Please ensure Javascript is enabled for purposes of website accessibility
Recent News
Home / News / PIM interview: Arne Carlson sounds off on Minnesota’s fiscal mess

PIM interview: Arne Carlson sounds off on Minnesota’s fiscal mess

[Editor’s note: This feature originally appeared in the February 13, 2009
edition of the PIM Weekly Report.]

On Thursday PIM caught up with former Minnesota GOP Gov. Arne Carlson at his winter place in Florida to ask his thoughts on the current budgetary crisis back home.

Carlson, who since leaving office in 1999 has been a vocal critic of political business as usual at the Capitol, has elicited no small amount of resentment from members of his own party for his frank criticisms in the past. But he continues to be entirely unabashed about calling the action as he sees it. In the course of our talk, Carlson sketched his best-case approach to solving Minnesota’s problems and lambasted the tendency to push fiscal problems off into the future that’s defined the state budget process for the past decade.

As for solutions, Carlson says all the key players at the Capitol must "disavow their ambitions. The people of the state of Minnesota are paying for these people to spend 100 percent of their time on Minnesota’s problems. That’s it. There’s nothing else to negotiate. So if Gov. Pawlenty wants to have credibility on the solutions to these problems, disavow any intentions of going somewhere else. The same goes for the leadership of the House and Senate.

"Go fulltime on this, and nothing else."

Here’s the complete interview.

PIM: You faced a deficit over $2 billion back in the early ’90s, and you solved it in part through tax increases. The crisis this time has a great deal to do with the economic downturn, but the state has been running what amounts to a structural deficit for a long time. Shouldn’t they have addressed part of this problem before now?

Arne Carlson:
Yeah. Approximately $1.5 billion of this should already have been dealt with. It was just postponed from the last biennium. What has been happening is something that the public as a whole should be paying increasing attention to is that politics–not just in Minnesota, but nationally as well–has become obsessively focused on the short term. The overall political prayer is, "Oh, lord, get me elected." The consequences come afterward.

So there’s a very strong tendency to postpone the delivery of bad news. And frankly that’s what’s been going on. If you go back to Jesse Ventura when he was governor, he announced that so-called property tax reform. It was sold as being bold. Well, it was bold, but it frankly wasn’t very intelligent. A year later, he recognized that he’d opened a black hole. So he came up with a series of proposals to raise the revenue to pay for it.

And at that time, on a very bipartisan basis, the two majority leaders–Roger Moe in the Senate and Tim Pawlenty in the House–refused to consider it, because they were candidates for governor. I remember that Rep. Pawlenty’s comment at the time was that well, we’ll grow out of it. The reality is, we grew into it. And from that point on, we had those continuing structural deficits. The solution, to some extent, has rested on gimmicks. One is, we’ll recognize inflation on the revenue side but not on the spending side. Well, how does a school district control the price of oil? It was an absurdity. The second one was, let’s not push out for four to six years. Let’s be partially blind to the future. There’s only so much of that you can do.

Then when the perfect storm comes, which is what we’re in right now, you’ve got an incredible problem. I wouldn’t even compare the deficit I dealt with as governor to this. This is much, much larger.

Why is Minnesota one of the worst-off states in the United States? If I’m reading the numbers right, the deficits in Florida are significantly lower than they are in Minnesota. Why?

The job growth in Minnesota is extremely weak, and it’s been weak for a number of years. During the ’90s, we led the nation in growth. Now we’re rather low compared to other states. I don’t have the answer to the problem. I don’t know what it is. But the point is, it’s imperative that the leaders know what it is.

So what I would recommend is, one, that we get a really good sense of the lay of the land. I would bring in people like Darrell Runge from the University of Minnesota. I’d bring in Tom Stinson. I’d bring in some economists from the private sector. I’d bring in Steve Lewis, the former president of Carleton College. I’d bring in Dan Laufenberg from Ameriprise, a very good economist. I would spend hours with them, and I’d ask, what is it that you believe is going on?

I’m not talking about solutions here, I’m talking about first understanding what the problem is. Because if the problem is very temporary, that suggests one kind of strategy. If the problem is rather permanent, that tells you another strategy. It’s important that we know the answer to that.

The second part, then, is to surround yourself with the best budget team you can build. The truth is, Minnesota has allowed its finance department to grow weaker and weaker in terms of talent. That has to stop. To this day, we still look back to people like Jay Kiedrowski, John Gunyou, Laura King, Pam Wheelock. We’ve had some great commissioners. The point is, good talent can go into the private sector and make a lot more money. I think there should be a pay exemption for commissioners of the finance department so that you can really attract the best talent. The state budget is, what, $35 billion? Imagine if you went into the private sector, to a $35 billion private company, and asked them how much they paid their CFO and the answer was $110,000.

The same thing is true for cities and counties. You really need talented people in finance areas. My gosh, a really splendid talent might be able to get you a quarter of point lower interest.

Those are all things I’d recommend doing before you even start discussing solutions. The second part is, I would have all the people that are key players disavow their political ambitions. I mean that sincerely, and I think it’s tragic that we haven’t discussed it. You cannot serve two masters at the same time. Only one. The governor has to wear the hat of the governor of the state of Minnesota and not have his eye on anything else. The same goes for legislators who are in leadership positions. If they want to become governor or senator, they need to forgo that for the next two years and just focus on this problem.

This problem requires all hands on deck.

PIM: Of course there is a lot of grumbling at the Capitol on the part of Democrats about the state being held fiscal hostage to Tim Pawlenty’s political ambitions. Do you think that’s fair, or is the blame rightfully more bipartisan than that?

Carlson: Well, I think what I said before is valid. Each of them needs to disavow their ambitions. The people of the state of Minnesota are paying for these people to spend 100 percent of their time on Minnesota’s problems. That’s it. There’s nothing else to negotiate. So if Gov. Pawlenty wants to have credibility on the solutions to these problems, disavow any intentions of going somewhere else. The same goes for the leadership of the House and Senate. Disavow any intentions, and that’s it. Go fulltime on this and nothing else.

Let me ask you this. Do you think any company would tolerate its leadership saying, well, we’re committed to the well-being of our company, but by the way–I’ve got my eye on being CEO somewhere else. If we wouldn’t put up with it in the private sector, why in the world should we tolerate it in government?

PIM: Are you surprised, or disappointed, that there has been so little straight talk about revenue-increasing options–taxes and fees–now that that’s clearly going to have to be part of the solution?

Carlson: Everything has to be put on the table. Everything. If you’ve got a $6 billion problem, you don’t go withholding pieces of the solution. You put everything on the table, and then you discuss–well, this option is not really very acceptable because of blah blah blah. That’s understandable. But you don’t eliminate options without some very thoughtful discussion.

I would strongly recommend that there be good, clear straight talk in a bipartisan way. If I were governor, I would very much want help from the Democrats. Unless I were prepared to solve it myself.

PIM: Do you think that the political establishment of both parties is still too caught up in tax-cut voodoo at a time when everybody is looking to government for solutions?

Carlson: I think political parties have achieved a status in America that they frankly do not deserve, and a status that is not acceptable. By that I mean that you have far too many people expected to be loyal to their party and to place that first, above national and state interests.

If you read through Madison and the Federalist Papers, the vision was that parties were a vehicle for dispensing, if you will, and for helping to get people elected. They really weren’t into rigid philosophies. Now they are. And the result is, they narrow the field of candidates. They don’t broaden it.

I mean, the fact that one political party can soberly say that Sarah Palin is acceptable–that stuns me. My only point is that higher offices should seek people, not vice versa. Here you have the United States going through a major financial crisis. I think both parties would be well-served to lower, if you will, their profiles, lower their criticisms, and see if these governors all over the United States are coming up with good, pragmatic solutions. And those people who do a superb job are the ones you ought to elevate onto the national scene.

You want to make sure that politics reflects merit and competence and not just some hardcore ideological commitment. What I find very perplexing is that–okay. As a society, we are expert on sports. So just imagine a coach going into his football team and saying, hey people, I’ve decided that I don’t like the forward pass, and we’re no longer going to have the forward pass in our playbook. That’s all there is to it.

How long do you think that coach would last? But somehow, when a politician does it, we say oh–he has principles. [Laughs] You get my point.

Let me just cover one more subject. That’s this whole issue of one-time money. The use of one-time money accounts for at least $1.5 billion of this pickle. One-time money is revenue you have today but will not have tomorrow.

The political system uses very colorful language–like for instance, they’ll say they "borrowed" from the tobacco fund. No, they didn’t borrow from the tobacco fund. They stole from the tobacco fund. Because there has been no effort, nor any discussion, of ever returning that money. And that money was supposed to go into our health care system.

So you have this endless "borrowing," and you have shifting. Now, my understanding–and I don’t know that I’m correct–is that some 70 percent of the current solution being discussed is one-time money.

What this says is, hey people, I can’t solve the problem today, so I’ll tell you what. My successor’s going to get it. For that, we shouldn’t be issuing a paycheck to anybody. That’s a postponement, and we shouldn’t be paying people to postpone our problems.

What I would want to get from these economists–what I would like to get from people like King and Gunyou and Kiedrowski and Wheelock and et cetera–is, how much one-time money would be acceptable? Because this problem is so incredibly painful that we can’t really solve it either with tax increases or with spending cuts. So how much would be acceptable? But I can’t believe the answer is going to be anywhere close to 70 percent. We have to be very sensitive about what we’re laying off to the future.

Leave a Reply