After months of procrastination, GOP gubernatorial candidate Tom Emmer has revealed his budget plan for Minnesota. Step #1: make the deficit bigger than it already is.
Rep. Emmer’s plan would cut corporate income taxes by $368 million, business property taxes by $100 million, and provide $158 million in other business tax breaks. These tax breaks would swell the current state budget deficit from $6.8 billion to approximately $7.5 billion. In addition, the Emmer plan would further drain state revenues through new business credits and exemptions, which would inflict an additional unspecified hit on the state general fund. After phase one of the Emmer budget plan, the state general fund deficit would expand to approximately 20 percent of projected state general fund spending.
The backdrop for the Emmer budget plan is what Rep. Emmer calls “out of control growth in government.” In fact, after adjusting for inflation as recommended by the State Council of Economic Advisors and others, real per capita state general fund spending will be slightly less in FY 2012-13 than it was in FY 2002-03. If we further adjust for funding transfers and other miscellaneous shifts and accounting gimmicks to provide a better “apples to apples” comparison over time, real per capita state general fund spending will be about 7 percent less in FY 2012-13 than it was a decade earlier. Since 2002, Minnesota has reduced real per capita state and local government own-source revenue more than any state in the nation.
The spin behind the Emmer budget plan is the same right wing happy talk that we’ve been hearing for the last eight years. Reducing public revenue will stimulate job and income growth. Proponents of this approach have been undaunted by the empirical analysis of experts. For example, during the summer of 2009 State Economist Tom Stinson testified to the Legislative Advisory Commission that the budget cuts and shifts made by Governor Pawlenty in July 2009 using his unallotment authority would cost Minnesota about 3,300 to 4,700 jobs – about 3 to 5 times greater than the job loss resulting from the income tax increase proposed by the legislature in 2009.
Even more compelling than the analysis of Dr. Stinson is Minnesota’s experience during the “no new tax” era. Since 2002, Minnesota income and GDP growth has lagged behind the national average, road conditions have deteriorated, pupil-teacher ratios have increased, and public elementary and secondary school per pupil spending has dipped below the national average.
With tax increases off the table, a Governor Emmer will have no option but to further cut funding for schools and infrastructure. In addition, more public costs will be shifted on to regressive property taxes as the state solves its worsening budget problems through reductions in the revenue that the state shares with local governments.
The Emmer budget proposal is going down the same road that Minnesota has travelled since 2002: reduce public revenue in the hope that the resulting economic stimulus will outweigh the harm done by more reductions to investments in education, infrastructure, and public services. The fact that this approach has not worked over the last eight years has not dissuaded Rep. Emmer from proposing more of the same.
This is not to say that some tax reductions cannot be on the table, but these reductions need to be more than offset by other revenue increases. Minnesota will not be able to solve its budget problems entirely by cutting general fund expenditures that are already seven percent less than they were a decade ago. Some new revenues will need to be on the table.