And Then What?

The MInneapolis Star Tribune today (4/24) has published their idea of a Budget Plan for Minnesota. 

Shared sacrifice should be the overriding principle for Gov. Mark Dayton and the 2011 Legislature as they complete the work of balancing the state budget in the next month.

It most closely resembles the "balanced" approach of "moderate" Tom Horner, Independence Party candidate for Governor in 2010.  Horner himself commented on it via Twitter:

A familiar budget solution. More innovation and close tax breaks, don't raise rates, but it's a start.

To which Craig Westover responded:

 "Shared sacrifice" instead of "shared prosperity" is self-defeating. We ARE "all in it together." "Sacrifice" implies we are not.

The Star Tribune's plan is about a third each continuing the K-12 shift, cutting spending and as always, raising taxes.  Actually, an additional increase is suggested within the spending cuts that would bring the total tax increase to over $ 2 billion next biennium.  Unlike Governor Mark Dayton's budget, this proposal would actually balance the upcoming budget, assuming that the new top income tax bracket actually brings in more money that is.  It has not in other states, some of which have since retreated from that strategy.

But like Dayton's budget and Horner's budget, perhaps the biggest question of all is completely unanswered: what about next time?  Say you do get all the new revenue specified.  With spending still largely out of control, there will be another large "deficit" next round as Dayton, Horner, and the Star Tribune define deficit: less than we want.

Even the Republican budget isn't all that focused on this, largely content just to match expenditures to anticipated revenue.  But they have at least made some strides.  Don't forget that this is their first turn at the wheel in decades and that they have had only a few months to assimilate all the data.  I expect we will see considerably more and better reforms, particularly if Minnesota remains sane long enough to keep the GOP in charge of the Legislature next election.

The Star Tribune is concerned that our tax structure is more volatile than other states, primarily because we rely more on income taxes than sales taxes.  As State Representative King Banaian has pointed out, it generates too much money in good years, too little in bad years.  This traditionally has meant big spending increases in those good years, at least some tax increases in the bad years.  So one could argue that stabilizing revenues would tend to stabilize spending as well.

But the DFL Legislature under House Speaker Kelliher and Senate Majority Leader Pogemiller ended that tendency in 2007, proposing an astounding $ 5 billion increase on top of a $ 2 billion surplus.  Assistant Senate Majority Leader Tarryl Clark was almost giddy at the thought of all the ideas they contemplated.  It was classic tax (first) and (then) spend.  It continues today, there being wide DFL support for mere wants like Light Rail transit.  And ultra-liberal Mark Dayton is Governor.

If the Star Tribune Editorial writers or any other Democrats want to really contribute to the solution, I suggest that they help all of us get control of spending.  That means a return to funding only the legitimate functions of government, funding those only once, and funding them efficiently. 

Nothing else matters.

 

Comments

[J. Ewing]

state spending has increased over 500% in the last 50 years, while state personal income is increased only about 100%, both numbers reflecting inflation. If the state budget had risen to keep pace only with inflation and population growth, we would be looking at a $30 billion surplus this year rather than a (phony baloney) $5 billion shortfall. There is simply no defending that kind of profligate spending.

[The Big Stink]

"There is simply no defending that kind of profligate spending."

Yes there is. We have a whole layer of society whose sole function is to defend and inspire the right to confiscate other people's money.

[Banaianshow]

You're right, Speed. It's a very volatile tax structure, but reducing that volatility will favor some income streams over others, and is thus a political battle to be fought. I think it's worth a good debate. You could start with a recent tax reform commission. http://taxes.state.mn.us/mntaxreform/index.shtml

[J. Ewing]

And then what? The standard liberal answer to such questions is to pull out the plan and say "and here a miracle occurs."

[Give2Attain]

Since Hiram has not chimed in yet... I'll ask his usual and very valid question.

With the number of K-12 kids flat or growing, and the unlucky (ie high cost) kids being the growing demographic... And with the number of 65 and olders growing rapidly, and living longer on top of it... Can we actually get by with a cuts only budget?

If so, for how long? Fewer good paying manufacturing jobs with fewer total working employees means something has to give. (ie jobs like the Ford and Polaris plants will be missed sorely) Especially if you old timers keep hanging on so long... Them nursing homes get expensive and those Doctors can keep your heart beating for a very very long time...

If not, where do you want to see the revenues come from to pay these obligations?

[J. Ewing]

Nope, sorry. The number of kids and the number of old people are not increasing by 8% per year, every year for the last 50, as the state budget has. We have a gigantic spending problem. We can get by with the budget of two years ago, plus a little inflation, and if we do that, we have almost exactly the number in this "all cuts budget." The $6 billion shortfall was never a real number, just the difference between what the DFL wanted to spend and what the economy could produce in taxes.

And all of this assumes that every government program is 100% effective at meeting its objectives, and that there is no waste, fraud, abuse, unnecessary overhead or stupidity, and that there is absolutely NO way that this program could be reformed to be better, or eliminated entirely with minimal impact.

[Hiram]

""Shared sacrifice" instead of "shared prosperity" is self-defeating. We ARE "all in it together." "Sacrifice" implies we are not."

Sounds like socialism to me. The message I get repeatedly from Republicans is that we aren't all in it together.

"But like Dayton's budget and Horner's budget, perhaps the biggest question of all is completely unanswered: what about next time?

Sound more and more like John Gunyou. We do have a structural deficit. What are we going to do about it? That's the question the state has been ducking for at least fifteen years now.

[The Big Stink]

J: If I give my 40-pound dog 20 pounds of food to eat he will eat it until it's gone. He will bust a gut jamming food in his face. Dogs and lawmakers aren't all that dissimilar.

It's an analogy, Hiram.

[Speed Gibson]

If I might restate JE's point, we have increased State Spending the past 40 years as if the "expensive" demographics had already arrived. The budget is therefore already more than large enough to handle those needs. The task at hand is to find and eliminate the spending on "inexpensive" demographics (those who really didn't need it) that have been eating up the budget in the meantime, like big labor, big government and big education.

[Speed Gibson]

I've seen and read John Gunyou many times. Summary of his position: "Nothing we can do! Raise taxes!"

[Hiram]

If I give my 65 year old dad life saving medical treatment, he will continue to use it, until his life is saved. Dogs and dads aren't as different as one might think.

"It's an analogy, Hiram."

Analogies that compare dogs to children and old people, the two things government spends money on are probably a mistake. To paraphrase Soucheray, how much medical treatment is enough?

[Hiram]

"I've seen and read John Gunyou many times. Summary of his position: "Nothing we can do! Raise taxes!""

Other solutions would be to stop having children and to stop growing older.

[Give2Attain]

I do agree there are cuts that can be made. I am just trying to figure out what was "promised" to the citizens in 1960 vs 2011? And how much the population grew and changed? These need to be understood before comparing the apple and watermelon.

Here is an interesting link:
http://www.mmb.state.mn.us/doc/budget/report-spend/mar11.pdf

Using my financial calculator... You are correct that the yr over yr increase to get from ~$509M in 1960 to ~$32,000M in 2011 is 8.46% per yr.

And if I use a more rational 6% the 2011 number would be only ~$9,900M. Then if we multiply by 4.9/3.4 the current budget would be ~$14,000M(Population 1960 was ~3.4 mil vs ~4.9 mil today)

http://www.lmic.state.mn.us/datanetweb/maps/growth/index.html
http://www.demography.state.mn.us/

By these simple comparisons it definitely seems we are spending twice as much per citizen than we did in 1960. Now what are we getting for this extra spend. That is the question and is it worth it? Or is it just inefficiency and Gov't waste?

[Hiram]

"I am just trying to figure out what was "promised" to the citizens in 1960 vs 2011?"

That's a historical question, and I am not much of a historian. And I don't think there is any reason at all why we in 2011 should be bound by the policy decisions made in 1960. What's driving the budget now, and presumably didn't drive it then is the aging of the population. Medicare didn't come in until the middle of that decade. In 1960 health care was cheaper, and the population much younger, the baby boom just entering it's prime working and most productive years.

[Give2Attain]

Well, if health and human services was nil to none back then, that would explain the doubling since that is currently almost half the budget. Now is HHS something that the State should be providing? There are definitely many opinions on this...

My guess is that K-12 education was also much simpler and less expensive back then. The content was less, the kids were more homogeneous, the parents were stricter, special needs laws did not exist, etc, etc... That would explain most of the remaining difference.

Any other changes in our society and laws that are driving these costs?

[Hiram]

"Now is HHS something that the State should be providing?"

I have no problem with someone else picking up America's health care costs. Any suggestions as to whom?

[Give2Attain]

Here is a crazy idea... The person that is the recipient of the healthcare should pay the bill.

I know, it is probably just too crazy to work...

[Hiram]

"The person that is the recipient of the healthcare should pay the bill."

What if he can't afford it? Who pays then?

[Give2Attain]

I am assuming that is what bankruptcy is for... The court gets to decide. Also, that is what charities are for.

Why would anyone save hard or make sure their insurance premiums are paid up if they know "someone" else will foot their bill?

There has to be some significant pain, inconvenience and embarassment as a consequence to a failure to work, plan and save. Or people will have less incentive to do it.

When freeloading and begging becomes socially acceptable and even planned for, we start down a very disturbing path.

[Hiram]

"I am assuming that is what bankruptcy is for."

What bankruptcy does is discharge debts. In essence, the former debtor walks away free and clear, and the creditors are left with cents on the dollar. The creditors have to eat their losses. How is this fair, especially when the creditors are doctors and nurses and other medical professionals who are often compelled by the ethics of their professions and by state law to provide their services regardless of the creditworthiness of their patients?

"Why would anyone save hard or make sure their insurance premiums are paid up if they know "someone" else will foot their bill?"

Because in the case of serious medical care, they would lose everything they have and still be left with unpaid bills.

"There has to be some significant pain, inconvenience and embarassment as a consequence to a failure to work, plan and save."

Possibly, but pain, inconvenience and embarrassment don't pay any bills. The hospitals are still left holding the bag no matter how humiliated their patients are feeling.

"When freeloading and begging becomes socially acceptable and even planned for, we start down a very disturbing path."

I have seen parents beg for care for their children for which they could not pay. I didn't think it was socially unacceptable, and I don't think it would matter to those parents if I did.

[Give2Attain]

Hiram,
So if people are not to take responsibility for their own health and health insurance premiums, who in your opinion should? (ie who pays the bill? And "government" is not an answer since they have no money accept what the citizens provide...

If people are to take responsibility for their own health and health insurance premiums, how do you intend to strongly encourage them through the policies you support?

The nice thing about being a sick kid is that there are tons of charities that focus on this demographic. Our society is very sensitive regarding kids, not so much so for adults. But by the time they are adults, we expect them to be contributing and responsible members of society.

[Hiram]

"who in your opinion should?"

I think we all should, if for no other reason, because we all do. We have already made the decision that we don't turn away people from our hospitals to die, so the only question remains is where we decide to send the bill.

"And "government" is not an answer since they have no money accept what the citizens provide."

If you rule out government, I guess that leaves it up to the citizenry, who might give some thought to banding together to form a more perfect union, that sort of thing.

"If people are to take responsibility for their own health and health insurance premiums, how do you intend to strongly encourage them through the policies you support?"

I wish people would or could take responsibility for their own health and health insurance, but the fact is they can't. Their is simply no point in encouraging people to do things they can't or won't do.

[Hiram]

"The nice thing about being a sick kid is that there are tons of charities that focus on this demographic."

I see no evidence of any charity stepping up and saying that it is willing to pay Ameria's health care costs.

[Give2Attain]

"I wish people would or could take responsibility for their own health and health insurance, but the fact is they can't. Their is simply no point in encouraging people to do things they can't or won't do."

You definitely live in a very hopeless and helpless world if people can't do this...

[Hiram]

I have seen friends generate a half million dollars in medical expenses within three days. That's the reality, however helpless or hopeless it might be.