Thursday, June 30, 2011

Trying to find the missing six percent Minnesota budget increase

 Republican ads on television keep claiming that the Republican legislative budget proposes a six percent increase, which "is enough" according to the ads.   Democrats deny absolutely that there is a six percent increase.    The six percent increase claim has really bothered me, because supposedly K-12 education is being protected in the legislative budget, and it looks to me like in education, we are getting cut.   Where could the six percent be going, if not to Education.  So, every time I hear the six percent claim, it seems like it just can't be true.

Listen, the spending and revenue issue can be argued a number of ways.   But its pretty hard to think clearly about it, if we don't even know whether we are increasing spending or keeping it the same.   A six percent increase is a pretty big increase, if there really is one.Its really hard work to trace down the real numbers, because in a political war, truth is the first casualty.   Here is the best information I can find. If somebody out there has better numbers than mine, I should would appreciate hearing from you.

What was last year's budget?  
Last year's budget was $34.5 billion.  Not $30 billion as some Republicans are claiming.   If last year's budget really was $30 billion, a six percent increase, would bring it to about $32 billion.  If, it was 34.5 billion, then a six percent increase would bring it to about $36.5 billion.   But never mind the six percent:  its a fiction of somebody's advertising agency.

Why are Republicans claiming that last year's budget was $30 billion?   Because the Pawlenty budget last year was funded with some tricks that allowed him to spend $34.5 billion, but "balance" the budget with only $30 billion in revenues.  The Pawlenty Budget was partially funded by $2.3 billion in federal stimulus money.   Without the Stimulus money, (and the K-12 shift) the Governor would have had to implement $2.3 billion in cuts, or $2.3 billion in tax increases.   By taking the stimulus money, the Governor was able to keep on spending while keeping his no new taxes pledge.  He kicked the can down to the next year, which is this year.

Ok, I get that, but 30 billion plus 2.3 billion is only 32.3 billion.  I thought you said that last year's budget was 34.5 billion?!    The rest of the difference was made up by a $1.89 billion K-12 aid shift.   The State shorted school districts in the 2010-2011 fiscal year, deciding to pay the last $1.89 billion out of this years revenues.  That allowed the State to authorize school districts to spend a billion - eight more last year than the state had in revenues, sort of a constitutional evasion of the balanced budget requirement.  The result is that the Pawlenty budget of 2010-2011 called for more than 4 billion in spending than revenues.   The Governor and legislature was running the State at a bigtime deficit, but they papered it over with shifts and stimulus money.

So is the budget 6% higher or not.  Who is right?  The Republican budget is NOT six percent higher than last year's budget.  It's just not.   The problem is that this is a year of reckoning.  Merely keeping the budget flat, required the governor and legislature to come up with 4 billion in revenues.   Dayton and the legislature agreed to cover some of the shortfall by pulling another aid shift.  They decided to kick school aid shift down the road another year.  But they still had to deal with the fact that the one-time stimulus money is gone.  

So, are you saying that the real problem is how to confront the loss of $2.3 billion in stimulus?  Well,  there are parts of the budget that are going up because of inflation, so its higher than that.    Part of the shortfall is made up because we are taking in more revenue this year, than last, because of a partial recovery from the Bush recession.   The Republicans wanted us to make up the rest of the difference entirely with cuts.  The Governor wants to make up the difference with a combination of cuts and tax increases on top earners.  The issue isn't whether we are going to increase the budget by six percent, the issue whether to slash the spending in the Pawlenty budget that was accomplished with stimulus and school aid shifts.

So,  the 6 percent we hear about on television is a fiction, or a wee bit of a prevarication......  It would be more accurate to say that the Obama stimulus package and the aid shift allowed Pawlenty to keep on spending without raising revenues, and that left us with a question of whether to cut the budget big time or raise some revenues to avoid those major cuts.

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