As you are likely aware, Minnesota faces a $935 million state budget deficit. We are working at the Capitol to reach agreement on a plan to balance the budget. The Governor has offered his budget-balancing proposal and the House has developed its proposal. The House is working into the night on this bill and the many amendments. We began today's session at 10 in the morning and at 1 in the morning, we are still at it.
There are some areas of agreement between the Governor and the House as well as key differences. I'm glad the Governor is finally on board with a plan to close corporate tax loopholes for companies that shield profits overseas. However, I am disappointed the Governor again plans to make deep cuts that profoundly affect our most vulnerable citizens. The Governor would cut $31 million from nursing homes and long-term care workers, over $50 million from the University of Minnesota and MNSCU schools (could lead to higher tuition), and uses $250 from the Health Care Access Fund, which provides health care for hard-working Minnesotans who do not have health care access.
The House budget proposal takes a more balanced, responsible approach. In our proposal K-12 education and nursing homes would get a needed funding increases through existing revenue, so other programs aren’t cut as a result. Instead of cutting the Health Care Access Fund, our proposal used part of our state's $1 billion budget reserve to fill the gap. Our budget fix includes cuts, but they are largely directed toward state agencies and the state legislature.
The Governor's plan could have serious negative long-term implications because its isn't responsible, or even effective, to only "cut" our way out of a budget deficit. In 2003, the last time we had a deficit, the Governor cut schools, health care, and nursing homes. Five years later we have skyrocketing property taxes, under funded nursing homes, and college tuition that is twice the national average.
The 2003 budget cuts asked lower and middle-class Minnesotans to shoulder too large a burden. A 2007 Department of Finance Tax Incidence Study concluded that in total taxes (income, property, sales, etc.) lower and middle-class Minnesotans now pay a larger percentage of their income than the wealthiest 1%, those making over $350,000 a year. You can look at that study here: http://www.taxes.state.mn.us/legal_policy/research_reports/content/incidence.shtml
We need significant tax reform that more fairly asks all Minnesotans to pay their fair share.
We are constitutionally mandated at the state legislature to balance our budget by the end of this session. This is a good thing. It means we cannot run up years of budget deficits that must be paid off by future generations. But the way we balance our budget does have a profound effect in the long-term economic health of our state.
Our House budget proposal responsibly contemplates both the short and long term implications for the future.
Posted on Friday, April 4, 2008 by Erin Murphy,