More questions, no consensus on state budget


Does the budget passed by the House and Senate raise property taxes? Would a fourth-tier tax on high-income earners drive them and the jobs they create away from Minnesota? Would a corporate tax increase be passed on to labor in the form of lower wages?

These topics were aired but no consensus reached at a Legislative Commission on Planning and Fiscal Policy meeting. Minnesota Management & Budget Commissioner Jim Schowalter told members, “I think the key issue here is getting to a budget resolution,” which may mean taking risks even in a fragile economy.

But whether it’s more or less risky to raise fees, surcharges and taxes or limit spending to the degree proposed — and the ripple effect of those decisions on property taxes, job creation and wages — is the $3.6 billion question.

Revenue Commissioner Myron Frans said historical evidence of levy-back patterns related to cuts in local government aid indicates the GOP proposal to reduce local government aid would trigger property tax increases of approximately $395 million.

Sen. David Hann (R-Eden Prairie) said unless Frans could point to a line in the budget that links them, “I don’t think it’s fair or accurate to say that our budget raises … property taxes.” Hann noted that property taxes have increased every year since 1995. “There’s clearly something else going on that’s causing prop taxes to go up rather than Republican budgets.”

Rep. Mary Liz Holberg (R-Lakeville) questioned whether the governor’s latest offer reducing his new revenue request actually moves him halfway toward the Republicans, as he claims.

If the governor’s proposal includes the nontax revenue such as surcharges he originally proposed plus a fourth-tier tax increase, that means he has only come “at best 25 percent” toward the GOP, she said.

“We don’t even know what your total spending number and revenue numbers are,” she said. “If, in fact, the governor is still holding on to including all these nontax revenues … then I don’t know how he can say he’s met us halfway.” But absent the details, she said, she could not be sure.

“We appear to have a smaller pie … but you guys aren’t done cooking,” she said. She and other members repeatedly appealed to Schowalter and Frans for details on the governor’s net spending proposal.

House Research Analyst Joel Michael presented highlights of tax recommendations and actions in other states, based on The Fiscal Survey of States spring 2011 report by the National Governor’s Association and The National Association of State Budget Officers. 

Rep. Paul Thissen (DFL-Mpls) noted that 39 states have raised corporate, sales or income taxes in recent years to solve budget gaps. He said the full budget picture must put tax proposals into context, which includes a growing and aging population that puts more demands on schools, colleges and health care.