Unions and allies: State’s budget woes show failure of Pawlenty’s ‘No New Taxes’

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A projected $373 million budget deficit announced today by the State of Minnesota illustrates the continuing failure of Governor Tim Pawlenty’s ‘no new taxes’ ideology, charged union leaders and progressive policy analysts.

The budget forecast, released by Minnesota Department of Finance officials, reports that a slowdown in the national and state economy has changed a $294 million state budget surplus estimated for fiscal year 2008-2009 into a $373 million deficit.

“This definitely is a manageable problem and we are well-prepared to address it,” said Tom Hanson, state finance commissioner. “We have planned well. We have record reserves.” He added: “the one thing you do not want to do is increase taxes.”

Taxes, however, enable the state to invest in jobs, transportation and education — and those investments become even more critical during an economic slowdown, union leaders and progressive policy analysts responded.

“The whole ‘no new taxes’ approach is worsening the state’s economy,” said Wayne Cox, director of Minnesota Citizens for Tax Justice. “It’s not hard to see why.” If you have worsening traffic congestion, Cox explained, it takes longer for businesses to move goods. If you’re not investing in education, he continued, you’re not training a skilled workforce. “If you shortchange the government, you short-change the economy,” Cox said.

“There’s a clear level of dissatisfaction with state services,” said Nan Madden, director of the Minnesota Budget Project. “The fact that the middle class is being squeezed is real.”

State finance department officials blamed the revenue shortfall on a faltering economy impacted by the slowdown in the housing market, tightening credit, and rising energy costs.

Madden countered that the revenue shortfall is rooted not in the economic downturn but in policy choices made by the Pawlenty administration.

“Governor Pawlenty has used his veto — or the threat of a veto — to lead our state to its current budget mess,” said Ray Waldron, president of the Minnesota AFL-CIO. “During his time in office, this Governor has rejected repeated opportunities to invest in Minnesota’s economy and get our state back on the right track. Even though a majority of legislators voted to raise revenues to fund education, health care, transportation and bonding bills, the Governor vetoed those bills, the jobs they would have created, and the economic recovery that middle class families are looking for.”

“Minnesota’s economy, its schools and its bridges are crumbling under Governor Pawlenty’s leadership,” Waldron said. “It is time to hold Governor Pawlenty accountable for the mismanagement that has led to lost lives, lost jobs and a loss of confidence in our state.”

“[President] Bush and [Governor] Pawlenty mislead us when they say smaller government and lower income taxes have helped working families prosper,” charged Eliot Seide, director of AFSCME Council 5. “Their policies have made the rich richer by squeezing the middle class. Not only have working families lost economically, we’ve lost the services that sustain our quality of life.”

“For a decade now, Minnesota has pursued a risky fiscal experiment,” said Dane Smith, president of Growth & Justice. “It began in 1999 with large and permanent tax cuts mostly for top-tier households, and continued with deep budget cuts and disinvestment in our once highly regarded education, transportation and health-care systems.”

“The latest forecast of a $373 million revenue shortfall — on top of mounting evidence that the state’s economy is underperforming the national average for the first time in decades — strongly suggests that this fiscal gamble was unwise,” Smith continued.

“…The numbers suggest that a vigorous return to public investment mode is in order, in education, transportation, public health and environmental protection,” Smith said. “At the very least, the current shortfall must not be addressed with further erosion of the public investment tradition that has made Minnesota among the healthiest, wealthiest and wisest of states.”

For the first time, key data indicate that “the Minnesota economy is worse than the national economy,” noted Cox. “Minnesota has gone from being an economic powerhouse to economic second class.” Yet, he continued, “the Governor’s message to Minnesota is we’re going to let things crumble even faster.”

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