Fiscal gimmicks costly to Minnesotans


(12/27/2009)

From: Sen. Steve Murphy

In a hearing this week at the State Capitol, members of the joint House-Senate Subcommittee on a Balanced Budget heard from administration officials who admitted deepening fiscal problems for our state. There is increasing concern among legislators with the direction of the state budget due to decisions being made by the Pawlenty administration.

Speaking before a bipartisan group of legislators, State Budget Director Jim Schowalter acknowledged that cash balances have dropped, slowly but steadily, over the last few years, due to a number of factors. The state is now at a low point that it has not seen in many years due to the economy and to previous use of state reserves.

Schowalter talked about the state using a variety of fiscal machinations just to cover the daily operating expenses of running government and providing basic services.

Minnesota has already delayed paying tax refunds and is now delaying payments to municipalities and banks. The likely next step will be to delay payments to the state’s higher education institutions.

Delaying payments to public entities is only going to make a bad economic situation worse. Thousands of Minnesotans are unemployed and struggling to make ends meet. The last thing we need is for employers to cut hours or eliminate jobs because of lack of funding. We need to be creating jobs if we want to turn Minnesota’s economy around.

Minnesota Management and Budget Commissioner Tom Hanson said the administration is considering taking out short-term loans to cover the cash flow shortages. As this economic downturn has often been compared to the lean fiscal times of the early 1980s, many in the Legislature have said that we should learn from past mistakes. Most specifically, short-term borrowing by the state in the 1980s led to an immediate and dramatic drop in the state’s credit rating, which experts estimate cost Minnesota taxpayers more than $120 million in increased interest charges.

The real roots of the current problem date back to the end of the 2009 legislative session. Offered a bipartisan solution that balanced the budget through a mix of revenue and spending reductions the governor instead chose to go it alone. He vetoed the balanced budget he’d been offered by the Legislature and used unallotment to make temporary shifts and cuts to vital areas like schools and health care.

Commissioner Hanson acknowledged that instead of a balanced approach to fix the current budget deficit, the governor will bring forth a plan sometime in January that will cut another $1.2 billion from many vital state services in order to temporarily fill the budget hole.

Legislative leaders have called upon the governor to submit his supplemental budget plan to the House and Senate sooner rather than later. Though the 2010 legislative session does not begin until Feb. 4, budget hearings could begin a month earlier, and with the governor’s cooperation, a balanced budget solution could be passed into law in the early days of the session, setting the stage for economic recovery and job creation for Minnesota.

I hope that this session, rather than going it alone, the governor is willing to work on a budget solution with the 201 legislators that have been elected by the people of Minnesota. Given our state’s current cash-flow crisis, we can see that these unilateral decisions and temporary fixes do nothing to get Minnesota’s budget back on track. Despite what is being suggested by Rep. Drazkowski, there is no “silver bullet” to this budget crisis. Amending the Constitution to limit spending might make for good press conferences, but such an amendment could limit the ability to make government reforms and respond to disaster situations and promote even further borrowing, and it still ignores the reality that our current $1.2 billion budget deficit is due primarily to lower-than-expected revenues. We need to work together on a long-term and balanced approach to build a solid economic future for our state.

For more information, you may contact Sen. Murphy’s Senate office at 651-296-4264.

 

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