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Minnesotans watch to see if state budget will increase

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ST. PAUL -- Minnesota's taxpayer-supported budget rose from $638,623 in 1962-63 to $35 billion in the current two-year cycle, and now Minnesotans and a new crop of lawmakers are wondering what the state's new budget number will be.

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A growing political gulf, rising health-care costs, demands for more services and a myriad of other reasons have made the budget a more difficult problem to solve every two years.

Driven largely by health care-related costs that soar far more than overall inflation, recent years' budget solutions have featured cuts in some programs and slowing growth in many others. The budget debate has grown sharper the last few years.

"We are still not out of the hole we dug for ourselves in the last couple bienniums," Democratic Governor Mark Dayton said. "That is the first reality."

Legislators and governors who came to the negotiating table with split agendas have done what is known in the Capitol as "kicking the can down the road." In other words, they used temporary solutions to balance the budget, while not solving it long-term.

Whatever the solution in 2013, Dayton insists that the state not resort to "shifts or one-time gimmicks."

Borrowing money from schools is called a shift, something Dayton opposes and most legislators decry, even as they voted for it through the years.

Among other tactics the governor defines as gimmicks is the Republican plan, enacted in 2011 to help end a state government shutdown, to borrow money against a tobacco lawsuit settlement windfall the state receives.

For the past few budget cycles, state leaders have said the easy budget fixes have been used and future action will hurt. Now, as they prepared for the session, which began January 8, they give few specifics about what Minnesotans can expect in the next budget.

Most are waiting for Dayton to release his proposal in January, something he is working on almost daily, including weekends. It likely will be revised, maybe dramatically, after a new state revenue report is released by early March.

"We will get our fiscal house in order and see where we go from there," Dayton said.

The budget could top $37 billion for the two years beginning July 1. That is how much money the state is due to collect from taxpayers under current law, and some Democrats hint at tax increases to provide more money for programs that they feel have gone underfunded.

Incoming Senate Majority Leader Tom Bakk, DFL-Cook, agreed with other Democrats when he said that many state programs "have been grossly underfunded, like early childhood education."

However, he quickly warned: "They are going to have to restrain themselves some...The Legislature is most likely going to pass a budget that has further spending reductions."

Many cuts have come from state health-care spending, which is growing far faster than other spending. Existing health spending, lower than many health-care advocates want, may not be safe.

"I hope we can find additional ways to find savings in that area of the budget," Bakk said.

MINORITY VIEW

Democrats do not need the support of Republicans to pass a budget since they control the House, Senate and governor's office.

Republicans said they would like to continue down the path they took when they were in the majority.

"It's fair to say we will continue to focus on controlling spending and not adding to revenue," Senator Dave Thompson, R-Lakeville, said.

He said that Republican approach has been "vindicated" in a lower deficit for the next two years than originally predicted.

The state will start its new budget cycle with no money in the bank and a $1.1 billion deficit in the next budget if nothing is done. But since the Constitution does not allow a deficit, Dayton and lawmakers must plug the gap.

One of the reasons state legislators cannot say much about what they will do with the state budget is due to uncertainty about how Washington will deal with federal financial problems, and if its solution will work in the long-term.

What happens in Washington affects the Minnesota budget.

"We are doing better, but not good enough," Senator Rod Skoe, DFL-Clearbrook, said. "My hope is the federal government will make fiscal stability their priority."

Representative Denny McNamara, R-Hastings, said the state will receive about $2 billion more in revenues in the next two years than during the last biennium, but projected spending also is expected to eclipse that.

"We need to look at the revenue coming in and say, 'What are our priorities?'" McNamara said. "We need to decide, 'Do we actually need more revenue?' "

DOWN THE ROAD

Democrats say lawmakers must look beyond the next two years.

"I think that a good goal for this legislative session is to find a budget that helps to solve some of the long-term structural problems that the state has faced because of imbalance in its budget in the past," Assistant Senate Majority Leader-elect Katie Sieben, DFL-Cottage Grove, said. "We've had year after year of rollercoaster swings in our budget. I'm hopeful we can correct that or begin to correct that in this legislative session."

While doubting Democrats' ability to control spending, Republicans say their example of fiscal restraint should be followed.

"I'd like to see us continue the same type of fiscal restraint we practiced in the last biennium," agreed Representative Steve Drazkowski, R-Mazeppa. "If we are able to continue to practice the type of fiscal responsibility we did the last two years, we'll stay on a very good trajectory."

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