Thursday, December 31, 2009

Gearin punts 

The news that a district court judge has undone Governor Pawlenty's budget fix via unallotment sounds quite horrible for conservatives. Gary has the expected reactions from GOP officials. However, I want to argue that it's a useful order that Judge Gearin has given, even though I disagree with several substantive points. The arguments are over things that are sufficiently vague that one hopes the higher courts take up the case. She at times seems to want to have it both ways, and at other times seems begging a higher court for help. Here's betting she gets that help.

Here's the full order
. The part quoted by the newspapers is indeed one of the points of contention.
"The authority of the Governor to unallot is an authority intended to save the state in times of a previously unforeseen budget crisis," wrote Gearin. "It is not meant to be used as a weapon by the executive branch to break a stalemate in budget negotiations with the Legislature or to rewrite the appropriations bill."
The sentence appears on page 6 of the order. The full paragraph is as follows:
In the beginning of June of 2009, Defendants took the steps to unilaterally balance the budget by unalloting specific programs enacted into law during the session. By exercising his unallotment authority to apply to reductions in revenues that were determined by a forecast made before the budget had even been enacted and by not excluding reductions that were already known when the budget was enacted, the Governor crossed the line between legitimate exercise of his authority to unallot and interference with the Legislative power to make laws, including statutes allocating resources and raising revenues. The authority of the Governor to unallot is an authority intended to save the state in times of a previously unforeseen budget crisis, it is not meant to be used as a weapon by the executive branch to break a stalemate in budget negotiations with the Legislature or to rewrite the appropriations bill.
I believe the facts presented beforehand illuminate Judge Gearin's reasoning. It seems more a matter of timing to her. The biennium had not started. And yet the law doesn't require one to wait for a forecast. The trigger for the unallotment process is a letter from the Commissioner of Finance. The House Research Department reviews this:
Subd. 4. Reduction.(a) If the commissioner [of finance] determines that probable receipts for the general fund will be less than anticipated, and that the amount available for the remainder of the biennium will be less than needed, the commissioner shall, with the approval of the governor, and after consulting the legislative advisory commission, reduce the amount in the budget reserve account as needed to balance expenditures with revenue.
(b) An additional deficit shall, with the approval of the governor, and after consulting the legislative advisory commission, be made up by reducing unexpended allotments of any prior appropriation or transfer. Notwithstanding any other law to the contrary, the commissioner is empowered to defer or suspend prior statutorily created obligations which would prevent effecting such reductions.
Judge Gearin says the law has been determined constitutional, citing Rukavina v Pawlenty. I talked about this in June. (Note the link to the case in the June article has gone dead -- the one above worked this AM.)
In the Rukavina case the Court of Appeals stated: "We conclude that MinnStat 16A.152 does not reflect an unconstitutional delegation of Legislative power, but only enables the Executive to protect the State from financial crisis in a manner designated by the Legislature." That remains the settled law in the State of Minnesota, and it would be improper for this Court to revisit the constitutionality of the unallotment statute itself. It is constitutional. It was the specific manner in which the Governor exercised his unallotment authority that trod upon the constitutional power of the Legislature, and the Legislature alone, to make laws that, in the Court's opinion, was unconstitutional. (p. 4)
She then reviews the history of the 2009 session, noting the Governor Pawlenty signed the HHS appropriations bill, simultaneously noting that he would unallot to balance the budget if he did not get a balanced one. This came days after telling the Legislature that he would not accept a tax increase (see his letter of May 8 in re the tax bill.) After the announcement the Legislature and the Governor passed budget proposals back and forth. The Legislature then does three things: fails to override the tax bill veto; fails to override the GAMC line-item veto; passes a new tax bill unveiled a mere two hours before adjournment. The Legislature was given time to act to come to an agreement with the Governor. They did not agree.

Most of that history does not appear in Judge Gearin's order. She mentions the second revenue bill like it is well-formed, with no requirement upon them to bargain in good faith with Pawlenty. The burden of bargaining in good faith seems put too much on him.

Timing appears to be an issue for Judge Gearin, and on this point I think a valid concern is raised. The trigger letter from MMB Commissioner Tom Hanson is dated June 16. Note that there is in the law NO requirement of waiting for a forecast from Finance or the state economist, just this letter; nowhere does the law say the Commissioner must wait for a new forecast. On that point I think she's wrong. A statement begins two days later on how the unallotment will be effected -- the biennium has not yet been set. Given Judge Gearin's fascination with June, it appears she thought that the Governor was obligated to call the Legislature back into special session. Yet that is nowhere in 16A.152. There is a vagueness that I for one would have liked clarified.

My point, then, is that while Judge Gearin says she can't rule on the constitutionality of the unallotment law, she is trying to put limits on where it can be used. At no point does Rukavina tell you when the unallotment is constitutional, and it does not give the Legislature an upper hand in taxing authority.
Although appropriation of money is the responsibility of the legislature under Minn. Const. Art. XI � 1, it is an annual possibility that the revenue streams that fund those appropriations may be insufficient to actually realize each appropriation. For that purpose, the legislature, by statute authorized the executive branch to avoid, or reduce, a budget shortfall in any given biennium. Minn. Stat. � 16A.152 does not represent a legislative delegation of the legislature's ultimate authority to appropriate money, but merely enables the executive to deal with an anticipated budget shortfall before it occurs.
It may be that you have to be in the biennium to enjoy this power. That is not for Judge Gearin to decide -- that will be up to the Court of Appeals and, I'll dare say, the state Supreme Court. The TRO she places on Pawlenty is in essence an invitation to the higher courts to clarify: Does he have to wait for the beginning of a biennium? If he knows there's a deficit, does he have to try again with a special session? Given that, in the present case, the Legislature never gave Pawlenty an overall budget target to which he could refer for the purpose of line-item vetoes, was Pawlenty entitled to treat the appropriations as things the Legislature would have to bargain over with him? It should be obvious from a reading of the history that they did not bargain. They passed a bill he disagreed with, that they knew he disagreed with, and for which they did not have the votes to override. Yet they continued to send spending bills. It's unfortunate that Judge Gearin chose not to include that history in her order.

At any rate, probably much ado about something that will be overturned quickly. Judge Gearin wants either the Governor and Legislature to agree to something, or for a higher court to review the constitutionality of the law as being perhaps overly broad. She'll get at least one of those, at which time her order will be a footnote. But she's doing us a favor, clarifying what has long been a rather vague statute.

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Thursday, December 24, 2009

Another reason to not tax Minnesotans: A congressional seat 

Minnesota would just barely miss keeping its eight Congressional seats, based on an analysis of new state population estimates from the U.S. Census Bureau.

The Congressional reapportionment forecast by State Demographer Tom Gillaspy projects Missouri would receive the last seat apportioned, with Minnesota just missing by about 1,100 people � a difference of less than one month�s population change for Minnesota. The difference between California, Texas, Missouri and Minnesota for the last three seats is about 2,200 people, which is well within the potential estimating error.

�Basically, this is a dead heat,� said Gillaspy. �Remember, these are just estimates by the Census Bureau, and our chances of retaining eight seats are improving every day. What will decide the issue is getting everyone in Minnesota counted in the 2010 Census.� Every household in the state will receive the 10-question Census form in mid-March 2010, which should then be returned to the Census Bureau by April 1.
I hope we don't have to depend on California continuing its slow slide to oblivion in order for us to keep eight seats, but that might be what it comes down to.

North and South Dakota each grew faster than Minnesota. In 2008 there were almost the same number of moving vans coming here as leaving, according to United Van Lines. I've got some students needing senior projects this spring; maybe to help settle the old discussion Charlie Quimby and I have had on this issue we should get one to play with the data. (Or maybe with the IRS data. I've wanted to have someone do this for awhile. Off to check references on Google Scholar. So far I find [1], [2], [3]. [4] papers worth reading; not all appear to go in the same direction regarding the outcome. This note is a placeholder for that lucky student.)

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Wednesday, December 16, 2009

Apple Valley Job (aka tax) Summit 

Tuesday, after attending a job (aka tax) summit in Apple Valley (AV) sponsored by the AV Chamber of Commerce, I visited a friend who works at Medtronic.

He told me about Medtronic's founder, Earl Bakken. His is a classic story, �What is the problem? Here is a solution." The first battery powered pacemaker was developed by Bakken as a huge improvement to the then existing devices that required a wire connection to an electrical source. Today there are over 1, 000,000 pacemakers implanted per year, and additional millions in use. This is the good news. The sad news is that today, it quite possible the device never would have been invented. Why? Government regulations. Now it can take up to five years to get approval to test a new medical device, and more to get a device to humans who can use them. Because of far too much bureaucratic intervention, many life-saving device ideas never see the light of day.

Connection with Apple Valley: The attitude that government can solve everything was alive and well with the legislators attending the AV summit who were DFLers and one lone Republican, Representative Tara Mack (who does not have a government can do all belief). Their talks were short but also worrisome. While MN does face problems including these:

1� Banks leery of lending money for two reasons: First, some government agency will come and second guess them; second, if you can get money at 0% from the federal government and earn a safe 2-3% in an investment, why take the risk on someone for a possible 6% return? Solution � the government needs to let the markets determine the interest rates, that is the value of money.
2 � Employers cutting back on hours worked in order to save jobs. Actually, this is commendable because it gives people an income versus letting them go.
3 � An erroneous attitude that in two years, the economy would rebound and all would be fine. In fact, that is one of the reasons the DFL wants to push through a $1,000,000,000 bonding bill this year. It looks nice but this is just more debt MN will have to retire. But oh, it goes for roads, zoos, etc.

Does the government have to intervene to solve everything including jobs?

As I listened to the politicians, I learned that MN has established a lot of government agencies trying to �help� business through programs, training, etc. While all this may sound good, it costs the taxpayers money to fund "middle man" government bureaucracy. I would think a business enterprise could provide the same service. What also was bothersome, some DFLers mentioned they wanted to "work with our partners at the federal level" to solve the job problem.

I distributed a chart with data that shows the 5+x rate of spending in MN versus population since 1960. Immediately, I was challenged on specific blips on the chart, etc. My response, �Even if the chart is off 100%, the approximate 45 degree trajectory is simply unsustainable. The easiest solution is to get government out of the way of business. Then the creativity, the risk takers, the Earl Bakkens, etc. can get moving on the job creation.�

My ultimate suggestion was this: �In the upcoming legislative session, make a commitment to cut business taxes and regulations by 20%. If you want jobs to come and stay in MN, this is the fastest way to get them. If government believes companies that left will come back, wake up, they won�t. They are gone. Now we need to protect the jobs still here.

Some regulation is necessary but the mindset to "protect everyone from everything" and
"government must interject itself to solve all problems" will not work. We need to remove the lousy middle man in job creation, the government.

Addition: Today's Star Tribune tells the story of a former Olympic swimmer who has a pacemaker. Would she even be alive without this invention? Who else will be denied a life-saving device because of "middle man" government's eagerness to "help" (aka get in the way)?

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Wednesday, December 02, 2009

Now the real budget fun begins 

In case my dean wants to know why I was constantly checking the cell phone during a meeting today, it was to see the new Minnesota budget forecast. ("My name is King, and I'm a budget addict." "Hi King!")
General fund revenues are now forecast to fall $1.156 billion (3.7 percent) below earlier estimates for the 2010-11 biennium. After adjusting for actions taken by the Governor following the legislative session, general fund expenditures are $44 million lower. When combined with a $91 million reduction in the ending balance from FY 2008-09, a budget deficit of $1.203 billion is now projected for FY 2010-11. About 70 percent of the projected deficit is due to a reduction in expected income tax receipts.
The loss in revenues is pinned on mostly a fall in wages (income from interest and capital gains "changed little".) The previous forecast was drawn in up February, was little changed from the November 2008 forecast except for the calculation of the effects of the Obama stimulus. Nine months between forecasts in this environment is an eternity, and there was no way anyone expected even this summer that the number wouldn't revise down by a billion or so. So I don't think this report is a shock or a sign that the economy is any more terrible than what I thought it was yesterday.

On the other hand, a new hand is dealt to the Legislature and Governor Pawlenty. They will be having press conferences in a while and we can expect DFL legislators to start their call for asking the rich to pay their fair share. Public employee union leader Eliot Seide was on the radio this morning (I listened during the Morning Show) saying the rich only pay 2/3 of their fair share and that getting the right amount from the rich would add $3.8 billion to revenues. For the life of me I can't figure out where either number comes from; what's this "fair share" he keeps talking about? Meanwhile, the governor is offering to talk to legislative leaders saying he doesn't want to use unallotment again. But having demonstrated he is willing to do it and not running for re-election, he undoubtedly feels he bargains from a position of strength. If you thought end of session in May was fun, pop some corn and settle in. This could be a hoot.

A couple of other quick notes while talking state budget. I did read this profile of state economist Tom Stinson and its effort to make him a pain in Governor Pawlenty's side. The article creates controversy where one doesn't exist, and the reporter was calling for weeks trying to dig up dirt on this topic according to people I spoke with. Tom's doing his job; everyone knows he tends to "go low" with the revenue figure, since the cost of underpredicting revenue is a lot lower than the cost of overpredicting (as we will now see; but the overprediction is certainly not an error made by the Minnesota Finance staff. Very few of us had 10% unemployment forecasts back in February.) The only shock in that article that I saw was Tom's age. I thought he was younger.

The other thing is this decision to list a separate estimate of inflation in the out-biennium forecast. I don't like it, I never have, and I wish they would stop it. You cannot assume a cost that doesn't yet exist. The decision to spend a public dollar takes a vote; it is not implied by previous decisions as taxes are.

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Tuesday, November 10, 2009

It's a spending problem 

Analyzing the current fiscal trend and the Left's answer to it, Keith Hennessey concludes:
This is why I try to encourage elected officials to use the phrase �spending discipline� rather than �fiscal discipline.� Our long-term deficit problem is a spending problem.
Welcome to Minnesota, where Governor Pawlenty has announced he wants a constitutional amendment to cap spending. The amendment reads: "Shall the Minnesota Constitution be amended to require that state government general fund expenditures be limited to the amount of actual general fund revenues received by the state in the previous two-year budget period?"

The reaction is predictable. You get DFL opponents saying things like "you can't cut your way to greatness." You get the StarDFLTribune cynically claiming that constitutional amendments that commit to INCREASED spending (such as the Legacy Amendment) are a reason why you can't have spending cuts.

Hennessey argues that the following line of attack follows the Left's hold on government:
Around Minnesota, where deficits are not allowed, you increase spending faster than the increase in personal income during expansions, letting the procyclical nature of tax revenues fill the gap. When your economy goes into recession, you label as radical or extreme anyone seeking to cut the deficit by spending cuts -- you vilify the "no new taxes" crowd. (I'd put in links for that, but I'd insult some liberal advocacy group by forgetting to link their sackcloth-and-ashes act.) You end up with an 11th hour "woe is us, we must raise taxes" ploy, and stick it to the rich at midnight. Rinse and repeat begins February 4, 2010.

Spending limits have a long history, as this National Conference of State Legislatures summary shows. Pawlenty's proposal is different from most in our history, which either set a limit tied to population growth or growth+inflation. (Cato argues that limits set by personal income growth have been ineffective.) Those that set a maximum percentage of personal income (share of a level, not a growth rate) would find us probably near the limit now. Unlike the Pawlenty logic, I actually do plan on spending more when I'm older if I think my income will rise over time. I would argue this plan would have had a more tested version than this. (How do I know in May when the Legislature adjourns what revenues were for June, the end of the biennium, for instance?) It's worth noting that Milton Friedman more preferred the pop-growth-plus-inflation formula.

I worry that this amendment will barely register a nod from the Twin Cities political establishment. But clearly Pawlenty has seen the light that Hennessey is shining. At my home when the checkbook looks empty, I don't usually say I have an income problem (and I sure don't ask my neighbor to cover it for me.) I say I have a spending problem, and I fix it by spending less.

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Wednesday, September 02, 2009

What your legislator thinks are high-profile issues 

On Saturday I had had some fun with the Minnesota House of Representatives list of questions that they were asking at the State Fair. An email by my state representative, Larry Haws, indicates that this is not scientific but important anyway:
This year there are 13 questions covering such topics as funding for a Vikings stadium, unallotment, medical marijuana, early voting and budget cuts versus tax increases. ...

Every year more than 6,000 Minnesotans take the House of Representatives State Fair Poll. I encourage you to show up at our booth and cast your ballot. Although this poll is not scientific, the ballot results highlight high-profile issues.

Participating in this poll is a wonderful opportunity for Minnesotans to share their concerns and opinions. Frankly, some of the best ideas come from listening to the suggestions of the people we serve at the State Legislature.
First, isn't it always the ideas of the people you represent that should be the ideas you take to the Legislature, Mr. Haws?

Second, what are these "high-profile issues"?
2. Should Minnesotans be permitted to fish with two rods at once?
3. When a person registers for a driver's license or state identification card, should they automatically be registered to vote?
8. Should speeding violations be placed on a person's driving record if the driver was traveling no more than 10 mph over the speed limit in a 60 mph zone?
9. Should the state lottery be permitted to operate slot machines inside the ticketed area at the Minneapolis-St. Paul International Airport, meaning only air travelers with valid tickets could use the machines?
13. When a homeowner prevails in a court action against a contractor or builder to have a warranty enforced, should the homeowner also be entitled to attorney fees and other costs related to the legal action?
That's five of them, Mr. Haws, that I would say you easily not answer for me next year. Hey, your 2010 just got easier! What is important is the budget mess you fellows left behind. And what are you asking about this?
5. Under current law, the governor is permitted to unallot to prevent an anticipated budget deficit. Should he or she have this power?
To use a State Fair metaphor, hasn't that horse left the barn already?
6. Should bill and budget negotiations between the governor and legislative leaders be required to be open to the public?
Really? You guys need more time on camera? What you say in a public room and what you say in a private meeting differ. Meetings on the budget need total candor, and candor and cameras do not mix. And you'll forgive me, sir, if I don't believe that this would be a high-profile issue if not for the fact that the governor currently doesn't wear the dark-blue DFL label.
7. Do you generally support budget cuts as opposed to increasing certain taxes in times of economic distress?
"Certain" taxes? Would you care to be a little more specific? I realize this isn't one of them fancy "scientific polls", as you say sir, but when you pass "certain" taxes in the past, you end up funding crappy arts via a sales tax that can't even pay off the advance you gave it. I'd like to be certain I have enough money after taxes that I can pay my bills, and I'd like to be certain that taxes I pay get used for the things you told me they'd certainly be used for. And I'd like to be certain it's not crap.

So if you don't mind, I'll take budget cuts for $4 billion, Alex, um, I mean, Larry.

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Tuesday, August 11, 2009

Didn't you already summit? 

Governor Pawlenty, in response to the DFL's request for extra time via a leadership summit, sends a letter to Sen. Pogemiller and Speaker Anderson Kelliher. I received a copy, and this is in full:
Thank your for your recent letter regarding plans for a "Minnesota Leadership Summit" in early September.

My Administration and I are declining to participate in your summit. As we have witnessed over the past year, DFL legislators have done a thorough job of admiring our state's budget difficulties, but have refused or been unable to take action to address them.

The state already has an annual "Minnesota Leadership Summit." It's called the legislative session and it lasts approximately five months. This past year, rather than taking timely and decisive action to deal with our budget deficit, the Legislature's DFL leadership wasted the first few months of the session. Passage of your final budget bills in the last few minutes before midnight on the final day of the session was indicative of how you managed the situation.

Rather than calling together former legislators and governors to rehash already established concerns, the Legislature's time would be better spent coming up with reasonable solutions, negotiating with my Administration and having them signed into law.
The DFL could not have expected their invitation to be taken, so they will now use this letter to show how he's still Governor Go-It-Alone. But was that worth it to give Pawlenty another opportunity to highlight the legislative session's failure?

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Tuesday, July 21, 2009

Jobs take more than education 

Gary gives us a lesson in how votes matter. In a vote for which no Republican joined the majority, the Minnesota House rejected a bill that would have provided for an investment tax credit for Minnesota firms. Within months, a firm in Minneapolis announced it would move to Wisconsin to develop products, and cited Wisconsin tax credits for "angel investors" as a reason for the move.

One of the common refrains of the DFL, that Gary cites, is that all we need to have high-paying jobs and investment in high tech is education. There's no doubt that education, or more generally additions to human capital, are part of the production process that will increase wages. But production is more than just human capital. You need bodies; you need physical capital; you need land; and most of all you need someone willing to accept the risk of guaranteeing those factors of production their payment regardless of whether what they produce is actually sold. (That last thing is of course profit, which is an incentive and not a residual.)

The productivity of any one factor is a function of the level of the other factors you have. All the brilliant people in the world won't be able to feed themselves if the physical capital they have to work with is destroyed. Reducing access to physical or financial capital renders Minnesota's investments in human capital nugatory.

To put it another way, our investment in education involves both benefits and costs. Those costs involve all the things we do not create in order to produce one more year of education for one more student. Any rational allocation of resources will recognize higher taxes as the cost of government-produced education. If the marginal productivity of the physical capital destroyed by higher taxes is greater than the marginal productivity of the human capital created by government education, more government education destroys wealth.

Gary quotes Rep. Laura Brod (R-New Prague), who gets it:
Minnesota needs to hear the wake up call that businesses like VitalMedix are sending as one after another flee our state and take innovation and good paying jobs with them. Many businesses are at the same tipping point and policymakers should be very concerned that the cost of doing business in Minnesota is simply out of whack and we are losing jobs because of it. Businesses and investors are price sensitive and have choices.
Gary identifies two local area representatives, Reps. Haws and Hosch, who voted against this bill. It should be doubly disappointing to their constituencies here in Central Minnesota, where a bioscience zone and a science initiative have been established by the state. It is like denying your garden fertilizer. You cannot support "education to create good jobs" with the one hand and deny the other factors that allow for job creation with the other.

UPDATE: I had meant to link the page with the vote before posting. Here it is. The amendment begins on p. 4911 (page 85 of this 114 page document) and the vote on p. 4918 (92).

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Friday, July 17, 2009

Beggar thy neighbor 

Mitch points out the complaint among the Minnesota Left that Governor Pawlenty left other states' money on the table in the unallotment strategy. It's of course a bit of a prisoners' dilemma problem: If Minnesota forgoes other states' money (or, as Mitch rightly abbreviates, OPM) there's no reason to believe other states won't spend Minnesota's.

But there's a better, more selfish reason for spurning government cheese: the cheese is temporary. It leverages state taxpayers in order to get a two-year benefit. When the stimulus is withdrawn, what will happen to the state's effort? We can just imagine the calls to "stop the cuts" paid for by government employee union dues in 2011 or 2012.

It's not just beggar-thy-neighbor between the states, it's beggar-thy-taxpayer within the state. Governor Pawlenty is smart enough to not fall for that shell game and leave his successor a battle to restrain spending more in the next biennium. One has to wonder why the DFL, already focusing on the size of the 2011-13 projected deficit, would want us to add $62 million or more to the next biennium's deficit and beyond just to get $72 million of OPM now.

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Tuesday, July 14, 2009

Party of the Rich..........................Democrats! 

For too long the mainstream media has parroted the Democrat Party mantra that the Republicans are the party of the rich. Bubble burst - false. While there are a few large Republican donors (Austins, Taylor and Cummins), according to this report, most of the largest donors to political causes are the Democrats.

What is very discouraging is many of these Democrat donors are businessmen (Opperman, Dayton clan, Burnet Realty, Pohlad, etc.). Why would those who have worked to build successful operations employing thousands of people support a party that wants to tax, control and blame others? It just seems counter to the mindset and skills required to make an organization successful. Guilt? Power? I don't know.

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Monday, July 13, 2009

Does MN government spending buck the trend? 

At Division of Labor, Frank Stephenson points to a graph from the Economist, which tries to make the point that state governments are not spending enough. Scott Beaulier adds that "The scale on the Y-axis is suspect and implicitly makes positive state budget spending [growth] look like the desirable, normal outcome!" Well, one will claim, particularly if one is a DFL legislator, that you haven't fixed this for inflation. So I thought I would, just for Minnesota. (Source data.)
This is not just for state level spending but for ALL levels of government spending except federal. So if there's a shift between state and local, the effect is a wash. Had The Economist graph been adjusted to inflation, I think the pictures would be similar.

As a share of state GDP, sub-national government spending has stayed between 18-21% since 1992, and the DFL-passed spending bills are estimated to put that number a bit above 20% in the next biennium. Worth noting is that the unallotment planned by Governor Pawlenty represents only a half of a percent decline in that number. The graph below assumes no compensating changes by local governments or school districts in driving up taxes to replace lost revenue from state government. State real GDP is forecast to rise by 2.4% in 2010 and 3.8% in 2011.

It is normal for that number to rise during a recession, as government spending doesn't tend to fall as much as GDP when recessions happen. But to argue, as many do, that we're somehow starving government in Minnesota is not borne out by the data. Real spending still rises even with unallotment, though more in line with the restricted spending in the first years of the Pawlenty Administration than the 3.5-4% per year wishes of the DFL. I don't recall seeing people dying in our hospitals or our kids getting stupid then.

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Thursday, June 25, 2009

Unallotment powers 

The DFL continues to make claims about the unallotment process that Governor Tim Pawlenty is using to balance the budget that the Legislature chose not to. Leading this charge has been DFL state Senator Tarryl Clark of St. Cloud. From her latest newsletter:
It has been just over one month since the Governor announced he was ending negotiations and would go it alone on budget cuts. We thought it was unwise then and it remains so now to do budgeting behind closed doors. Unallotment is meant to be a scalpel, not an ax and it is meant to be used at the end of the two-year budget cycle, not the beginning. It is for unanticipated budget shortfalls, not ones created by vetoes and a refusal to negotiate.
This is wrong on at least two levels. First, the DFL legislature had in fact created the budget in private, asking next to no help from either the governor or the Republican caucus. It did so on May 8, and then did so on the last night of the legislature, passing a bill barely by midnight. It is rather rich for Clark to argue that the governor will go it alone when they did not take his wishes into account (something Rep. Gene Pelowski understood.) Gary Gross is correct in saying that Clark and her colleagues assumed they could get Pawlenty into special session, where the pressure would bear down on him as much as them. She is upset that the Governor side-stepped that box.

Second, Clark has misrepresented the nature of the unallotment process. Luckily, a review of the process was done only last October. The House Research document on unallotment speaks to the issue of timing:
The statutory duty to reduce allotments is mandatory to the extent needed to make up a projected deficit not solved by use of the budget reserve account. However, the statute does not specify a timetable. The authors presume unallotment would have to occur in time to make up the projected deficit within the biennium. Arguably, the Commissioner of Finance must unallot immediately once the conditions that require unallotment have been determined to exist, and the commissioner has approval of the governor and has consulted the LAC. However, in the past, it has been a common practice of commissioners of finance and governors to wait until the legislature had time to rewrite the budget before unallotting. The requirement to obtain the governor�s approval and to consult with the LAC may imply that the commissioner has some discretion in the timing of unallotment. (pp. 4-5)
The governor notified the legislature of his intention to use the power if he did not receive a plan from them. They chose not to act on that power except to run forward a last-minute bill that had already been vetoed once (and had that veto sustained.)

The Minnesota Supreme Court also spoke on the unallotment process in Rukavina v Pawlenty (684 N.W. 2nd 525 [2004]), finding it constitutional for the Legislature to have ceded that power.
Although appropriation of money is the responsibility of the legislature under Minn. Const. Art. XI � 1, it is an annual possibility that the revenue streams that fund those appropriations may be insufficient to actually realize each appropriation. For that purpose, the legislature, by statute authorized the executive branch to avoid, or reduce, a budget shortfall in any given biennium. Minn. Stat. � 16A.152 does not represent a legislative delegation of the legislature's ultimate authority to appropriate money, but merely enables the executive to deal with an anticipated budget shortfall before it occurs.

Although purely legislative power cannot be delegated, the legislature may authorize others to do things (insofar as the doing involves powers that are not exclusively legislative) that it might properly, but cannot conveniently or advantageously, do itself. (cite omitted). It does not follow that, because a power may be wielded by the legislature directly or because it entails an exercise of discretion and judgment, it is exclusively legislative. (cite omitted). Pure legislative power, which can never be delegated, is the authority to make a complete law--complete as to the time it shall take effect and as to whom it shall apply--and to determine the expediency of its enactment. We conclude that Minn. Stat. � 16A.152, does not reflect an unconstitutional delegation of legislative power, but only enables the executive to protect the state from financial crisis in a manner designated by the legislature.
Indeed, to the extent possible Governor Pawlenty has delayed most unallotments to not take place until July 1, 2010, to both hope for more revenue from an improved economy and to allow the Legislature time to make changes in cooperation with the Executive. The door isn't closed: The governor offers the chance to find a better solution, and makes plain the consequences of not compromising.

Clark notes that Pawlenty has used unallotment three times, and in one of those cases the legislature had sought an opinion from the Supreme Court. It therefore had full knowledge of the law. If it did not want to permit the executive the power to "protect the state from financial crisis" through the current law, it only needed to pass a law amending the process. Certainly if the executive is expanding power unduly, the DFL could find a few GOP representatives to vote to defend their prerogative.

I encourage you to read Gary's post for more on what's wrong with Senator Clark's e-letter. But the point here is to make it plain that the DFL continues to mischaracterize Pawlenty's use of powers the Legislature delegates to him. They knew the issues, they did not address them by legislative initiative, and they continue to be hypocritical over who didn't bargain in good faith with whom.

UPDATE: Gary has a second post. Key point I would highlight:
It isn�t accurate to say that the DFL didn�t submit a balanced budget. It�s accurate, though, to say that the first balanced budget they submitted to Gov. Pawlenty passed the Senate with minutes left in the session. It�s equally accurate to say that the Tax Bill that passed was a hodgepodge bill, filled with a litany of tax increases and spending shifts.
And let's not forget that this was trotted out at 10:30pm for passage before midnight in an uncivil manner. Senator Clark should also answer for that clusterfarg.

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Tuesday, May 26, 2009

Beware the do-gooders 

In four short paragraphs, we get a veritable cornucopia of crap.
We tend to believe that the United States is the best place to live. And of all of these United States, Minnesota is the best of the best. Collectively, we want opportunity and education, quality health care and transportation systems, as well as readily available police and fire protection.

So why can�t we agree on how to pay for these things that we all use? Our Legislature last week presented the state with a two-year budget that is balanced and fair. It taxes those who can afford it the most and includes cuts to spending where possible. Our governor says he will veto this bill and cut spending according to his own whim.

This no tax policy favors the rich at the expense of the rest of the state.

Gov. Tim Pawlenty spends much of his time with the top 2.5 percent (by income) of the population of Minnesota. Is this why his tax policy favors them? Is it because his experience is different from the majority of Minnesotans?
Where do we start with this?
"We tend to believe"? �Why hedge this? �Are you suggesting that this might be a wrong belief?
  1. "Collectively"? �What is there about the belief in opportunity and freedom, the ability to develop your human capital (education), and quality health care, that is a collective belief? �These are things I believe in as a person, as an individual. �
  2. And yes, I know you didn't write "freedom". �I meant to ask, why not? �
  3. Is it the "collectively" meant that the writer had concluded already that the only way to provide for those things he's listed we want is to use the state to buy them.
  4. "Our Legislature last week presented the state with a two-year budget that is balanced and fair." �Well no they didn't unless you are referring to the two-hour budget on Monday night which didn't technically pass by midnight and which Times' executive editor John Bodette said "doesn't work" as a budget. �(I agree with Gary on the rest of John's column.)
  5. "It taxes those who can afford it the most" always means "it taxes those I've decided can afford it the most." �It means "we won, so we get to take your money." �(Seems I've heard this before. �Why yes, yes I did.) �By the way, 77% of Americans disagree with needing more taxes.
The rest of this column describes this leftist's visit with the local group GRIP, a long time point of discussion on this blog (here and here). �But in this article he keeps coming back to this "business leaders" and "2.5% (by income)" point like all business leaders are somehow rich. Did he ever talk to a business leader? �And who are they? �Try reading the Survey of Business Owners from the US Census and you would learn:
  • 15% of them are seniors;
  • half of them don't have a college degree;
  • almost a fifth of them are veterans; and
  • most of them don't make much money (check out this graph).
But that group is not the favored group right now. �We read for the remaining 500 or so words of the article about an "ecumenical" group that seems to have no place for 20 million or so business owners. �Isabel Paterson once noted:
Most of the harm in the world is done by good people, and not by accident, lapse, or omission. It is the result of their deliberate actions, long persevered in, which they hold to be motivated by high ideals toward virtuous ends.

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Tuesday, May 19, 2009

"Civility took a beating" in "an act of defiant irresponsibility" 

The DFL was jamming through a close-of-session tax bill and Republicans were screaming, not so much at the content of the 33-page bill, they didn�t have time to worry about content. They were screaming about the style. Rammed, jammed, slammed. You name it, the DFLers were doing it. Their timing, their discipline was extraordinary. Parliamentary procedure, civility took a beating....

But as the clock moved to 11:55, decorum was blown away.

The tax bill was introduced. Republican Sen. Julianne Ortman was speaking, trying to ask a question about the bill.

Sen. Jim Metzen, the president of the Senate, spoke over her.

�We adjourn at 12,�� he said. �We�re going to vote this bill.��

Now it was complete chaos.

Republican Sen. Dick Day left his seat and started collecting Senate rule books from his Republican colleagues.

�We don�t need these anymore!�� he yelled.

As the DFLers voted, Senate minority leader Dave Senjem was yelling into his mike.

�Senator Ortman has the floor!��

�I don�t recognize you,�� Metzen was saying.

The Senate DFLers passed the bill. Republicans didn�t vote. It was midnight, maybe a shade after midnight.

�Motion to adjourn,�� yelled Metzen over the din of angry Republicans.

There was a 43-0 vote to adjourn.

...The DFLers unloaded months of frustration. In what many will see as an act of defiant irresponsibility, they got to say that they balanced the budget in a responsible way. It�s so responsible DFL leaders were trying to say, with straight faces, that maybe Pawlenty will see the wisdom of it and sign it.

Doug Grow. Quem Jupiter vult perdere, dementat prius.

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Monday, May 18, 2009

A tweeted weekend 

I probably used Twitter more than ever this weekend in arguing a few points with people over the budget discussions. You'd be better off following that trail to find out what I said. A few points of summary:
  1. I doubt the DFL really thought either override vote would pass. It was theatrics and nailing a few positions down for the 2010 elections, particularly on the GAMC line-item veto. Expect what Gary calls the Fine Whine Tour over the next sixteen months. Certainly the reporting over the weekend over the "somberness" and crying of DFL legislators over the vote indicates this.
  2. Pawlenty spokesman Brian McClung (via Twitter) says legislative leaders are to be at the Governor's mansion in the next twenty minutes. There was this odd conflict last night over who was supposed to call who next after the governor dropped a plan on the DFL late Saturday night. One side said the governor's representative said they'd be in touch, the other side said the DFL would sleep on it and call back. Reminded me of teen love and phone standoffs that often happen therein. Besides, I doubt the DFL was going to do anything before getting their override votes. (UPDATE: Politics in Minnesota reporter says meeting delayed to 12:15 at DFL request: unclear why a delay.)
  3. The DFL seems still to be in denial over the recessionary effects of a tax increase. The least recessionary thing they could have done was to do something with the governor's tobacco bonds, but because that cuts revenue for them to spend in later years they don't want to do that. So they are stuck using a tired Keynesian argument that tax increases are less harmful than government spending increases. This is a better argument at national than subnational levels of government. Speaker Kelliher and the two tax committee chairs really needs to read Feldstein and Vaillant before talking about this again.

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Coffee-spitting line of the weekend 

Speed Gibson:
Know what I think of the DFL lecturing us about ethics? Pull my finger.

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Friday, May 15, 2009

What leaders do 

It is worth contemplating the anxious reaction of the DFL leadership to Governor Pawlenty's announcement last night that he'll use his line item veto powers to balance the budget if he does not get agreement with them before Sunday. Within hours of his announcement DFL House Speaker Margaret Anderson Kelliher sent a letter to the governor. (Thanks to Politics in Minnesota for posting copies of many of these letters.)
According to your press availability this afternoon, your latest offer to solve our budget deficit implies that you will sign the budget bills sent to you by the House and Senate, and then proceed to unilaterally unallot portions of the state budget. As you clearly have been planning this course of action for some time, Minnesotans have a right to know how you plan to proceed with your unallotment strategy. It is best if this offer can be fully vetted in a public forum.
She attempts to personalize this by crossing out "Governor Pawlenty" and handwriting "Tim", which I think is rather arrogant as well as her demand in the next paragraph that "an immediate meeting of the Legislative Advisory Commission must be convened" so they can dress down the chief executive officer of the state.

Which is what he is. To re-use a rapidly wearing out phrase, elections have consequences. He is not a king, he is the duly elected governor of this state, and he earned therefore the right to the line-item veto. To put it in sports terms, "scoreboard."

When my boss makes a decision after hearing five months of discussion, and after having received a memo from me, I do not call it arrogant for him to decide not to do exactly as my memo suggests. The CEO gets to make the final decision. And that's exactly what Governor Pawlenty told her in response last night:
You characterized my announcement this afternoon as an "offer". It was not an offer, it was a decision.
The CEO does not react to the anxious demands of his or her organization. He leads; he makes decisions. He leaves the door open to discuss those decisions but does not relinquish his executive rights. What many have praised in President Obama has been coolness in leadership, a firm vision of what he wants to do and a determination to do it. I don't like what he's doing, but I have to tip my cap to his public stylings (as opposed to his private thuggery.) Governor Pawlenty is displaying at this moment that same cool hand: "The budget will be balanced; no endgame shenanigans or uncertainty of a shutdown or special session. There will be no tax increases; get on with your lives."

Leaders lead.

If the Legislature intended to have further discussions it could have held these bills from the Governor until such time as a revenue agreement was reached. They offered these bills to induce an endgame where they could negotiate the revenues ex post. I don't write my household budget by writing down all the expenditures I want first and then figure out how to pay for them. I write my budget listing income first and then what I can afford. (Do you write a budget? Here's an example of how. Note what's on top.) They have made a hash of the session, a vacuum into which Pawlenty has had no problem stepping forward. The blame for their fate is in the mirror into which they stare nervously this morning as they wonder what they'll say when they take their end-of-session flyaround on Tuesday.

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Thursday, May 14, 2009

Crossing a line 

Apparently the DFL made a mistake. �They sent all their spending bills piecemeal to the governor, for which he thanks them. �If they don't want to establish any new revenue he likes, fine.
Turning the heat up to a boil in the closing days of the legislative session, Republican Gov. Tim Pawlenty said today that he would use his powers of line-item veto and unallotment to balance a state budget facing a $4.6 billion deficit.

Pledging there would be no government shutdown or special legislative session, Pawlenty said that every bill sent to him by the DFL-controlled Legislature would be subject to his surgical veto pen, likely beginning with a massive Health and Human Services bill awaiting his signature.

"There is a key principle at stake here. You can't spend more than you have. The DFL-majority just did that," said Pawlenty, flanked by Republican legislators at a Capitol news conference. "In these economic times, the people of Minnesota want to see decisive action. We're going to take action to make sure this session ends on time with a balanced budget."
When the legislature sends an instant tax bill they know he would veto, and when they refuse a compromise offer, the DFL doesn't turn the heat up to a boil"; only when the Governor uses his Constitutional powers to balance a budget they won't does the water bubble: It's not just the balance sheet that's bankrupt at the STrib.

The Governor has been clear that there will be no tax increases, as repeated in his statement this afternoon. �When Speaker Kelliher calls Pawlenty "Governor Stand-Alone" she is wrong: �There are enough Republicans in the House to make the Governor's pledge stick. �The DFL has not only to find the three Republicans to flip, they still have Rep. Pelowski in their way. �If the Republicans thought Pawlenty was doing this just to burnish his presidential credentials, why would they show such solidarity?

They tried the lights-on gambit, but this lies on the ground in ashes now. �The DFL has been told its window of opportunity closes Sunday. �The ensuing panic will be fun to watch. �I wonder if the Patriot will let us have a live Sunday show?

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Wednesday, May 13, 2009

Backwards budgeting 

Did not the DFL try this before?
State legislators planned to take final votes on five major budget bills today, covering everything from K-12 education to ethanol subsidies to flood protection.

But the bills won't settle the session. Pawlenty hasn't said whether he'll accept them. And there's still a budget hole lawmakers haven't figured out how to fill.
So we're going to send all the bills that require money to be spent and not the bill that identifies where that money comes from? I am teaching people this week about how to teach about family budgeting. I promise you, at no point do I teach "figure out your mortgage, savings, insurance, food, and entertainment expenses before you figure out your income.

They did this very same thing in 2007, which led to a special session. Pawlenty would not sign spending bills then without the source of funds identified. � The endgame ended up in favor of Pawlenty.

Stupidity is the DFL doing the same thing over and over and expecting a different outcome.

Andy notes that the tax bill may not even reach an override vote. �Read the blow-by-blow from Gary for more.

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Monday, May 11, 2009

The cost of "get Pawlenty" (UPDATE: Pawlenty compromise spurned) 

Speed Gibson makes good points about the DFL legislature's failures of the current session, and pins the tails on the right donkeys: Kelliher and Pogemiller.
Both of these leaders are incompetent. So are their lieutenants, Taryl Clark and Tony Sertich. They've had two years to learn their jobs, but the events this past week show no tangible improvement. Again, forget the policies and proposals for the moment. Look at the process and the resulting lack of progress. When even the normally undemanding media is openly complaining, even the DFL must admit they have a problem.

Look at this $ 992 million tax bill, just announced. Gone, suddenly gone, are the "thoughtful" Senate and House bills that made their way through weeks of deliberation. All that work for nothing, replaced by something hurriedly cobbled together, a bill they could have written in January. It needn't have waiting for the February forecast, but OK, they could have written it March. Instead, we see it in May, with two weeks left in the session. I have to believe even a few in the DFL were surprised and disappointed by this. ...

To my untrained mind, this session has only one real purpose for the DFL: get Pawlenty. That's what the "listening" tours were about. That's what all this posturing the past two months has been about. And now it's May, crunch time. As this new tax bill concedes, operation "Get Pawlenty" is headed for the rocks.

What Pogemiller and Kelliher don't understand is that they're no match for Pawlenty in a political duel. They have only their strength in numbers, and those numbers should seriously think about who they're following and why.
Gary Gross is calling it "seat of the pants taxation":

As a result of the DFL�s infighting, they were forced to take the step of rewriting the Tax Increase Bill from scratch, passing it through the House and Senate, then have Gov. Pawlenty veto it before he headed out for the Annual Governor�s Walleye Opener on White Bear Lake.

What�s worse is that the DFL hasn�t shown any inclination towards finding cost savings. There�s no denying that they�ve figured out cuts but that�s a different story. Cutting budgets just means that you�re cutting spending and services. Finding cost savings means that you�re cutting spending but keeping service levels the same.

The tactic of "get Pawlenty" has focused on his proposal to pull future tobacco settlement revenues forward to cover some current spending that the governor has decided cannot be reformed in the way Gary describes. What the governor does is say "look, I can't cut a billion more here in this biennium: too much, too fast, and unwise in a recession. What I can do is pull money into this biennium and get you to spend less later when the economy improves." A smaller reform, details TBA, starting two years from now. It's not a great plan in my opinion, but it's not bad. (Better would be to identify what you're cutting later, rather than letting the Legislature figure it out for you.)

But the only other options are to find current cuts without cutting services, as Gary describes it, or raise taxes. When Sen. Bakk defeated Rep. Lenczewski in conference and got this tax bill -- which the governor declared DOA before they even passed it -- the leadership put itself in a box: It has said it won't accept the tobacco bonds while agreeing with Pawlenty that the last billion can't be cut. It therefore must act contrary to wishes of its own national leadership either to raise taxes or cut spending in E-12. If it thinks it can do that and also "get Pawlenty", they have yet to show how.

UPDATE AND BUMP: Just before I left I checked the comments email box and got this at the bottom of a statement from Marty Seifert (I assume this is a summary by House GOP caucus staff -- I haven't seen an official letter):
Also today, Governor Pawlenty made the first significant offer to bring the session to an on-time close. In a letter to the Legislature, the governor said he would accept the Senate DFL's position of not funding the budget reserve, accept the House's desire for a larger K-12 education shift, and halve his proposal for appropriation bonds. Democrats responded by calling the offer "not responsible" even though two of the three parts are DFL initiatives. By rejecting their own proposals, Democrats are making it awfully difficult to bring this session to a close by May 18.
We might need a corollary to the rule of holes: when you've painted yourself into a corner, stop painting! Because the DFL is still working that brush.

And they might still want to remedy this year's deficit.

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Friday, May 08, 2009

You've got taxes! 

Details are emerging of a new tax plan from the Minnesota DFL leadership, dropped this morning into a conference committee "without any discussion" according to Republican sources. The details I have at this time are for about a billion dollars, half of which comes from a new 9.0% personal income tax charged on income over $250k for married couples filing jointly ($141,250 for singles and $212,500 for marrieds filing separately -- updated via Andy). An increase in tax on all varieties of alcohol and a surtax on "excess (?)" interest income on credit cards makes up the rest. $585 million of that money goes to E-12 education and the remainder to HHS.

There's a press conference of the Republican legislative leaders happening probably about now. More details as I get them.

UPDATE: Conference report is up. Larry Schumacher finds it odd.
I've never seen a bill that wraps both taxing and spending provisions together, and neither have the other two reporters on staff here who've covered the Minnesota Legislature in the past.
Yes, but it puts two powerful lobbies in play to campaign for a tax increase. (Not like they hadn't already.) For them, it's not "you've got taxes!" but "you've got OPM!"

UPDATE 2: Found an email in a folder I wasn't watching this morning from the House Republican Caucus. They note on this bill:

UPDATE LAST: As expected, Pawlenty calls it DOA:
The end of the session is rapidly approaching. I understand the DFL majority is poised to pass a hastily processed and ill considered letter tax increase proposal.

If you insist on passing such legislation, I respectfully request you send it to me today so I can veto it immediately and leave a maximum number of days for better legislation to be considered and passed.
Rep. Marty Seifert via Twitter notes that all Republicans plus Rep. Gene Pewlowski voted against the measure, which passed 86-47.

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Wednesday, May 06, 2009


Representative Pat Garofalo of Farmington wondered about six weeks ago about "integration aid", without some people being sure what it's used for:
In 2005 the legislative auditor performed an audit of state integration funding program and found a number of problems.

For example, the purpose of funding is not clear � some school staff believed its purpose was to alleviate racial imbalances, other thought the funding was to close the achievement gap, noted the auditor,

Other findings were that neither school districts nor the state adequately assessed the program, and racial concentrations in some schools receiving the funding continued to increase.
Rep. Mindy Greiling, DFL chair of the K-12 Funding Committee said everyone knows it's broken and suggested it be capped. Why would you keep this going?

Today Rep. Garofalo repeated the charge and added more examples as the K-12 bill heads towards completion. I assume this to mean the integration program is still intact.
  • After school soccer, $3,000
  • Art Exhibit: supplies, consultants and �artifacts�, $7,500
  • Collaborative coordinator, $43,000
  • Cultural liaison officer, salary & benefits, $125,000
  • Culturally responsive teacher training, $15,000
  • Equity coach, $74,000
  • Ethnic celebrations, $3,000
  • Field trip scholarships, $10,000
  • 5th grade kindness retreat, $5,000
  • Food and snacks for ethnic celebrations, $4,000
  • Integration program coordinator, $99,000
  • Secretary to IPC, $57,600
  • Newcomers program teacher, $113,000
  • Pen pal book club, $3,500
  • 6 step hip hop program, $2,000
Is a six-step hip hop program meant to teach people how to hip-hop or like hip hop Anonymous, a six-step program to stop hiphopoholics? (That was fun to write, thanks for asking!) I don't think $5,000 is enough to pay for a fifth grade kindness retreat -- you ever work with fifth graders? Oy!

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Tuesday, April 28, 2009

Ann of a thousand yachts 

It's last week of the semester here, and it's going to be a little harder to post things during the day this week. I have some links I put up for development students on my class blog, class of which occupied my morning.

I am probably the most sympathetic conservative to the idea of removing tax preferences in legislation, but I think Rep. Ann Lenczewski has missed the main message of tax reform. The lesson from 1986 was that you could only trade their removal for lower tax rates. The 2005 tax reform proposal at the Federal level was an example of this as well. But removing tax preferences makes substantial changes in the tax price of certain economic activities. Removing the tax preference for home ownership raises the cost of it, at a time when the market needs to stabilize. The plan Lenczewski proposes reminds me of nothing so much as the famous yacht tax. The home construction industry is probably in worse shape in 2009 than the boat-building industry was in 1990. Million-dollar mortgages support million-dollar homes which support many electricians and carpenters. A phase-in during a period of robust home construction would make much more sense than the present bill.

I could go on, but time is short. I outsource my own thoughts on tax reform to Alvin Rabushka.

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Monday, April 27, 2009

Name the author 

I am 61 years old. I have lived and worked in Britain all my life. Not even in the dark days of penal Labour taxation in the Seventies did I have any intention of leaving the country of my birth.

Despite a rumour put around some years back, I have never contemplated leaving Britain for tax reasons. But in the 40-plus years I have been lucky enough to work here, I've seen a bit. So I must draw your attention to what is really proposed in this Budget.

Here's the truth. The proposed top rate of income tax is not 50 per cent. It is 50 per cent plus 1.5 per cent national insurance paid by employees plus 13.3 per cent paid by employers. That's not 50 per cent. Two years from now, Britain will have the highest tax rate on earned income of any developed country.

I write this article because I fear the inevitable exodus of the talent that can dig us out of the hole we find ourselves in. It is inevitable, given that other countries are bidding for entrepreneurs.

Give up? Suppose I said "composer" rather than "author". Link below.

Meanwhile, let's consider what Senator Tom Bakk, whose bill to put up tax rates in Minnesota is now in conference with a competing bill by Rep. Ann Lencewski (she deserves her own post, which will have to be tonight), said about alcohol and income taxes:
The new income taxes would raise virtually everything Senate DFLers were looking for in new revenue to help erase a $4.6 billion deficit through the middle of 2011. They are also proposing across-the-board spending cuts and using federal stimulus dollars.

Senate Taxes Committee Chairman Tom Bakk said tax cuts of the 1990s were unsustainable and the state needs more money for priorities such as schools, even though the Senate voted to cut K-12 education.

Bakk said the reductions would be deeper without new tax dollars.

"It's a huge deficit that the state is facing. Everybody's going to have to participate in the solution," said Bakk, a Democrat from Cook who is preparing to run for governor.

...Bakk said eliminating the current mortgage interest deduction could hurt Minnesota's high rate of homeownership and higher alcohol taxes would drive some liquor shoppers across the Wisconsin border. [Both these provisions are in the House bill --kb]

Bakk said about 85 percent of taxpayers would pay more under his plan, but most of the money would come from people with the highest incomes. ...

The Senate tax bill would raise the lowest rate, 5.35 percent, to 6 percent on income of up to $31,860 for married couples filing jointly. The middle rate would rise from 7.05 percent to 7.7 percent on income between $31,860 and $126,580. The current top rate would climb from 7.85 percent to 8.5 percent on income of $126,850 to $250,000.

The new fourth-tier rate of 9.25 percent would apply to incomes starting at $250,000 for married couples, $141,250 for single taxpayers and $212,500 for single heads of household.
So people would drive across the border for alcohol if we raise the tax on booze, but if we raise the tax on work they'd stay put? Not just the top rate either. As Sen. Julianne Ortman pointed out on my show Saturday, the Bakk plan gives us two of the top ten state income tax rates in the U.S. Bakk seems impervious to the idea that life location decisions are as influenced by tax rates as booze purchase decisions.

The Briton who doesn't believe this? Andrew Lloyd Webber. H/T: Stephen Karlson. Webber notes a young entrepreneur in the stage construction industry:
Under the new tax regime, he will have to pay 13.3 per cent to employ himself before he pays himself anything. And then he will have to pay 51.5 per cent on what's left.
This is a guy at the cutting edge of his profession who works all over the world. He is in demand in every major territory where entertainment is produced. He has a young wife and two children. Last Thursday he told me that he and his wife had decided that the UK was no longer where they wanted to live.

His wife thinks the State education system is inadequate. And she fears that a bankrupt Britain will increasingly be a worse place in which to live as the horror of our present financial mess hits us all in the solar plexus.

He says that he is young enough to set up shop somewhere else. The new tax rates were the final straw. These talented young people know they will make it impossible for them to educate their kids privately in the UK.

So Britain plc loses not just the 40 per cent he would have paid in personal taxes under the old regime - plus NI and everything else - but... Come on, I don't need to explain the knock-on effect. It's obviously huge and immensely damaging ...
I realize Sen. Bakk lives on the other end of the state, but he might want to pay a bit of attention to Sioux Falls.

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Tuesday, April 21, 2009

Bonding and jobs 

Sen. Dan Sparks, DFL-Austin.
One bill that�s already in conference committee is the bonding bill. The bonding bill is expected to create more than 3,600 jobs in the construction phase by spurring infrastructure improvements across the state, and even more ongoing jobs will be created once renovations and facilities are completed. It�s a key area where we can spend a little money to make even more money in the future and put Minnesotans back to work. Unless Minnesota makes important investments in economic development initiatives and other job-growing policies, we will not recover from this recession or have an opportunity for success in the future.

But it hasn't worked, as the data above show. There has been no increase in construction even in the areas most likely to add jobs with government money.
The Senate bonding bill weighs in at a whopping $329 million while the House version is a �slimmed down� $248 million. Both bills greatly exceed what the State Management and Budget Office pegs as the maximum remaining bonding capacity in order to keep the State within a 3 percent debt service payment limit.

Under normal legislative procedures major bonding bills (public construction projects financed with state general obligation bonds) are dealt with in the even year sessions. But never wanting to miss an opportunity to spend the State further into debt, DFL majorities in both the House and Senate want to use the recession as an excuse to create �public works� jobs at taxpayers� expense.
And while the whole construction industry is on its back, we have a local legislator proposing a bill to create a new board for a state residential building code. That'll help, Larry!

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Friday, April 17, 2009

She didn't get the memo 

In her e-news letter to constituents, Senator Tarryl Clark (DFL-St. Cloud) reports on the difference between the Senate's plan to balance the state budget and that of Governor Tim Pawlenty.
Using a combination of cuts, federal recovery funds and new revenues it brings the state budget into balance for not only the next two years, but also the two years beyond that. This is something our Governor does not plan to do. Instead he pushes much of our present problems into the next two years. Seemingly he is hoping, and that�s all it is, is a hope, that things will get much better, much sooner than most economists believe. If his hope is misplaced Minnesota will be in even worse financial straits.

I don't think the Obama administration is buying that with their forecast of GDP. CBO, who has panned some of the President's numbers, nevertheless expects real GDP to grow 4% in 2011, 4.1 in 2012. Indeed, the disingenuous part of Sen. Clark's statement is that there are no forecasters saying growth will be weak in 2011, when the next biennium budget begins. �(See the WSJ survey last week, or Blue Chip yesterday.)� Why is Sen. Clark so pessimistic about Minnesota? �Why does she not share the optimism of her party's leader?

I will be dissecting other parts of this letter next week.

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Monday, April 06, 2009

I can't hear you 

I don't understand why the Minnesota Senate is choosing to pick this fight. A press release from the Minnesota Senate Republican Caucus came with an attachment indicating a vote today for an amendment offered by Republican leader Senator Dave Senjem to retain Truth in Taxation (in SF3) for property tax levies. Four DFLers joined all nineteen Republicans in supporting the Senjem Amendment; forty DFLers were against. After the vote Sen. Senjem said
As a former city council member, I will attest that �Truth in Taxation� hearings provide an invaluable opportunity for a specific meeting dedicated to discussing the budget and to hearing directly from citizens regarding the tax policy of local governments.

Ending �Truth in Taxation� hearings at a time in history when we need more citizens involved with their government and paying more attention to tax policy in Minnesota is simply wrong.
MN House of Representatives Research shows what a Truth-inTaxation hearing is intended to do:

Under the law prior to TnT, the main avenue for taxpayer involvement was on the valuation side of the system. Taxpayers received their market value notice early in the year, and then no further information was sent to the taxpayer until the property tax statement was received the following February or March�almost a whole year later. The legislature felt that TnT would improve local accountability by focusing taxpayers on the relationship between the budget process and property taxes.

The main purposes of TnT were:

  • to enhance public participation in Minnesota�s property tax system,
  • to educate the public on how property taxes are determined,
  • to encourage the public to understand the local government�s budget process,
  • to encourage the public to become involved in helping local officials set spending priorities.

Although there are some exceptions (i.e., referendums, court costs, etc.) the local government�s final levy can not be increased above the proposed levy amounts reflected on the TnT notices.

It appears at least you'll still get the notices that tell you whether your property taxes are going up because of a change in spending, change in valuation, state aid, etc. But your local elected officials will no longer have to hear from you as they set spending targets. The PiPress spoke against SF3's repeal of TnT already. I guess the DFL only likes listening tours when they know who they will listen to.

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Trying to have it both ways 

Local state senator Tarryl Clark was chastised by the St. Cloud Times last week for a bill that would take the teeth out of Gov. Pawlenty's Q-Comp program by forbidding the state from withdrawing funds from non-compliant school districts. Clark complains today that she's misunderstood. Yet her defense says three things that are collectively inconsistent:
  1. Q-Comp is failing to improve student achievement. I could be persuaded this is true, but wouldn't you then look to end it?
  2. The school district signed up in good faith believing it would work, though it never put in the pay for performance provisions that are at the heart of Q-Comp.
  3. Clark does not want to impose any penalty on the St. Cloud school district while she decides whether it works or not. This while there's a state budget deficit greater than $6 billion.
As noted last week, St. Cloud schools were told many times the money was in jeopardy, but did not solve them. It doesn't work according to Clark, but you should still give your money. So when she says "We owe it to our students, teachers and taxpayers..." I think she's only worried about the debt to one group.

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Friday, April 03, 2009

Mrs. Scholar writes 

Before she wrote about it, I was unaware that the school district was contemplating issuing these bonds (OPEB) that incur a cost to taxpayers that the school district does not have to get a vote on. But here's our school district (ISD 742) listing a set of alternatives to close its budget deficit and the top of the list is to float $1.6 million in bonds "and levy to repay bonds". This of course allows them to take the money it would have used to pay health benefits to retirees, and use that money to do something else.

Barbara writes (links added):
Although school board members are elected to make decisions on behalf of the population, pecuniary decisions are best left to the people. This has been a guiding principle in our laws, as shown by the requirements that other excess levies require voter approval.

However, the Legislature is now moving further with rules that circumvent the ballot box. If a levy passed and opponents could get 15 percent of the school district�s voters to sign a petition, a school district could face a revocation of that levy.

The recall allows some mechanism to demand accountability from school districts. But the Senate E-12 Education Budget and Policy Division has now sent forward a bill that would kill the petition option.

And it�s not just at the school board. Rep. Paul Marquart, DFL-Dilworth, introduced a bill to allow a county to raise sales taxes to �make up� for reductions in state aid. While some cities have made hard choices and found budget savings, Marquart�s bill would allow the others to avoid those choices and impose new taxes on a recessionary economy.
The conversation at the Times website today is animated on this subject. Check it out.

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Wednesday, March 25, 2009

Have a cough? Get a Kirby! 

Last night I was at our BPOU meeting and heard about HF 264, which would have mandated health insurance policies that covered durable medical products like a wheelchair to provide hypoallergenic pillows and HEPA-filtered vacuum cleaners to policyholders who were suffering from "asthma symptoms." It was also to be included in payments for people on medical assistance. This is the braincrampchild of Representative Karen Clark of Minneapolis. We had some fun talking about it this morning on the KNSI Morning Show.

Today they posted a revision, removing the mandate on private policyholders, but retaining it for MA. It's on its way to the Finance Committee, having passed Health Care and Human Services. One can only shake his head, but hope his dandruff does not cause an allergic reaction.

Maybe it's time for another version of stupid bills.

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Thursday, March 19, 2009

Marty gets a pass, for one 

Marty Owings, whose fight to get access to the Minnesota Legislature was chronicled on our show last Saturday and earlier, is now credentialed to the Minnesota House. How many others? We don't yet know:
My remaining concerns are simple. If there are new rules for "online" media, I haven't seen any. Perhaps we all fall under the umbrella of "Press", but then there remains the issue of updating the language to remove words like "television" and "radio", to be replaced with the more generic term "Press". If the process has not changed and the rules are what they've always been, then will every Journalist who applies for credentials have to wait two months and pester Legislators endlessly until they approve them?
So we do not yet know if anything has been done for Dan Ochsner. As Sunshine Week conitnues, let's keep working for equal access to all journalists, regardless of their media. Let's hope that Marty getting a pass and Dan losing his is the result of a process that provides equal access and not because Marty and Dan are on different sides of most issues.

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Monday, March 16, 2009

Happy Sunshine Week! 

My interview with Marty Owings and Dave Aeikens on the Minnesota House press-supression is here. The St. Cloud Times weighed in yesterday with an editorial:
In an apparent effort to avoid being caught on candid camera, the House tried to limit audio and video recording and photography of public hearings in House Committee hearing rooms.

Yes, that�s right. They sought to prevent reporting to the public events at public hearings.

On the Senate side, local conservative radio personality Dan �The Ox� Ochsner had the DFL-led Senate deny him annual media credentials this session despite having held them several other sessions.

Capitol folks have tried to justify these actions on themes such as �not enough room,� �we�re updating our rules� and �they don�t regularly cover the Capitol.�

Sorry, but they are missing the point. Legislators are conducting the public�s business, not the media�s business. The only rules needed are those that embrace openness � no matter who is asking for it.
Amen to that. Gary Gross provides additional coverage.

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