No More “Happy Budgeting” – Please

With the firm declarations from the Republican leadership in the House and Senate summarily dismissing any and all revenue increases, the prospects for a government shutdown clearly increase and should now become part of the overall political discussion.

However, before a principled stand can be taken, the budget presented by the Republicans must fully comply with those principles.  This means a balanced budget without any revenue increases and one that is truly in balance.  This would be in keeping with the repeated rhetoric suggesting government waste, abuse, fraud, etc.  As a matter of fact, during the campaign there were public declarations by gubernatorial candidate Tom Emmer and Governor Pawlenty that there actually was not a deficit but rather a surplus.

Hence, from the prospective of the current legislative Republicans, the task of balancing the budget based solely on spending reductions should be relatively easy.  Unfortunately, that has not been the case.

While the budgets from the House and Senate are not identical, they are roughly comparable.  For instance, both budgets start out with an agreement to continue borrowing $1.4 billion from K-12 education.  This borrowing constitutes some 28 percent of the solution, but hardly meets the standards laid out by the “principles”.  A debt represents an acceptance of spending but delays the payment. 

I would submit that the validation of the spending and the delay of repayment is a deferred tax increase.  For those who would suggest that it could be a future budget cut, I would simply note the lack of courage and integrity to do it now.  Why should we always expect the future to have the courage to do what we refuse to do now?

To continue, the proposed GOP budgets violate any accepted standards of budgeting integrity when they book over a billion dollars in savings that cannot be verified by either the state’s Department of Revenue or Department of Management and Budget.  This speculative piece of the budget constitutes over 20 percent of the total budget so its importance should not be understated.

Suggesting cost savings reforms is excellent but booking them as budgetary savings is wholly unacceptable particularly when the two state departments warn against it.

For instance, what happens if the anticipated savings is realized to the extent of 80 percent and that would be a generous assumption.  The answer is a $200 million deficit and another struggle between tax increases and spending cuts with all the attendant political charge and counter charge.  And again, Minnesota’s already diminished credit rating will be reviewed for another reduction.

It should be remembered that “happy budgeting” is precisely what got us into this mess in the first place.  Go back to the “Big Plan” presented by Governor Ventura in 2001 which called for property tax reduction on one side and a sales tax expansion on the other.  The legislature decided to accept the tax reduction and eliminate the revenue increase to pay for it.  This absurd act of foolishness had bi-partisan support but Senate Majority leader Roger Moe and Senate Finance Chairman, Larry Pogemiller joined with Finance Commissioner Pam Wheelock, in strongly opposing the measure while House Majority leader, Tim Pawlenty, pushed for its adoption.

The oddity here is that the more liberal leaders were actually fiscally conservative while conservative leaders were liberally reckless.

From that point on, Minnesota rolled from one deficit to another even during the high growth Bush years from 2002-2007.  Every tool was brought into play in order to avoid a “tax increase” including massive multi-billion dollar borrowing, accounting shifts, “fee” increases, reserve depletion and transferring costs to local government.  State governments even rewrote the basic laws of economics by allowing for inflation on revenues but not on expenditures.  It ignored repeated warnings from bond rating agencies and suffered the loss of our prestigious AAA bond rating from Moody’s.

As a more traditional Republican, I would suggest that the Republican cause would be better served if the focus were to shift from partisan “principles” which appear not to be working to a higher standard of governance which involves respect for differing opinions and the recognition of placing service to the people over party loyalty.  

When the greater good is served, political leaders win.  Republicans would be well advised to share governing responsibility with the Governor and put together a compromised budget for this biennium and then be part of a bi-partisan alliance to eliminate the ongoing structural deficit via long-term reform.