If you've ever had the experience of arriving at work and learning that an unpleasant task had unexpectedly disappeared from your to-do list, then you understand the relief that legislators must be feeling about the budget forecast that came out Thursday. Returning to St. Paul with a $399 million budget surplus for the current biennium will make the legislative session's first few days much less frenetic.
But the larger problem remains. The Minnesota Management and Budget office projects a $6.2 billion deficit for the upcoming two-year fiscal period. Of course, even this figure is open to some political interpretation — which is a polite way of saying that the spin doctors on either side were quick to jump all over it.
Gov. Tim Pawlenty, after gleefully claiming victory about the short-term budget surplus, declared that the long-term deficit wouldn't exist — or would at least be much smaller — if the DFL weren't allowing government spending to grow "on autopilot."
The DFL, meanwhile, had one of its rising stars, Rep. Ryan Winkler of Golden Valley, go on the attack against Pawlenty and his policies: "That’s the legacy of the Republican addiction to ‘No New Taxes’: no new jobs, chronic deficits, and a state undermining its children’s future."
The truth, of course, lies somewhere in between. It's absurd that Pawlenty is boasting about leaving Minnesota with a balanced budget and "money in the bank." Those claims will look good on presidential campaign literature, but the fine print should disclose this surplus wouldn't exist without federal stimulus dollars and a $1.4 billion loan from Minnesota's public schools — an IOU that will come due in 2012.
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But on the other hand, there's no denying that under Pawlenty's leadership, Minnesota has tightened its belt. General fund spending has increased at a rate of less than 1 percent per year since 2003, and although cities and counties have been forced to raise property taxes to compensate for losses in Local Government Aid, there's little doubt that the public's dollar is being used more efficiently than it was eight years ago. Had he not been in office when the national economy went into the tank, Minnesota's financial situation might be much, much worse.
But where do we go from here?
Let's start with some absolutes. Some lawmakers will be tempted to delay repayment to the schools, but they should resist that temptation. The state was wrong to borrow against its children's education, and it would be unforgivable to force our schools to engage in more short-term borrowing. Pay up, and do it immediately.
Next, our new governor should sign Minnesota up for early Medicaid expansion. Yes, there would be some cost to the state — about $400 million between 2014 and 2019 — but the return would be billions of federal dollars. This money is there for the taking, and Minnesota simply can't afford to ignore it. More than 100,000 of Minnesota's poorest, sickest residents would be covered by Medicaid, thus removing an enormous financial burden from the hospitals that now must provide uncompensated care.
Concerning the the overall budget, we won't disagree with Pawlenty's argument that the projected growth rate in state spending must be slowed. And we'll even go so far as to say that his idea of a "Spending Accountability Amendment" has merit. If state spending for each two-year period were limited to the amount of revenue received in the previous two-year cycle, a lot of guesswork would vanish. The end-of-session wrangling about the budget would be much less complex if everyone knew exactly how much money the state had to spend.
But that approach won't work if it is paired with a continuation of Pawlenty's "No New Taxes" policy. Minnesota's population is aging, which means we're spending more on health care. There are hundreds of bridges and thousands of miles of roadways that need to be repaired. Our population is growing, which means we have more children enrolling in public schools.
To meet those needs, we can't simply sit around, waiting for the economy to improve so revenues will grow "on autopilot."
The ball is in Republican hands, and the outgoing governor has left them with no low-hanging fruit. If they choose to tackle the deficit solely through spending cuts and "new efficiencies," then their task will be challenging indeed.
