Minnesota budget future is darkFor 28 years, Jim Mulder has looked into his crystal ball and predicted how legislators and the governor will solve budget problems. Now, the Association of Minnesota Counties' executive director said, that crystal ball is dark.
By: Don Davis and Scott Wente, State Capitol Bureau
ST. PAUL – For 28 years, Jim Mulder has looked into his crystal ball and predicted how legislators and the governor will solve budget problems.
Now, the Association of Minnesota Counties' executive director said, that crystal ball is dark. Mulder and other veteran budget-watchers are stumped as lawmakers prepare for the 2009 legislative session that begins at noon Jan. 6.
No one knows how to fix a record state budget deficit that most predict will top $6 billion for a two-year budget lawmakers and the governor must write in the first half of 2009.
Usually as a new legislative session approaches, lawmakers are full of ideas for how to solve problems facing the state and they rattle off a list of other bills they will push. However, when the noon Jan. 6 start of the 2009 legislative session arrives, there will be no answers to the budget question, a question so dominant that few other issues even are being discussed.
For one, Sen. Gary Kubly, DFL-Granite Falls, admits to being puzzled, even after a dozen years in the Legislature.
“I don’t have a clue how to start handling that kind of a deficit when we’ve already used up the easy money,” Kubly said. “I don’t know what kind of revenue increases could be agreed to. That’s part of the bewildering nature this time around.”
Kubly and other veteran lawmakers remember 2003, when lawmakers and Gov. Tim Pawlenty used a variety of budget-balancing tricks with tails that will limit what they can do in 2009.
One thing Kubly and other policymakers know is that upcoming budget cuts “will be deep and painful.”
Or, as Rep. Kent Eken, DFL-Twin Valley, put it: "It's not going to be a very fun session."
It is a hard problem to grasp.
"I don't think most people, even those who work around the Capitol, understand the depth of this problem yet," said Sen. Tom Bakk, DFL-Cook.
The state often has faced budget problems. But in those years, such as 2003, the public has not seen much change. The warning to Minnesotans this time around is that everyone will feel the impact of this economic situation, in part because changes made six years ago still limit legislator's options.
The problem is simple: The state does not have enough money to cover its expected expenses.
If the state budget continues as is, Minnesota easily would spend more than $37 billion in the two years beginning next July 1. But if the economy continues as is, taxes and other revenues will struggle to reach $32 billion. An economic report early in the legislative session likely will show an even bigger gap.
Policymakers are left with two options:
-- Cut the budget.
-- Raise taxes.
Everyone agrees state budgets will be cut, although no one in power has decided just how to do that. Most want to keep money flowing to education. Pawlenty also puts a priority on public safety and veteran-related spending. And various types of health and human services spending for the poor, especially, are becoming even more important in this time of economic distress.
Some legislators, particularly Democrats, quietly suggest tax increases, but even the strongest tax proponents say there is no way to raise taxes enough to fix the problem.
Republican Pawlenty says he will not accept higher taxes or fees, but has made vague references to higher revenues.
Legislative leaders plan to ask their committees to evaluate state spending and revenues right after they convene for the year.
"We are thinking about how in the world can we start handling things of this magnitude?" Sen. Keith Langseth, DFL-Glyndon, said.
Pawlenty must release his budget proposal by Jan. 27, and he makes it clear it will focus on cuts.
A legislative budget plan probably will not come out until well after a late-February or early-March economic forecast that many experts expect to show a budget deficit well north of $6 billion (the current prediction puts the deficit for the next budget at $4.85 billion). The budget must be balanced; deficit spending, like done in Washington, is not allowed.
The state constitution requires lawmakers to end their regular session by May 18, but many predict the budget mess is so ugly that a special summer session will be needed to finish the budget.
"I'm not planning on any summer vacations," Rep. Doug Magnus, R-Slayton, said.
There is no roadmap about what to do. And during a series of interviews, it became apparent that even long-time lawmakers are not sure how to proceed.
A veteran Democratic legislator said a tax increase could be floated, but such a proposal won’t go far.
“We’ve got 201 legislators and somebody will (propose a tax increase), but as far as it picking up or gaining momentum, I honestly don’t think so,” Sen. LeRoy Stumpf, DFL-Plummer, said.
Minnesotans facing a recession cannot handle higher taxes, he said.
Stumpf predicted there could be some fee increases, but said that approach has been used a lot since 2003 and Pawlenty recently said he would look at fee increases like tax increases – not where he wants to go.
Rep. Larry Howes, R-Walker, conducted an informal poll of his northern Minnesota constituents in recent weeks that showed many could accept a sales tax increase easier than other taxes.
People told him purchases are “a choice you make” and the sales tax captures tourists’ dollars.
On the other hand, many Democrats say that the sales tax already hurts the poor more than it does the rich. They prefer a new income tax bracket for the richest Minnesotans.
Lawmakers worry the average Minnesotan does not grasp the severity of the crisis because they are too focused on their own economic challenges.
“Most people aren’t engaged in the process,” Sen. Dan Skogen, DFL-Hewitt said. “They have lives and jobs and careers and families.”
Fewer Minnesotans have jobs than in the past. And that complicates the budget situation.
Some, like Pawlenty, see the budget problem as an opportunity to make changes.
“This is a wonderful opportunity to downsize government,” Sen. Bill Ingebrigtsen, R-Alexandria, said. “We don’t have any choice, quite frankly.”