundreds gathering for refreshments, networking, chats with like-minded neighbors, and political leaders. It was so successful and fun, everyone wants to do it again and it’s an opportunity for those who missed the first one to join in. Learn more about what you can do to fight liberal lawmakers who want to increase spending and raise our taxes at this fun, free event.

Here’s a link with a map to Trocadero’s and  here’s a link with a map for parking.  Hope to see you there. Click here for an event flyer.

Governor Tim Pawlenty

Following the latest state budget forecast, Governor Pawlenty put together a revised plan to deal with the state’s projected $6.4 billion deficit. The proposal relies heavily on one-time money, including a $2.6 billion infusion of federal “stimulus” money and $2.3 billion in borrowing and delayed payments. The rest of the budget gap is addressed via spending cuts, while increasing funding for K-12 education by 2% (sort-of).

The K-12 education budget will grow in on paper, but a portion of the money budgeted for schools will be withheld. In the short run, K-12 funding will actually be cut – until the $1.3 billion payment shift kicks in two years from now.

The governor’s previous budget plan tightened Minnesota Care’s eligibility rules. Adults without children would have been precluded. Because of strings attached to the federal money, this change has been reversed in the governor’s revision.

As was the case with Governor Pawlenty’s original budget proposal, the deficit would be closed without increasing taxes, but it is only a temporary solution. Heavy reliance on one-time money means we’ll likely face the same budget problem in the next biennium.

State spending always increases during economic boom years, creating a budget crisis in the bust years. This continues a cycle of alternately expanding government and increasing taxes. Pawlenty’s plan would buck that trend for the time being, by kicking the problem down the road to the next biennium, when the one-time money tricks are no longer available. If we are fortunate and see drastic economic recovery between now and then, perhaps the budget deficit won’t be as large as it is today, but that’s entirely unknown. It could be better. It could be worse. At some point the fundamentals of the state’s budgeting process will have to be reformed. The current model is unsustainable.

Click here for an overview of the governor’s revised budget recommendations.

Senate Majority Leader Larry Pogemiller

Yesterday, Minnesota’s Senate leaders announced preliminary plans to close the state’s looming $6.4 billion budget gap. Included in the sketchy proposal is $2 billion in unspecified new revenues. Though the source of the new revenue wasn’t directly stated, Senate Majority Leader Larry Pogemiller (DFL – Minneapolis) said, “It will take shared sacrifice by some taxpayers — we hope those with the best ability to pay in this difficult financial time.” Which seems to strongly suggest an income tax hike.

In addition, the Senate plan would cut spending across the board by 7%. The teachers union, Education Minnesota is up in arms about the plan, which would cut just under $1 billion from the $14 billion Department of Education budget. Education spending is the largest item in the state’s budget.

Health and Human Services, the second biggest piece of the state budget pie would get cut $719 million.

All told, the proposed budget cuts equal around $2 billion. This $4 billion plan counts on one-time federal stimulus dollars to plug the rest of the projected $6.4 billion budget hole. Clearly, this is not a long-term solution, but it will result in a long-term increase in tax rates.

For some time, liberal legislators have mostly been saying that the budget deficit is too big for either a tax-only or a cuts-only solution. The (roughly) half-and-half proposal seems to be exactly what they’ve had in mind all along.

To suggest that balancing the budget strictly by spending reductions is impossible denies the reality of recent spending increases. Had government spending been held to inflation and population growth instead of expanding government’s reach over the past decade, there would be no deficit at all today. In fact, there’d be a nearly $8 billion surplus.

State spending has increased by 36% since just 2003. Government has been growing faster than inflation and personal incomes. Simply rolling back the $8 billion in new spending enacted in the last 5 years would put us back into surplus territory. New taxes are by no means a requirement to balancing the budget. In this recession, personal incomes are in decline. The taxpayer’s are entitled to ask, why should government now be entitled a larger share of a smaller paycheck? $2 billion in new revenue is a tax hike of historic proportions.

Solving the state’s budget without raising taxes is entirely possible. Whether that happens or not depends on the priorities of our elected officials. Do their loyalties lie with we the people, or the machinery of state government?

Hundreds of messages from private sector citizens have now been received as a part of the Virtual Listening Session campaign. Nearly all of the messages are from taxpayers demanding that state legislators cut state spending in order to balance the budget. Taxpayers are upset by how legislative leaders tried to manipulate the recent “listenings sessions” conducted as part of their “Misery Tour” acoss the state.

Last week, state legislators concluded their 24-city “Misery Tour,” officially known as “Listening Sessions.” The series of town hall-style meetings were promoted as opportunities for citizens to provide their input and ideas about Minnesota’s projected $6-7 billion budget deficit.

We were told that the meetings were designed to solicit input from everyday Minnesotans on what should be done about the state’s budget crisis, but behind the scenes, legislators were directing the entire production. Government workers were urged to attend and told what to say. Legislative leaders set the itinerary for a predetermined outcome, lining up speakers that fit their agenda and excluding the people who pay the bills: the private sector taxpayers.

Representative Gene Pelowski sent an email from his House account to a long list of Winona-area government workers, describing the purpose of the listening sessions as being to get testimony from affected programs in every level of government, education, health care or service impacted by the cuts suggested by the Governor’s state budget. In the email, he instructs, “We would ask you to focus your comments on the impact of the Governor’s budget including what is the harm to your area of government or program. Please be as precise as possible using facts such as number of lay offs, increases in property taxes, cuts in services, increases in tuition, elimination of programs.”

The government employee’s union, AFSCME directed their members to attend the meetings, and provided talking points to argue for tax increases.

In city after city, legislators heard primarily from government employees about the catastrophic impact the Governor’s budget proposal would have on their department, and the people dependent on their services. In some cities, the government talking to government echo chamber was nearly absolute. For example, only two private-sector taxpayers addressed the Rochester meeting, amid the testimony of over 50 government-funded workers.

The beneficiaries of tax dollars were out in force, and were overwhelmingly chosen to speak ahead of the producers of those tax dollars, the private sector workers and small business people. Groups like the Minnesota Budget Solutions coalition and others worked tirelessly to expose the sham of the staged “Misery Tour,” and we had an impact. In the final two days of listening sessions, a shift in the policy of legislative leaders was noticed. It appeared that they were shamed and embarrassed into ending the iron-fisted grip of government-only testimony. Public outrage over the staged government echo chambers at last led to the inclusion of more ordinary taxpayers in the sessions’ agendas.

Most accounts from observers of the final two days of the listening sessions indicated attempts to appear more balanced. Instead of the 2-4 private sector taxpayers allowed to speak at previous sessions (to 50 or more government speakers), the mix was closer to 50/50. This likely still wasn’t representative of the actual attendees, but it bears more of a resemblance to balance.

Congratulations to everyone who showed up to a listening session to be heard, to everyone who called a legislator about the staged nature of the sessions, and to everyone who called a radio show or wrote a letter to the editor about them. It appears that thanks to your outcry, our legislative leaders were shamed into changing their listening session agenda and were finally forced to acknowledge the voices of ordinary Minnesota taxpayers.

Until the very end, ordinary taxpayers were excluded from the process, their testimony greatly outweighed by the volume of government workers invited to speak. Participate in our Virtual Listening Session to add your input on how to solve Minnesota’s projected $7 billion budget deficit.

Today the MinnesotaBudgetSolutions.com coalition announced the launch of a campaign designed to expose the truth about recently completed state budget “listening sessions” and solicit real feedback from everyday Minnesotans. The campaign is being launched with a new hilarious parody music video based upon the Beatles’ Magical Mystery Tour. The campaign also includes a “Virtual Listening Session” that allows private sector citizens to submit online video testimony with their suggestions to legislative leaders on the state budget crisis.

“We heard from many people who registered to testify at one of these legislative ‘listening sessions’ that they were passed-over in deference to government employees bellyaching about how cuts in spending would result in dire consequences,” said Jeff Davis, president of Minnesota Majority and a member of the coalition. “Now its time for legislators to hear from the people who are footing the bill.”

Other coalition members said that it was difficult for some people to get to the sessions. “Many folks were too busy running businesses, working jobs and raising families to take the time to come to one of the sessions,” said Pat Anderson, president of MN Free Market Institute. “This provides a convenient way for people to be seen and heard from without leaving their homes.”

TAKE ACTION: Participate in our Virtual Listening Session.