Econ 101: Klobuchar watched while misery doubled

Since Sen. Amy Klobuchar (D-MN) took office, the National Debt doubled, unemployment doubled, and gas prices doubled.

Economics teacher and Republican Senate candidate Kurt Bills has set up a little visual aid at the Minnesota State Fair this week, to illustrate the federal spending binge. Jars of corn kernels show how the federal debt doubled on Klobuchar's watch, to over $15 trillion and counting.

national debt

Obviously to anyone but President Obama and the Democrats in the U.S. Senate, which hasn't passed a budget since April 2009, this level of debt is irresponsible and unsustainable. We must send fiscal conservatives like Bills to Washington, D.C. to stop the bleeding and quite literally save our country.

Kurt Bills and Klobuchar will debate this Thursday, August 30, 12:00 noon, at the Minnesota Public Radio booth at the Minnesota State Fair.

Miller Time

Bureaucracy and over-regulation are threatening Minnesotans' supply of Miller Lite, Blue Moon, and 37 other MillerCoors brands of beer. The headlines report that MillerCoors failed to renew their three-year brand license before the government shutdown, but deeper reporting reveals that the State of Minnesota simply failed to cash their check before Gov. Mark Dayton shut down state government. The fees involved for a three-year renewal total only $1170 ($30 per brand). In an epitome of bureaucratic irony, by forcing MillerCoors to pull its product from sale, the state of Minnesota cuts off its nose (liquor tax revenues) to spite its face.

This situation fits into an ongoing discussion by Bob Davis and Tom Emmer on their morning radio show. They have been questioning the very existence of licensing fees like this. Why does the state collect brand license fees at all? Minnesota law surrounding the labeling of alcoholic beverages seems to overlap or duplicate federal law. If such a product is legal to sell in the United States, shouldn't it be legal in the Minnesota? What is the benefit of Minnesota brand label registration to the consumer, really? Besides that, at $30 for three years, the state might even lose money on every license it sells.

Some permit and license requirements protect consumers and the public, but others appear to be solely administrative processes that give the state government a piece of the action in private business transactions while adding zero value. (Anyone remember the Stamp Act?) If you're wondering what business owners mean by "regulatory burden," it's when government makes it more difficult to make a buck, and in this case, even to render a tribute unto Caesar.

The 5% solution

A couple of years ago, my employer, Hewlett-Packard, cut everyone's salary 5% and stopped matching employee 401(k) contributions. Well, not everyone's salary was cut by an equal amount. Hourly worker wages were cut around 2% I believe, and management got a 10-15% cut. Nobody liked it, but our salaries were eventually restored this year (not retroactively), and we decided that a pay cut was better than a layoff. (Thousands of our co-workers were laid off.)

Governor Dayton and the Legislature are said to be about $1.6 billion apart between their budgets. That is less than 5% of the record $34 billion budget, much closer to Dayton's levels of funding than the GOP originally proposed and without the tax cuts and reforms that conservatives demanded in the last election. The State of Minnesota does not have a revenue problem, it has a spending problem. If new sources of revenue are found, new ways to spend the money will be found. Contrary to the fuzzy math of the unions and special interests, getting less of an increase than you asked for is not a "cut." Less of an increase is certainly better than a layoff, or a shutdown.

You can't always get what you want, and the Legislature has given the governor quite a lot of what he wanted. It's time for governor Dayton to sign the budget and get Minnesota, the only state in the union in government shutdown, back to work.

Why a shutdown?

Contrary to the impressions left by media reports and DFL statements, the GOP-controlled legislature sent several budget compromise proposals to Governor Dayton in an attempt to avoid a state government shutdown. Rep. Sarah Anderson (R-Plymouth) provided this summary in an e-mail to constituents:

May:  Knowing Governor Dayton wanted more revenue, Republicans proposed a balanced budget containing a 6 percent increase in state spending.  This proposal would have avoided a special session and a government shutdown.  STATUS:  Vetoed by Governor Dayton

June 6:  Republican leaders offered to accept 50 percent of Governor Dayton's budget.  This compromise proposal would have adopted the Governor's funding numbers for schools, courts, and public safety.  STATUS:  Rejected by Governor Dayton

June 16:  Republican leaders dropped request for tax cuts - a key provision for us.  This compromise proposal also included increasing spending for higher education, transportation, and more.  The compromise also renewed our offer to accept Governor Dayton's numbers for schools, courts, and public safety.  STATUS:  Rejected by Governor Dayton

June 30:  Republican leaders offered to add $10 million to the University of Minnesota and issue appropriation bonds.  Governor Dayton wanted to shift school aid payments from 70/30 to 50/50.  GOP leaders said no to Governor Dayton's 50/50 school aid payment shift, but did move a little on that split to generate $700 million in revenue for the Governor.  Republican leaders then offered to increase per student aid to cover borrowing costs.  STATUS:  Rejected by Governor Dayton

Republicans have passed the largest budget in state history without raising taxes, without the tax cuts that conservatives have demanded, with funding for many of the governor's priorities, and even giving a little toward the governor's 50/50 shift proposal, which would tighten the financial screws on school districts once again (especially charter schools). Governor Dayton, the CEO of Minnesota's divided government, should put his "tax the rich" mantra on hold for his reelection, and reopen the state for business.

UPDATE: Senate Majority Leader Amy Koch (R-Buffalo) stated on the July 5 edition of Capitol Report (Senate Media Services) that the Governor's last budget proposal is still $1.6 billion higher than the Republicans' last proposal, itself the highest general fund budget in state history. She also pointed out that despite many divided state governments nationwide (different parties controlling the legislature and the governor's office), Minnesota was the only state in the union that shut down its government this year.

Radical idea: live within our means

When the amount of money going out exceeds the amount coming in, many households and governments alike delay short-term pain by going (further) into debt, or by spending from savings. While both measures have their legitimate uses, neither is sustainable — in either a household budget or a government budget.

Going deeper in debt, and robbing Superintendent Peter to pay Saint Paul are two dubious tactics that the Minnesota Legislature will again consider this session as they face what the Minnesota Management & Budget office reports is a multi-billion dollar budget deficit for the 2010-2011 and 2012-2013 bienniums.

Moody's Investors Service downgraded the state's debt outlook rating, citing the budget deficit and "the state's ongoing financial and economic weakness as the primary reasons. The ratings agency also singled out the state government's depletion of reserves and a heavy reliance on one-time resources to balance its budget as reasons for the downgrade," according to a report in Finance & Commerce. "This leaves the state facing the challenge of addressing ongoing structural imbalance with limited resources in an uncertain economic environment."

A downgrade by Moody's often leads to states having to pay higher interest rates on debt.

Predictably, Republicans like Rep. Sarah Anderson (R-Plymouth) are trying to deal with the fiscal realities, while the DFL is virtually deaf and blind to them. In an e-mail to constituents, Anderson said about the DFL bonding bill, "Though some of the projects in the bill are important for maintaining Minnesota's infrastructure, many of the proposals contained in the bill fail to meet the 'project of statewide significance' standard or are not fiscally prudent given the state's deficit of $1.2 billion [in the current biennium]. We will be spending state general fund dollars to support this debt bill at a time when other areas of the budget such as our schools are facing potential cuts."

"I have authored a bill requiring the Legislature to pass a balanced budget before they pass any other bill," said Anderson.

The state is also planning to temporarily withhold aid payments to school districts, forcing many districts to borrow or spend down their cash reserve funds. Sen. Terri Bonoff (DFL-Minnetonka) said, "I am very concerned by the precedent being set to borrow from school district reserves and penalize districts for sound fiscal management. Our local school boards and school administrators have worked hard to manage their budgets and secure positive cash reserves. Districts hold money in reserve for financial stability, cash flow, and to maintain their credit rating. Fund balances are often derived using local taxes paid by homeowners and businesses. It sends the wrong message to fiscally responsible school districts that the state would look to their positive cash reserves in order to manage state finances."

Messing with public school funding is highly disruptive to district operations. The state should get its runaway spending addiction under control, which would make accounting tricks like this unnecessary. The state does not have a revenue problem, it has a spending problem.

Pawlenty to DFL: chores before allowance

Once again, Gov. Tim Pawlenty is being forced to play the adult in the room to the Minnesota Legislature's adolescent refusal to face fiscal realities.

In his letter Monday, Gov. Pawlenty told the Legislature to do what they already know the state Constitution mandates must be done: balance the budget.

Prior to this evening's debate on the Capitol Investment bill, I wanted to inform you, and the entire legislature, that I will be vetoing this bill in its entirety.

The people of Minnesota expect us to spend their tax dollars frugally and wisely. This bill does neither...

As you know, the state is facing a $1.2 billion deficit. Before the legislature passes any additional spending bills, I ask that DFL legislators submit a plan to resolve the budget deficit. My budget plan has been available for more than a week, but during that time the DFL majority has only shown an interest in spending more money, not in balancing the budget.

With Moody's recently lowering the state of Minnesota's debt rating, the DFL needs to get serious about getting the state's fiscal house in order, or risk paying higher interest rates on its bonds, not to mention passing on higher debts to the taxpayers. It's no different in the people's house than in your house: more money going out than coming in is an unsustainable, an unnecessary, situation.

Once again, with Republicans in the minority, Gov. Pawlenty is the last man standing in the way of the DFL spending more money we don't have on things we don't need. Later this year, Minnesotans must elect another governor who is prepared to do the same, regardless of which party holds the majorities in Saint Paul.

Education and Health and Human Services funding levels are unsustainable

Part 1 of a 3-part series

By Brian W. Grogan

Minnesota is faced with the deepest budget deficit in the state's history. Its outcome will impact our state for the next generation. Education and Health & Human Services (HHS) account for over 75 percent of State budget. If we do not adequately address the future obligations of these two entitlement programs today, then by 2025 the continued projected growth of two programs combined will literally bankrupt our state.

The need to communicate honestly to all Minnesotans about the reality of our commitments is urgent and reform is critical. Unfortunately, neither our governor nor the DFL party is aggressively tackling this monumental problem or our ballooning state budget. Did you realize that our state budget is projected to grow by nearly 8% in 2010? Minnesota is facing the largest deficit in its history and our state legislators want to grow government by 7.7%.

What is our history? Minnesota’s State General Fund budget since 1960 has had an average growth rate of 18.6%. That’s 18.6%! Our total state budget in 1960 was $250 million. In 2010 the budget will have grown to over $17 billion. If we look out 15 years and assume an 18% growth, our State’s budget will have grown by 2025 to over $225 billion. If we can somehow slow down State government growth to 7%, our state’s annual budget will grow to nearly $50 billion. Is this sustainable over the long term?

The drivers fueling this dramatic growth are Education and Health and Human Services (HHS). In fact, according to Governor Pawlenty’s Budget Director, Tim Stinson, HHS is projected to grow from 28% today to over 80% of our State’s budget by 2025.

There are concrete steps we can begin to take now to address this unsustainable growth, but our legislators will need to make difficult choices. This is their role and why we have elected them. It is their duty to watch out for all Minnesotans and the future of our state.

Brian Grogan, Minnetonka, was the Republican-endorsed candidate in state House District 43B in 2008.

Minnesota budget solutions

Serious, principle-based budget solutions have been proposed by two Minnesota groups. They merit serious consideration by the Legislature and Gov. Pawlenty to solve the state's $6.4 billion budget deficit. As an informed citizen and taxpayer, you should check them out, too, and let your legislator know what you think about them.

The Minnesota Budget Solutions Coalition, a group of grassroots non-profit organizations led by the Taxpayers League of Minnesota and Minnesota Majority, has published its recommendations in a comprehensive yet easy-to-read document on its web site. The recommendations are based on four core values:

• Limited government
• Fiscal responsibility
• No new tax increases
• Long-term solutions instead of quick fixes

The Center for the American Experiment has just published its budget recommendations in a document called Preparing For an Even More Demanding Future. It has four goals:

• Promote job growth
• Expand economic freedom
• Bring balance to budgets beyond the next biennium
• Obtain more value from government programs

Please urge your legislators to seriously consider these proposals as a way to solve our state's fiscal crisis and establish a better way forward for the state of Minnesota. And show your support for these principles by attending the Tax Day Tea Party near you next Wednesday, and the Tax Cut Rally on May 2 at the Minnesota State Capitol.

The seven percent solution

The Senate DFL is getting a lot of grief for their seven percent, across-the-board budget cut proposal. Sen. Larry Pogemiller (DFL-Minneapolis) sounded several fiscally conservative notes at a Thursday press conference announcing the proposal, which includes a $1 billion cut to K-12 education over the 2010-2011 biennium budget. He spoke of "shared sacrifice" and making the tough cuts now to avoid bouncing from one budget crisis to another. The proposal to trim K-12 education, which Governor Pawlenty and House Republicans oppose, has created a bizzaro situation in which Education Minnesota has (temporarily) switched parties.

As of the November forecast, K-12 Education was projected to consume $13.9 billion, or 38% of the state's $36.7 billion 2010-2011 budget. Health and Human Services takes 31 percent. In order to hold the teachers' union and welfare recipients completely harmless, which together take 69% or $25 billion of the state budget, and still erase the projected operating deficit as required by the state constitution, we would have to eliminate whole categories of spending, like Higher Education ($3.2 billion) or Property Tax Aids and Credits ($3.4 billion).

The Senate DFL proposal has a simplicity and undeniable shared sacrifice about it. But instead of a $2 billion tax hike (which, unlike the budget cuts are not shared equally among all taxpayers), let's start with a 14% across-the-board budget cut, spare us the partisan bickering, put aside the frills like casinos and a new Vikings stadium, and get down to the serious work of bringing structural balance to the budget consistent with Minnesota values and priorities. Only after this process is complete should we look at the possibility of tax increases.

If the largest income groups (our state's most productive citizens) can be tapped for ever larger income tax rates, shouldn't the biggest spenders in government also be asked to trim their budgets? Why should the public sector unions get a holiday from the recession? Where's the shared sacrifice in that?

Performance pay for legislators

Now that the Legislature's so-called "listening sessions" have been staged, it's time for the Legislature to get serious about how they are going to dig the state out of its multi-billion dollar budget deficit. I am not sure how necessary a listening tour is in this age of the Internet, not to mention the telephone or postal mail, but I'm sure it made for good political theater and cost the state a lot of time and money.

Where I work at Hewlett-Packard, revenues are down. The workforce has been reduced and budgets tightened. Salaries are being cut across the board, starting with a 20% cut for the CEO, Mark Hurd. Top executives are seeing a 15% cut, exempt employees 5%, hourly employees 2.5%. Similar measures are being taken across the country — but not at the Minnesota State Capitol.

Consider the message of accountability, responsibility, and leadership that the Legislature and the Governor could send to the taxpayers of Minnesota if the Governor accepted a 20% pay cut, the Legislature accepted a 15% pay cut, and all state agencies had to cut their budgets by a minimum of 5%. I would pay back the salary cuts if a balanced budget agreement was signed before the end of the regular session.

As the Legislature considers yet again, in the midst of a global financial crisis, how to confiscate taxpayer dollars for yet another professional sports stadium (among other boondoggles), Q-Comp for our elected officials is an idea whose time has come.