Can Minnesota government do away with its structural budget deficit in 2011? The early signs aren’t encouraging.
Republicans originally planned to make their first round of cuts stick. As introduced, their $1 billion budget cutting bill made permanent reductions to programs like local government aid (LGA), health and human services and higher education that had been temporarily cut as part of the state’s 2010 budget agreement. But in the first House committee hearing on the proposal, an amendment brought by House Taxes Chairman Greg Davids changed the bill to make the $480 million-plus in LGA cuts a one-time reduction, reverting back to previous levels starting in fiscal year 2014.
And though the GOP Senate had passed permanent LGA cuts, the final conference committee version went the temporary route. “The Constitution says one Legislature cannot bind a future Legislature,” Davids said of his amendment. “Nothing is permanent around here.” He was not the first GOP legislator to sound that refrain in 2011, but Davids’ amendment was also a token of the political pressures at hand: The compromise was required in order to win the assent of rural Republican members whose districts rely heavily on the aid.
On the 2010 campaign trail, legislators and challengers from both parties said that this year’s session had to produce permanent solutions to Minnesota’s long-standing structural deficit. Yet the temporary LGA cuts brought the total of one-time fixes in the eventual $900 million cuts bill to $587 million, or nearly two-thirds of the total package. And Republicans as well as Democrats in the Legislature are currently inclined to go along with Gov. Mark Dayton’s proposal to defer rather than cut the state’s K-12 school aid shift, which by itself accounts for almost a quarter of the general fund deficit.
If they do so, it would bring to $2.3 billion the portion of the deficit on which the Republican Legislature has signaled its intentions. And of that sum, nearly $2 billion – or about 86 percent – would consist of one-time budget remedies:
- Temporary (2012-13 only) local aid cuts: $487 million;
- One-time state agency appropriation cuts: $100 million;
- K-12 aid shift deferral: $1.4 billion.
Davids acknowledged that the outcry from rural GOP legislators was a major reason for the amendment rendering the local aid cuts temporary. But he also defended the approach on grounds of policy. “I’m hoping that the economy turns around enough so that we can go back to the old levels and analyze our situation in two years,” he said. “In this business, two years is a long time.”
The move to make the cuts one-time only was not lost on DFL Rep. Mindy Greiling. She said she is opposed to deep LGA cuts, but added that if cuts are made, they should be made to last.
“The main thing we need to do this year is have a permanent fix,” she said, “and not just be lurching from one session to another, pushing it off to the next legislators and the next generation. I didn’t support the original [local aid cut], but I think this makes it even worse.”
In addition to LGA, Republicans originally proposed a one-time, fiscal year 2011 cut of $200 million to state agency appropriations. That number was eventually lowered to $100 million, when the leadership learned that their original target would require cuts to veterans and higher education programs.
Regarding the $1.4 billion K-12 shift, GOP Rep. Tim Kelly introduced a bill that would also delay paying back the shift. That proposal won unanimous support last Tuesday from Republicans and Democrats in the House Education Finance Committee.
Education Finance Committee Chairman Pat Garofalo said the move was intended to show Dayton that they are willing to work with him on the budget solution. Asked whether his caucus has considered writing off the shift – making it a permanent cut – Garofalo said House Republicans were waiting for the February economic forecast to weigh all of their options.
Senate Education Chairwoman Gen Olson said she supports the law the way it is now, and is taking Dayton’s proposed shift under consideration. She said a possible write-off of the shift has not been a part of the Senate GOP’s budget discussions.
That $1.4 billion shift could get even larger, said Charlie Kyte, a lobbyist for the Minnesota Association of School Administrators. Kyte said school lobbyists have told legislators to make the shift larger if the alternative is deeper, permanent cuts. The Republican leadership has not yet said whether they would be willing to cut any facet of K-12 funding.
“The shift isn’t good, but it’s still better than a cut,” Kyte said. “We know that’s a mechanism that saves us and saves the state.” But Kyte said schools would only support a larger shift “within reason,” and would encourage legislators to consider options to pay it back as soon as possible, like new revenue that doesn’t blink off in a few years.
But in the area of health and human services, according to House HHS Finance Committee Chairman Jim Abeler, there are no similar options – and years of making one-time cuts have not worked. “We’ve been living in a world of one-time cuts,” he said. “They’ve been haphazard, with only the goal of balancing the budget. We’ve got to think long-term.”
Abeler said he hopes to find permanent cuts to human services this time around, but will focus on cuts to health care management overhead that will make services run smoothly with minimal disruption to health care delivery.
DFL Senate Deputy Minority Leader Terri Bonoff believes Republicans are going to have trouble finding the permanent cuts they touted on the campaign trail. “Now that they’ve got the gavels,” she said, “they see that making permanent cuts is not as easy as it sounds. There are real effects, and these cities will see property tax increases. [Republicans] are going to have a hard time keeping their campaign promise.”