The 2010 legislative session is just around the corner, and this is a pivotal year. Our state government is at a crossroads. My position is that we need to face up to our state fiscal realities and start to reform government to advance Minnesota for the future.
Unfortunately, WashingtonDC isn't helping the cause – government takeovers, bailouts, huge deficits, out-of-control spending, and corruption will never make us a great nation or state. The federal health care takeover is bad enough, but the corrupt Chicago politics on full display is destroying any final shred of confidence in our leaders.
If like me you are concerned, let’s remember that We The People – you! – still can make the difference here in Minnesota. The 2010 elections are closer than we think. Get involved, stay informed, and let’s work together to make good things happen in 2010!
You can start by attending our Edina Republican precinct caucuses on February 2nd, 7pm, at SouthViewMiddle School.
There’s a lot on the table, so please read below for additional details on the budget and bonding.
Regards,
Rep. Keith Downey
District 41A, Edina
323 State Office Building
100 Rev. Dr. Martin Luther King Jr. Blvd.
St. Paul, MN 55155
Office: 651-296-4363 rep.keith.downey@house.mn
Commentary
1. The State Deficit
2. 2010 Bonding Bill
1. The State Deficit
The Minnesota Office of Management and Budget released its most recent economic forecast, predicting a state deficit of $1.2 billion for the current two-year biennium ending June, 2011, and a $4 – 5 billion deficit for the 2011-12 biennium.
Why? Over the past forty years, Minnesota government spending has increased an average of 20% with every two-year budget. Just think, had state spending increased at the healthy rate of inflation plus population growth over the past 25 years, our state budget would be $10 billion dollars less than it actually is today, showing a surplus not a deficit!
And while private sector industries have experienced 5%, 10%, even 20% job losses, government employment across Minnesota remains the same as two years ago, education and healthcare employment has actually increased, and state government is now the largest employer in Minnesota!
Amazingly, at a recent forum a DFL legislator said that we should look to California’s recent budget solution as a model for Minnesota!
I couldn’t disagree more. We can balance our budget and provide our citizens nation-leading public safety, courts, schools, transportation, and other infrastructure—but we must do so by prioritizing and reforming government spending. Specific proposals I will be supporting this year include:
1. The Governor’s proposed constitutional amendment to cap state biennial budgets at the previous biennium’s revenue levels.
2. A “base closing commission” to recommend phasing out redundant layers of government and higher education campuses.
3. Early retirements, furloughs, wage freezes, and hiring freezes for state government.
4. A “sunset commission” to audit and reauthorize every program and agency every 12 years, and identify functions for privatizing which are not constitutionally required of the state.
2. 2010 Bonding Bill
Although state government is already exceeding its historical debt-service guideline of 3% of the general fund, DFL legislative leadership wants a massive bonding (borrowing) bill and will push one through.
In these times, I question whether the state can afford a bonding bill at all, and at most I would support one containing only critical maintenance projects and those state projects that result in a proven government cost savings.
My position is that the state needs to return to our historical 3% debt-service level as quickly as possible. We need to set priorities and focus on true necessities.
However, Speaker of the House Margaret Anderson Kelliher (DFL-Minneapolis) and Senate Majority Leader Larry Pogemiller (DFL-Minneapolis) are calling for a bonding “jobs” bill of up to $1.5 billion. The Governor has countered, saying a bonding bill is not imperative from his perspective, and releasing his initial recommendation for a $685M package.
It’s not as though we aren’t already borrowing and spending!
The State of Minnesota approved bonding of approximately $1B in 2008, $275M in 2009, and $800M dedicated to transportation starting in 2008. We will also spend $550M of federal stimulus funds on transportation and $175M on weatherization projects. Minnesota is competing for another $100M - $200M in federal transportation project grants, and the stimulus II bill that passed the US House would give Minnesota another $500M in transportation funding.
Whether state or federal, Minnesota taxpayers are already financing huge amounts of public debt!
But the politics are simple. After voting to raise taxes year after year, and continuing to make it harder to do business in Minnesota, DFL’ers need to show they care about the economy and job losses. DFL candidates may be running under the banner of “Jobs, Jobs, Jobs”, but their toolkit is the same – more government spending and a huge bonding bill.
Using their logic and looking at the amounts of current government borrowing and spending, one wonders why anyone is unemployed in Minnesota!
Why doesn’t bonding produce the advertised jobs?Because for every dollar of government debt sold to investors to fund government projects, that same dollar won’t be invested in the private sector by those same investors. We are simply trading private sector activity for government activity. And bonding bills take years to be authorized and expended, so there is not nearly the amount of short term employment advertised. In the private sector those same funds would be utilized much more quickly and productively, so in fact the net impact of government borrowing on jobs is negative.
And bonding simply pulls money from the future. Minnesota taxpayers must re-pay the bond holders principal with interest, which means that taxpayers today are paying for stuff that the legislature wanted a few years ago instead of things we need now. Even if all our bonds were sold to Minnesotans and all the proceeds came back to people in our state, the net impact on our state’s financial capital is still zero – over time we simply take the money from one group of Minnesotans (taxpayers) and pay it to another set of Minnesotans (bond investors). And if a portion of the bonds were sold to investors outside Minnesota, we are actually exporting capital from Minnesota to another state!
So borrowing with bonds only makes sense for state government, like any family or business, when it is judiciously used in those areas where the state has a constitutionally mandated role and where the investment can be justified based on a measurable statewide return. There is no jobs benefit, so we need to keep our eyes on the long term and invest only in core infrastructure and education.
A final troublesome note. Against my and others’ advice, the office of Minnesota Management and Budget has chosen this point in time to “modernize” its debt-service guidelines in a way that allows more bonding without the red flag of warning that we are beyond our historical 3% ceiling for debt-service in our state budget. California here we come?
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“Keith Downey is exactly what we need in St. Paul to advance our state.”
