Minnesota Chamber Monthly Column

Government SpendingLet’s put brakes on Minnesota spending
By Bill Blazar, Interim President of the Minnesota Chamber of Commerce

The recent budget forecast sets the stage for Governor Dayton and the Legislature to adopt a budget for the next two years. The good news is that Minnesota has a growing surplus. That’s not surprising given the fact that the 2013 Legislature raised permanent taxes by more than $2 billion to solve a much smaller two-year shortfall. A good share of these increases fell disproportionately on Minnesota businesses.The Minnesota Chamber of Commerce and our local partners recommend a balanced approach that will best position Minnesota for a strong economic future. The projected surplus is an excellent opportunity to reduce uncompetitive business taxes and to invest in key infrastructure needs of transportation and education/workforce.

The governor’s supplemental budget will frame the budget debate. His current recommendations fall far short of what our economy needs to change and grow. He makes no progress in improving Minnesota’s business competitiveness. He instead supports using virtually all of the nearly $2 billion surplus on new and permanent spending.

The budget debate can be dizzying in the exchange of numbers. But all Minnesotans should pay attention to these telltale figures:

  • Minnesota’s general fund is projected to have a surplus of $1.869 billion for the two years beginning July 1, 2015 – and another $3 billion for the following two years.
  • The surplus is above and beyond a 4.5 percent increase, or $1.8 billion, in spending that is assumed under current law.
  • Dayton proposes to use $178 million, or less than 9 percent, of the surplus for tax relief targeted at individuals and is actually increasing taxes by $47 million on various business taxpayers.

It begs the question: How much money is enough to fund state government?

Minnesota ranks among the top in the nation on many quality-of-life measures. However, our taxes on all businesses – small, medium and large – rank among the highest in the nation. The budget debate must not ignore the realities of globalization, competitiveness and our changing demographics – all of which will have great impacts on Minnesota’s economy and the state treasury.

Our challenge is to meet the dual tests of an aging population and globalization simultaneously. We can’t simply increase spending and the taxes that go with that while expecting the world economy to look the other way. Over the next decade fewer people will be sharing the bill for an aging population, and our businesses will increasingly compete in a global marketplace. We cannot sustain higher permanent spending, putting even greater pressure on taxpayers.

Instead, we urge policymakers to adopt a balanced budget solution to best position Minnesota for a strong future. First priority should be to lower our uncompetitive taxes, allowing taxpayers to invest their own money in their families, their businesses and their employees. Secondly, Minnesota should invest a portion of general fund resources in key infrastructure needs.

We need to reduce taxes and figure new ways to deliver important public services. Transportation and workforce are the most immediate and greatest opportunities. Transportation financing deserves to receive consideration the general fund. In early childhood, as just one example, we get greater bang for the buck if the state funds scholarships for low-income children of all ages, rather than providing pre-K for all four year olds.

This is only the beginning of rethinking how we spend our state dollars; health care is perhaps our greatest challenge. But we can make a great start by putting both transportation and education/workforce on new, 21st century funding plans that are sustainable while making our state more competitive. We can settle for nothing less to ensure a growing economy.