Minnesota Economics – Part One

Last week, Minnesota House Speaker Steve Sviggum gathered his caucus leadership around him and delivered the Republican house supplemental budget proposal.

(MPR Photo/Laura McCallum)
He seemed to be asking Minnesota voters to close their eyes and hope as they continue to cut necessary services and try to pay for government with gambling proceeds — all in the name of protecting the interests that David Strom and the Minnesota Tax Payers League. It bothers me that they don’t seem to care what Minnesota voters will see once they open their eyes again, or care about the devastation of the scene before those of us watching carefully. As policy makers, they should be thinking about the Minnesota they are creating or destroying with their policies. I, for one, don’t want a Minnesota where education and support services are in decline, where a once strong and influential university system continues to pare back and downgrade its ability to be an economic driver and a shaper of a highly skilled workforce. The Republicans must be dreaming if they think we can count on maintaining our great institutions by starving them.

I believe the majority of Minnesotans envision a Minnesota that can be great for everyone and believe we should not use government to insulate a few from the hardships that exist. Hubert Humphrey wanted Minnesotans to dream big dreams, and as he said,

I think the worst thing this nation could do for humanity would be to leave any uncertainty as to our will, our purpose and our capacity to carry out our purpose.

Lately, I’ve been meeting with a number of groups who are concerned about our economic future and the direction of our current economic policies, which are putting what we value at risk. These group members range from economic experts to those expert in living with the impacts of economic policy (you and me!).

They focused on a too often ignored fact: We are in this financial fix in part because of the tax cuts that were put in place over the past administrations, at the state level beginning with Perpich and continuing with the Pawlenty administration. The history of tax fairness is one worth looking at going back to the 1960s, which shows a huge drop in the tax rate for the highest income brackets, ranging from percentages in the 90’s, dropping to the 70’s in with the cuts in 1986 and now down to the 30’s. With that drastic a drop in revenue, it’s no wonder we have a problem

House Republicans are fond of using the analogy of the family budget, saying when you run short on funds you have to cut back on your spending. They never mention that when you cut back on revenue by taking a part-time as opposed to a full-time job and you discover you can’t make ends meet, you’d better go back to full-time employment and bring in some more revenue. When you look at budgets, it all depends on what your needs and values are and what kind of life you want to forge for yourself, but if you aren’t bringing in enough income, that needs to change, it’s a problem that cutting expenses won’t solve. When I spoke recently with a solidly conservative constituent, and we were talking about this point, he recognized the need, and said, “I would have raised taxes in a heartbeat.”

In a recent article David Morris offered some comments on what happened as a result of the last legislative session’s budget solutions.

David Morris: Folly of running government as a business

David Morris

Published 03/03/2004

Conservatives believe government should be run like a private business. They’re wrong. Now Minnesota is paying a stiff price for their mistake.

By law, a private corporation must strive to maximize the economic return to a handful of owners. One might argue that a public corporation should pursue a similar objective. But in that case the owners are the entire community the government serves. To maximize the benefit to the whole community requires a different kind of decision-making calculus than that used in the private sector.

And for comment on Pawlenty’s current plan, I found this in City pages:

A Cure for the Common Good:
Pawlenty continues his slash-and-burn crusade to cut health care

by Britt Robson

About the only good thing that can be said about Governor Tim Pawlenty’s latest round of proposed budget cuts is that this time he has spared us the specious rhetoric about everyone sharing in the sacrifice. Instead, just a few months after a blue ribbon commission Pawlenty himself convened released a survey indicating that the vast majority of Minnesotans would favor a tax increase to ensure universal access to health care coverage for state residents, the governor’s proposed cuts will deny crucial and timely treatment for thousands of needy citizens.

Specifically, Pawlenty proposes raiding the entire $70 million surplus that currently exists in the state’s Health Care Access Fund. This money, amassed in part from the membership fees and co-payments exacted from the working poor enrolled in the state’s MinnesotaCare health insurance plan would be used to help balance the general fund budget. It would also assist in paying for a Gang Strike Force and additional prison beds, items that Pawlenty claims are vital to the safety of the general public.

Pawlenty’s proposed raid again puts him on a collision course with Minneapolis DFLer Linda Berglin, who chairs the Senate’s Health, Human Services, and Corrections Budget Committee. Berglin is proposing that the bulk of the health fund surplus go toward maintaining health insurance coverage for approximately 8,000 residents who would otherwise be thrown out of MnCare during the course of the year. This includes an estimated 3,000 single adults, most of them with chronic conditions such as mental illness, diabetes, and hypertension, who exceed the $5,000 cap on coverage that was imposed as a result of Pawlenty’s budget cuts last year. Another 5,000 people Berglin hopes to keep insuring are the working poor whose modest pay increases–often as little as five or ten cents per hour–price them out of MnCare eligibility.

The governor’s proposed budget, which seeks to wipe out a $160 million deficit, anticipates criticism of his health fund raid: He proposes greater coverage of mental health and diabetic services, and expanding MnCare eligibility for those making over 75 percent of the federal poverty limit. But the relative pittance he provides to fund these initiatives–$7 million over the next three years–amounts to a fraction of the funds he is raiding and ensures that these people will inevitably be thrown off the health insurance rolls.

Through this cynical maneuver, Pawlenty is trying to deflect responsibility for further damaging the state’s health care safety net. Minnesotans battling mental illness, diabetes, and hypertension will eventually end up costing the health care system more if their conditions go untreated. Inevitably, their health will deteriorate to the point where they will require emergency care at a safety-net hospital.

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