Wednesday, September 14, 2011

Budget Deficits – A Time for A Growth Strategy

With the advent of fall comes football, back to school and an early focus on the next legislative session.  The latter is as welcome as a trip to the dentist.

The reason is simple and that is the reality that weak economic growth and declining income spell trouble for state budgets dependent on income and sales growth.

Currently, Minnesota will likely face a deficit of approximately $1.9 billion for 2013-14.  This figure does not include any inflation or payback of the $2.1 billion from K-12 education.  But the real surprise will be on the revenue side.  If my recollection is correct, the February forecast pegged projected economic growth at 3.2 percent.  That is turning out to be highly optimistic.  Two percent or less is more likely.  This means that revenue expectations will be considerably lower and we can expect a shortfall to be announced in the November forecast.

Rather than being surprised in November, it would be more prudent to plan for another deficit now.  Further, I would contend, this should give our leaders the opportunity to do it right.  By that I mean putting an end to the rolling deficits that have been the norm for the past nine years and produce an integrated budget that is pro-growth and projects out revenues and expenditures for at least four years with inflation included on both the revenue and expenditure side.

When I use the phrase “pro growth” I mean tilting our expenditures and tax system toward long-term job growth.  This means investments that will advance growth and a tax code that entices growth.  The simple reality here is that we cannot cut or tax our way to success.  We must grow the economy.

The true opportunity here is that we as a state have an enormous number of talented people from both the private and public sectors that can put together a pro growth strategy.  Political leadership should be modest enough to know that they cannot do it alone.

The process really starts with the Governor and Legislative leaders having a free ranging conversation with leaders from groups familiar with this area such as the Itasca Project, the Economic Club, the Citizens League – past and present and some solid financial minds including the University of Minnesota and former state government Finance Commissioners.

The prerequisites are simple:  a commitment to make it work.

From here, the group can formulate a process that leads to comprehensive legislation.  But the key in the opening conversations is that they should take place in a comfortable and relaxed environment with privacy respected.   The goal here is to grow the economy not the partisan feud.

A successful product will give all of us a sense of success and a better future for our children.  It will also restore our pride in the quality of our governance.


  1. Governor,
    When you talk about grow the economy, I can't help but wonder what kind of jobs you're talking about. It's wonderful that Faribault Mills are up and running again, but what about other blue-collar jobs? They've gone away, but with what will they be replaced?

    When they talk about job training...what are they training people to do if there is no manufacturing.

    I keep going over and over this, and getting nowhere. Would you be be so kind as to address that question?

  2. Thanks for your posting Governor. Combined with Erik Hare's posting (, it has been wonderful to read forward-looking business-oriented postings that represent Minnesotans thinking of the best state for Minnesotans.

    Now, can we get our fellow Mionesotans moving? Pushing their legislators away from devisive partisan hackery and toward providing these kinds of jobs? Giving MN businesses hope that MN politics has its priorities straight so they invest here?

    If state leaders say we can find $600 million in funding in some vain attempt to build the Vikings some kind of entertainment-based Zygi World, we should be able to afford 10 times that for alternative energy to reduce our dependance on foreign energy, improved education to create better businesses, and all these other areas that improve our state's economy and provide better jobs.

    This is a time of great opportunity with an incredible amount of idle talented people and available resources for business, and the only thing missing is civic and business leadership willing to put it to work.

  3. The purpose of creating a growth strategy is to grow jobs. That process should take into consideration the questions you (S.J.) are raising. What is sad is this was not done during the earliest stages of the recession in '07 -'08.

    Hopefully, if a strategy is developed it will be clear, understandable, and deal with your specific concerns. My best, Arne

  4. Agree Governor! We need to recognize that we are in a crisis and boldness is our only way out.
    1) We need to get people back to work and back to spending their earnings.
    2) We need to invest in infrastructure that promotes a prosperous business environment.
    3) We need to recognize and invest in human infrastructure necessities for a long-term and sustainable state and national economy.

    My perspective:
    1) We have never had a better era of low-cost financing available, combined with hungry contractors and workers ready to bid low and work.
    2) We have never had a greater need for infrastructure repair and improvement. A bonding bill is the fastest way to get asset-building funds into private hands and multiplier business.
    3) Competitive countries that have a low cost labor force and an exploitable work environment, are investing in the third leg of "technical expertise". The U.S. has dropped from #1 in the post-secondary degrees rate for age 25-45, to #16. To compete against low cost labor and still protect the the U.S. lifestyle, this trend must be reversed ASAP!


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