On Monday, the House and Senate majority caucuses released a joint plan to reduce the state’s budget deficit by $1 billion, largely by continuing unallotments Governor Tim Pawlenty originally enacted in 2009, many of which were included in budget-balancing legislation in 2010. The plan represents the first phase of what is likely to be a cuts-only approach by the legislature to balancing the state’s $6.2 billion budget deficit and reveals some of the dangers of that approach as the state struggles to emerge from a recession. (A complete list of the proposed cuts is available online.)
Focusing on cuts to low- and moderate-income Minnesotans puts a drag on the state’s economy. There are few things the state can do to speed Minnesota’s recovery, but it is counter-productive to reduce demand in the economy by pulling resources from people who would spend the money quickly and locally. In 2009, Governor Pawlenty unalloted resources from the Renters’ Credit, which provides a tax credit to more than 300,000 low- and moderate-income households – more than one-quarter of which include seniors or people with severe disabilities. The House/Senate plan continues that unallotment, reducing tax credits flowing to these households by $106 million in FY 2012-13.
Another element of the House/Senate proposal includes eliminating Emergency General Assistance, which serves individuals or families who need one-time help to avoid a crisis situation, such as losing their housing or having utilities shut off. The proposal eliminates all $18 million in funding for FY 2012-13. Not only would this action leave low-income or disabled Minnesotans at risk of going without basic necessities like food, clothing or shelter, but means Minnesota stores and landlords will not get paid those dollars.
Failure to invest in Minnesota’s infrastructure undermines our long-term economic future. The House/Senate proposal also continues unallotment actions that will hurt Minnesota’s ability to succeed in the long term. The plan would permanently reduce funding for higher education by $93 million a year. Whether Minnesota will have a well-educated workforce in the future depends heavily on access to quality and affordable educational and training opportunities today. However, the House/Senate plan would cut state funding for higher education below FY 2006-07 levels, inevitably making it more difficult for many Minnesotans to develop those vital skills.
Minnesota’s future also relies on the vitality of our communities – are these places where business want to locate and workers want to live? The House/Senate proposal to continue to cut state aid to local governments by $230 million a year could jeopardize the infrastructure of our counties, cities and towns. Local governments have been feeling squeezed as state aid has been declining significantly in recent years, forcing them to rely more heavily on property taxes to provide fundamental services like ensuring public safety and maintaining roads. Ongoing cuts in state aid will create even more pressure to cut back on basic public services.
Spending reductions will need to be part of the solution for resolving the state’s budget deficit, but they should be presented as part of a balanced package that helps Minnesotans survive the slow recovery and prosper in the future.
The House and Senate intend to act quickly, planning to send this proposal to Governor Dayton before he releases his own budget proposal on February 15.
-Christina Wessel
No signature on tax cut legislation until a comparable revenue package is included. If that results in no package before the Legislature adjourns, maybe we’ll have a special session. Someone has to be honest with the people.