Our battered state budget: What's the cure?

Our battered state budget: What's the cure?
Star Tribune | December 6, 2009
By Marcia Avner, Mark Haveman, and Jim Miller

Should the state raise taxes? Cut spending? Throw out all budget notions and start over? Six experts offer ideas on fixing the budget once and for all: Marcia Avner, Mark Haveman, Jim Miller, Phil Krinkie, Nan Madden, William Blazar.

MARCIA AVNER
public policy director, Minnesota Council of Nonprofits

For a decade of budget debates, we Minnesotans have been caught in the trap of false choices. What do we cut? Health care or job training? Whom do we blame? Who takes the heat in the next election?

Maybe last week's news about the deficit will jolt us out of our acceptance of polarized politics, foolish choices and gridlock.

Here's the reality: The state isn't falling into neglect and disrepair because of forces beyond our control. Minnesota has made the clear and continuing political choice to cut taxes, creating ongoing deficits, which result in reduced services -- which result in a poorer economy.

We have chosen to accept the myth of tax cuts as economic engines, and in so doing we have chosen to ignore our real economic strengths: a healthy population, secure and stable individuals and communities, and the education that has been Minnesota's stock in trade.

This deficit is grim. We are long overdue for strong leaders willing to make real choices. Taxes are the fees we pay for a healthy economic state. We need gutsy leaders willing to raise adequate taxes, do it fairly, and invest in Minnesota.

MARK HAVEMAN
executive director, Minnesota Taxpayers Association

The state economic forecast reaffirms what previous budget projections have told us: Existing state government finance is unsustainable. Taxing more and spending less doesn't address the significance of what we are facing. Minnesota needs an overhaul on both sides of the ledger.

Tax reform must emphasize policies that grow the tax base rather than simply squeeze more revenue out of existing taxpayers. Our continued reliance on tax code tweaks and incentives to keep Minnesota competitive and attract business is destined to disappoint. Other states and nations are racing to match and exceed these piecemeal efforts.

As Mark Twain said about whiskey, "Too much is not enough."

Abolishing Minnesota's corporate income tax is one example of the bold reform we should be considering.

Spending reform must focus on redesigning public service delivery. There are many strategies to accomplish this, but all revolve around enabling greater flexibility and focusing on outcomes, not process, in the delivery of public goods.

Tax reform shifts the burden among taxpayers. Spending reform inevitably addresses a thicket of issues concerning public sector workforce size, organization, and compensation design. Both entail significant political risk, but both are essential to put Minnesota on a sound financial footing.

JIM MILLER
executive director, League of Minnesota Cities

The new budget forecast serves as yet another grim reminder that the state/local fiscal partnership is fractured. At risk is our ability to continue to adequately fund essential services at all levels of government in Minnesota.

As we have seen too often in recent years with dramatic cuts in aids and credits to cities, budget-balancing decisions made in St. Paul have a profound impact on the provision of city services -- police and fire protection, snowplowing, street maintenance, parks and recreation, and more.

Additionally, when service cuts are not feasible, or cannot be implemented because of mandates, property taxes increase, city reserves are depleted, and city bond ratings are jeopardized.

While it's true that full attention must first be directed to addressing budget shortfalls in the current biennium, the equally important challenge lies in what we do to remedy the state's underlying structural fiscal problems and avoid repeating future shortfalls. The current system of inadequately financing government services cannot be sustained with short-term fixes. If nothing is done to address long-term fiscal challenges, Minnesota's quality of life -- strong education, sound transportation and public safety and vibrant communities -- will be diminished for all.