How to fix the budget?

Published 10:13 am Wednesday, February 9, 2011

Lawmakers at the State Capitol in St. Paul are fighting to keep the state out of the red. -- Illustration by Tim Engstrom and Stacey Bahr/Albert Lea Tribune

Minnesotans are watching state leaders struggle with the worst projected budget deficit in the state’s history. Where to find $6.2 billion is no easy task, particularly when everyone is trying to defend their slice of the pie. Tribune reporters contacted state, city and county officials to get their perspectives on the situation.

Freeborn County Administrator John Kluever:

“Even on my best day, I would not pretend to know the state budget well enough to tell you which programs or line items to reduce or what the impact of such reductions would be. Therefore, I will try to answer this from the larger philosophical perspective.”

Kluever suggested the following actions take place now:

“In a crisis, all facets of state spending should equally share in dealing with the issue.

“Faced with a $6.2 billion deficit you need to find dollar bills and not nickels and dimes. No matter the political agenda, the dollar bills should be identified first and the nickels and dimes second. Often the nickels and dimes are dealt with first and the dollar bills are left until late in a session when legislation is debated and completed in haste.

“Solving a budget crisis does not mean delaying a budget crisis. The idea of delaying a payment so the budget is balanced does not solve a crisis.

“The last eight years have showed you cannot just reduce services/payments to get out of this deficit and you certainly cannot just tax your way out either. A blend of both reducing services/payments and taxing is needed.”

He suggested the following actions take place in the future:

“The $6.2 billion deficit figure does not include an inflationary factor. To not include an inflationary formula is not realistic and compounds the issue.

“Budgets have been built around revenue forecasts with a pattern of growing in the good years which then becomes unattainable in the bad years. Restraint during good years in preparation for the bad years is needed.

“Out of the 87 counties, 29 border with another state and 28 of these are not part of the ‘metro’ counties. To help create jobs statewide, tools should be given to all non-metro counties and especially counties that border with another state to allow them to compete competitively for these valuable jobs. Not only creating jobs but building the tax base at the same time.

“Allow localities the option to opt out of unfunded or underfunded mandated services — that is the county administrator in me talking.”

Freeborn County Recorder Kelly Callahan:

“I suspect the final result will be by a combination of spending cuts and tax/fee increases. Counties collect millions of dollars in revenue for the state while, on the flip side, the state continues to reduce aid and place local government costs back on the local taxpayers. The net result is a tax increase to many taxpayers. The state needs to utilize its revenue more wisely. Minnesota has already missed the boat on gambling by allowing the Native American-owned casinos to basically operate tax free, and I don’t envision the Mall of America casino idea to be the saving solution. I am personally opposed to further tax/fee increases to solve the crisis, but there are dozens of exemptions to the sales tax and eliminating some of those could potentially generate millions in revenue.”

Christopher Shoff, Freeborn County 4th District Commissioner:

“A combination of cuts, taxes, economic growth and changes in the operation of government are the ways to fix the deficit. The task of dealing with Minnesota’s budget deficit is monumental but we must embrace this challenge as citizens of the state. The greatest impact and least painful way to solve a large portion of the current deficit is work to foster and ensure Minnesota’s economic growth. The state must immediately pursue a revitalized commitment towards economic growth. While dealing with the remaining issues leading to the budget deficit we must move deliberately to avoid the unintended consequences of government’s action.

“In a short amount of time, we have gone from giving back state surpluses to an almost insurmountable deficit. The talk of shifting costs and responsibilities to local units of government is reprehensible. A $6.2 billion dollar deficit will take hard work, determination and cooperation in order to right the ship in a way that will not be a deterrent to Minnesota’s future. We will not be able to only cut our way to fix this deficit. We will not be able to only tax our way out of this deficit. The ways of government must be examined. The political parties by themselves will not be able to fix this deficit. Through a concerted effort of bipartisanship, open communication with the local governmental entities, and open communication with the constituency, the problem will be corrected. The state of Minnesota has a bright future and will only be stronger after we all band together to tackle the current deficit.”

Albert Lea-Freeborn County Chamber of Commerce Executive Director Randy Kehr:

“I don’t believe that there is a simple answer to the question and certainly not one that I can provide. The one thing that I believe must take place is open communication with all the stakeholders (that is, cities, citizens, groups that depend on government support, etc.) with the goal being developing consensus on the issue. In order to do so, participants need to leave their agendas at the door and take measure of each and every line item. It probably means realistically examining every program and determining what each needs to continue delivering the services that the citizens expect. I believe that one should resist taking the low hanging fruit and sacrificing one area for the quick fix without proper study and evaluation.”

Dan Belshan, Freeborn County 2nd District Commissioner:

“I have not studied the state budget. While I wouldn’t presume to tell the state legislators what to do, an obvious answer would be to do what each household must do in a budget crisis: stop spending more than it takes in. Using today’s technology with video conference meetings on the Internet to save travel expenses could be a place to start. One thing I would like to see in the future is that any board with the ability to levy taxes must be elected. There are currently many boards in the state which levy taxes but are not elected.”

Ellen Kehr, Ward 2 Albert Lea City Council:

“I believe that the state legislators are currently faced with the task of ‘budget reform’ which is a far more complicated process than ‘balancing the budget.’ True budget reform requires as much attention to the future as it does to the present. Common sense tells me that is critical to know where we want to go before making decisions on how to get there.

“Across the board percentage cuts, unallotments, salary freezes and tax cuts may work for a short term fix but they are not a long-term solution to achieving a financially healthy and robust state economy. We need to do on the state level what local governments across the state have been doing for the past several years: gathering community input, identifying potential partnerships and reaching out to them, setting priorities, leveraging their monies with private enterprise, restructuring their organizations, adopting best practices, creating a vision for the future and making economic choices that are sustainable and support the quality of life issues for all their residents. This is a fine balance and will not be an easy task on either the local or state level.

“As we proceed with this process each sector of our communities must be considered carefully, treated fairly and valued as part of the whole. We will find our solutions working together for the common good. We are all residents of Minnesota; we pay our taxes, share our resources, contribute to the economy and live here out of choice.”

Dan Dorman, Albert Lea Economic Development Agency executive director:

“I am starting with what I would not do and why.

“Our budget problems are not new and started in late 2002. Since then, cities like Albert Lea have given up 25 percent of their LGA. Before considering additional cuts in this property tax relief program, cuts should be made to programs that impact cities that don’t get LGA.

“It is clear we can no longer afford the 2001 property tax bill. The LGA portion of this bill has already been eliminated. The rest of the bill should be repealed. Besides LGA, this bill included a metro transit levy takeover and completed the general education levy take over.

“All spending programs should be examined. Likely cuts would include the renters property tax credit and reductions in the working family tax credit, bringing these programs in-line with our neighboring states.

“The delay in education funding should continue; the districts would continue to get their funding but delayed. This is one of the accounting shifts from the last legislative session that we can’t yet afford to buy back.

“We should reform and modernize the tax system, including the following:

“• Expand the sales tax to clothing, which would make our sales tax more progressive.

“• Reduce the corporate tax rate which is one of the highest in the nation and is hurting job creation. These taxes are ultimately passed on in the form of higher prices anyway.

“• Extend the sales tax on capital equipment purchases to the service industry and make this an up-front exemption.

“• Adopt a small business investment tax credit to spur job creation, which will result in increased tax revenues.

“The above would not likely solve the entire budget deficit. We need to make long-term reform to our health and human services budget, but these reforms will take time. To solve the balance of the deficit I would advocate returning to the income tax surcharge on all taxpayers. This was last used during the crisis in the early ’80s.”

District 27 Sen. Dan Sparks:

“The state is facing a $6.2 billion budget deficit, the largest in the state’s history. That’s 20 percent of the entire general fund budget that isn’t accounted for, making it among the top five budget deficits in the nation. Only states like California and Illinois out-rank our problem.

“I say these things because I think too many people dismiss this as a small problem, easily solved with a few trims of the budget and absolutely no outside-of-the-box thinking. Yes, Minnesota must take this as a cue to cut back on spending and streamline government services that have gotten out of control in recent years. But, there are a lot of government services that people consider vital to the quality of life we enjoy in this state. Local government aid is a great example — it keeps our property taxes much lower than places like our neighbor, Wisconsin. Education is another — Minnesota continually ranks near the top of educational rankings because we’ve made a conscious decision to invest heavily in our children, our classrooms and our teachers. I don’t think we should abandon these priorities.

“In order to uphold our most basic priorities, keep Minnesota great and solve this deficit, we need a balanced plan: spending cuts, more efficiency and reform in government programs, and a new revenue source that will support new cost demands that our changing economy will require in the coming years. Anyone who claims to be able to meet our state’s goals without a true balance between cuts, revenue and reform likely isn’t being completely honest about the problem.”

Albert Lea Mayor Vern Rasmussen:

“In order to make good decisions about the overall state budget there needs to be more comprehensive reform. Over the past several years, it has been the rural communities that have sacrificed, by way of LGA cuts, to balance the state’s budget. There has to be across the board cuts in all areas, not just a few, to ensure the health of our state as a whole.

“This being said, the most important idea is to endeavor to build our state, not cut our state. We must become more attractive to recruitment of businesses and supportive of existing business to build our tax base. The current approach to economic development in Minnesota forces us to cut our way out of budget problems, which further erodes our quality of life.

“In closing, I feel the state needs to chart a more aggressive economic development plan and approach any cuts in a more inclusive manner. This will open the door to the future, not close it.”

District 27A Rep. Rich Murray:

“We have to slow the growth of government. The biggest thing that’s needed within state government is for it to become more efficient, effective and innovative.

“We need to look at all spending and start budgeting based on priorities. Keep in mind, state revenues are increasing. Minnesota actually has an additional $1.5 billion more to spend this biennium. The problem is, current spending on government programs is projected to increase by more than $8 billion.

“This is why priority-based budgeting is needed. If your income goes down, you have to fix your budget. In Minnesota’s case, its income is going up, but it’s already committed to spending much more than it collects. We need to decide which programs are worth funding and which we can live without, and spend only the money we have accordingly.

“We’ll need innovation and reform to make this happen. Community leaders must recognize that the local government of the future will be much different than the local government of the past. ‘That’s the way we’ve always done it’ is a common phrase in St. Paul. It’s also the reason we have deficit after deficit year after year.

“I was elected to reform government, create positive job growth and find ways to have a strong core safety net. Lawmakers need to focus on the future and bring state and local leaders together to make state government better and more efficient. Throughout this session, we will analyze every program to determine which will be kept, which need to be reformed and which simply will need to be dropped altogether.

“No one said eliminating a $6.2 billion deficit would be easy. But if we can create a better job climate that puts more people to work our tax coffers and are not purchasing goods and services, craft a priority based budget and reform the way state government conducts its business, we will improve Minnesota’s economic condition.”

Interim Albert Lea City Manager Pat McGarvey:

“My suggestion would be to reduce appropriations to achieve most of the $6.2 billion. Expand the sales tax application to gain additional revenue. Limit large supported programs allowed increase in spending so that less state support does not end up becoming a dollar for dollar local property tax increase. Every state and local branch of government needs to recognize the serious reality of the economic circumstances this country is facing and share the sacrifice necessary to achieve balanced budgets. Reduction of the the annual federal deficits must begin with citizens accepting that entitlements must be included in the mix of budget contractions. Political courage and leadership essential.”