Not enough money in the cookie jar

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Baby boomers are expected to suck the state dry if current budget problems prevail, because more money will be spent for their health care — and living on fixed incomes, they will no longer provide the tax revenues they once did. The State Budget Trends Study Commission presented this and other findings to a joint meeting of the House Taxes and Finance committees Jan. 13. Health care is growing at a rate of 8.5 percent per year. State revenues are expected to grow at an annual rate of 3.9 percent over the next 25 years. Continue Reading

The state of our state

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With a nearly $5 billion projected deficit facing the state, Gov. Tim Pawlenty urged bipartisan teamwork and proposed tax cuts and credits to businesses to stimulate job creation in the state’s lackluster economy. “We face brand new challenges in a rapidly changing world,” Pawlenty said in his State of the State address Jan 15. “The old ways aren’t going to cut it anymore.”
As a way to “jump start” job creation, the governor outlined his proposed Minnesota Jobs Recovery Act that would:
• cut the state’s business tax rate in half, from 9.8 percent to 4.8 percent, over the next six years;
• provide a $50 million package of tax credits that would create more than $100 million in new investments;
• provide a 25 percent refundable tax credit for small business owners who reinvest in their business quickly to stimulate the economy;
• provide a capital gains exemption for qualifying investments in small businesses; and
• provide businesses with a 100 percent exemption from the sales tax immediately upon the purchase of equipment, instead of filing paperwork for a refund. “These tax cuts and incentives may seem aggressive in the context of our budget challenges,” Pawlenty said. “But we simply have to take dramatic measures to improve our job climate and kick-start job growth in Minnesota.”
With an image of a mom and dad sitting at their kitchen table fretting over “a budget that’s tighter than it’s ever been,” Pawlenty asked legislators to bring the same emotions and concerns faced by everyday Minnesotans to the Capitol. Continue Reading

VOICES | Pawlenty’s plan will make things worse

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If Minnesota’s economic recession were a 30-below zero cold snap, Governor Pawlenty’s solutions would start by turning off the furnace. In his January 15, 2009 State of the State address, Pawlenty outlined a policy vision that compounds the present disaster with another, greater one. Facing a $5.5 billion projected budget deficit and state infrastructure already overstressed, the Governor believes massive budget and tax cuts will improve our situation. If effect, we’re supposed to start breaking up and burning the furniture to stay warm. That’s no solution; it is a clear prescription for deepening, widening failure. Continue Reading

Budget blues: $5 billion deficit visits Minneapolis’ North Side

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The subzero temperatures didn’t scare away North Side residents. Roughly 50 people gathered Tuesday night at the Minneapolis Urban League to meet with their state legislative delegation and learn the details of Minnesota’s looming $4.8 billion budget deficit. Freshmen Reps. Bobby Joe Champion (pictured) and Jeff Hayden (the only two African-Americans in the Legislature) were on hand, along with veteran state Sen. Linda Higgins. “The reality is that people are really, really frightened,” Hayden said at the start of the discussion. Continue Reading

Political maneuvering begins in budget battle

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As the budget battle at the state Capitol gets going, MinnesotaRepublicans are promising to obstruct efforts to both cut expenses and raise taxes. DFLers are looking at a pending stimulus plan from the White House in February in order to guide how the budget session takes place. And at least one DFLer thinks that Gov. Tim Pawlenty might change his stance on taxes (or “revenue enhancements”) to help fill a historic $4.8 billion deficit. House Minority Leader Marty Seifert, R-Marshall, says his caucus would not vote for any tax increases, with the only possible revenue generator an expansion of state-sponsored gambling. He called any tax increase “dead on arrival” during a press conference late last week. Continue Reading

Starting from zero

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Barring a miraculous economic turnaround or a sudden windfall of new revenue, legislative leaders and Gov. Tim Pawlenty face the likelihood of having to squeeze, trim and slash the state’s $37 billion biennial budget down to $32 billion by the end of May. It’s an unappealing task — so much so that they’re considering an altogether different approach to budgeting: starting from scratch. The idea is called zero-based budgeting, and it works like this: instead of constructing a budget based on what was spent the last time around and then adjusting the numbers up or down as needed, you start with zero and build your way up to whatever amount is available. Pawlenty, in responding to the release of the state’s dismal November budget forecast — which predicts a whopping $4.85 billion shortfall — made a succinct case for this kind of budgeting. “The projection now is that there will be $32 billion coming into the state of Minnesota in the next two-year budget cycle,” the governor said. Continue Reading

Who gets the axe?

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The state budget deficit crisis is monumental. As the legislature reconvenes in January, they will be faced with decisions about cutting programs, raising taxes and deficit spending. The state of Minnesota cannot run a budget deficit, but issuing bonds to pay for state spending is an option that looks something like deficit spending. Bonding means basically taking out loans to cover spending and paying them back over the long term. Bonding typically covers construction and public works projects.The Minnesota House of Representatives has set up a webpage to gather your comments on the budget deficit, which totals $426 million this biennium and $4.8 billion for FY 2010-11. Continue Reading

Local government, aid to the poor hit hard by unallotments

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Governor Tim Pawlenty on Friday announced cuts – known as unallotments – to the state budget in order to close the yawning $428 million deficit this fiscal year. The move left some legislators and public officials worried, and one advocate for the poor called it “an assault on the underclass.”
Two weeks ago, Minnesota Management and Budget Commissioner Tom Hanson announced Minnesota faced a dramatic shortfall in revenues, meaning the 2008-2009 state budget would have to be cut back before the current fiscal year ends in June of next year. Part of the deficit will be closed with $155 million from the state’s budget reserves, and the remaining cuts will come from a number of sources, most notably $110 million from local government aid and $73 million from human services spending. “Are there a few things we can cut?” asked Blaine Hill, the city manager in Morris, MN. “Probably, but not many.”
Hill said after Pawlenty cut $35 million in local aid in the 2003 budget crisis, many cities, including Morris, had to re-organize and dramatically streamline their operations. Continue Reading

Facing budget shortfall, Pawlenty targets cities, counties and human services

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Gov. Tim Pawlenty announced his budget cuts today to address a $426-million deficit for 2008. When facing budget shortfalls, state law allows for unallotment, a process through which the governor makes the final decision on what parts of the budget he wants to cut. At a Friday afternoon press conference, Pawlenty unveiled his unallotment decisions, announcing that cuts will come from local government, human services and higher education. Here’s the rundown of cutbacks: $66 million in local aid to cities, $44 million local aid to counties, a $73 million reduction in human services spending, $40 million reduction in appropriations to the University of Minnesota and the Minnesota State Colleges and Universities, a $40 million reduction in state agency spending (10 percent of operating budgets), $4 million in unspent funds from the Minnesota Housing Finance Agency Fund, a $2.2 million voluntary reduction of the Legislature’s unspent funds, $1.5 million reduction in the 21st Century Minerals Account and a $700,000 reduction in the Minnesota Investment Fund. An additional $155 million will come from the state’s reserve. Continue Reading

Watch out for falling school budgets

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As Minnesota governments reel from the December 4 announcement of the $5.3 billion state budget deficit Twin Cities schools are nervously examining their own budgets in anticipation of cuts in state aid. $476 million of the deficit announced last week will fall during this budget cycle, and the remaining $4.8 million will fall in the next 2-year cycle, beginning in 2009. Even as the state announced its budget deficit, Minneapolis Public Schools announced that the district is facing a $28 million shortfall for the 2009-2010 school year, up by $6 million from projections made in January. The district’s December 5 press release said:
“- Enrollment projections will decline 2.8% next year – a smaller decline than in years past, but a decline nonetheless.- State revenue will not increase next year. Earlier projections had anticipated a 2% increase from the state, but that assumption has been changed to a 0% increase, given the recent state economic forecast.- Personnel costs, which account for 80% of the budget, do not include any increases beyond what is currently identified in existing contracts.- Investment earnings losses of $4 million.”
“We don’t know what we’re going to do for the long term,” MPS’s Chief Financial Officer Peggy Ingison said in an interview. Continue Reading