We are midway through the Legislative session and we are focusing our attention on solving our record budget deficit and positioning Minnesota for economic recovery. It is clear the two cannot be separated. We have released our budget framework in the Minnesota House DFL caucus. It requires sacrifice including significant cuts and new revenue. It demands reform and we are considering innovations across the budget. Most importantly, the House budget is a fair, honest and practical approach to solve the deficit and position Minnesota for economic prosperity.
In this recession, it is more important than ever to invest in areas of our budget that can help grow our economy in the short and long term. Our plan maintains our commitment to early, K-12 and higher education - our very best investment to create long term economic prosperity. We also prioritized areas of the budget critical to protection and creation of jobs.
As the House developed our budget targets, our caucus took a careful look at what a “cuts only” strategy would look like for Minnesota. It isn’t pretty. Even with full use of federal recovery dollars, a “cuts alone” approach would require deep spending reductions in every area of government.
If we cut all education categories 4 to 5 percent (over $1 billion in cuts) all other sections of the budget - environmental and natural resources, health and human services, local government aid - would all face cuts in the range of 20 percent or more. Under these cuts, over 12,000 school employees across the state could lose their jobs, tuition at the U of M and MnSCU would rise significantly, 10 percent of all hospitals and 33 percent of nursing homes would close, 3 prisons would need to close, and property taxes would increase by as much as a billion dollars to offset part of the cuts to local governments.
We cannot cut our way out this budget deficit. This fact is acknowledged in both the House and Governor’s budget proposals, each which employs new revenue to close the deficit. However each proposal takes a different approach on the question of revenue.
The Governor’s proposal would raise $1 billion through a borrowing plan that would take out a 20-year loan for state operations. Akin to maxing out a VISA to pay off a Mastercard, this approach asks our future generations to pay for our current deficit until 2030 and beyond at an eventual cost of $1.6 billion. The Governor proposes a $1billion in delayed education payments. The Governor’s plan also assumes over $600 million in property tax increases through his deep cuts to local government aid.
The House proposal includes $1.5 billion in budget cuts and raises $1.5 billion of revenue. The revenue will likely include a combination of tax code reforms and tax increases, yielding a progressive revenue proposal. The 2009 Minnesota Tax Incidence Report demonstrates that Minnesota's tax code has grown more regressive. We propose that the financially strongest among us share in the solution, making the tax code more progressive. The House proposal includes a delay in school payments and we will produce a budget to balance in both the 10-11 and 12-13 biennium. This is no small feat.
In the middle of the great recession, we must advance practical and achievable solutions. We must consider the economic impact of cuts and tax increases and strike the right balance as too much of either intervention could further weaken the economy. I hope we can pass a budget that reflects Minnesota's values - protection of the vulnerable, investment in education, self sufficiency and jobs and hope for a brighter future.
Posted on Friday, April 10, 2009 by Erin Murphy,