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Reaction emphasizes differing approaches - deficit Minnesota faces record $5.27 billion deficit Associate Editor In a philosophical debate that may mirror potential conflicts during the next Legislature, Brainerd area lawmakers discussed what should be on or off the proverbial table when they grapple with the two-year budget deficit of $5.27 billion that was announced Thursday.
At the upper end of that prediction, the Star Tribune reported, the deficit would equal nearly 14 percent of the state's total budget.
Sen. Paul Koering, R-Fort Ripley, and Rep. John Ward, DFL-Brainerd, differ on their approach to the problem, possibly mirroring the upcoming legislative debate. Koering said increased taxes should not be a part of the solution while Ward said new revenue and cuts should all be on the table.
Koering said the Legislature's first task will be to fix this biennium's budget shortfall in the next six months - a figure that amounts to $426 million. Then the lawmakers will have to tackle the larger two-year deficit.
"We're probably going to have to see government workers, state workers, having to be laid off," Koering said.
The two-term senator said he wasn't sure education could be spared state cuts, even though that would be his preference. At this point, Koering said tax hikes should not be considered because people are losing their jobs and their homes.
"This is so serious that it scares me," Koering said. "I'm going to be 44 years old and I've never seen this in my lifetime."
Koering said he was telling constituents to brace for the equivalent of a Level 5 hurricane when the state tackles the budget deficit. He said it could be two to four years before the economy picks up.
One reason this session's task will be difficult, Koering said, was because the easy decisions were made in previous sessions.
"All the shell games of the past, the moving pots of money around from here to there, all those monies are gone," he said.
Schools could see no increase or cuts, he warned.
Despite the dire conditions, Koering said he did not think the state could afford to raise taxes.
"As far as I'm concerned that's completely off the table," Koering said. "I'm going to hold firm to say we've got to try to do it strictly with cuts rather than raising taxes on people when people are to the brink right now. To think they've got anything else to give is just a fantasy.
"It's going to be tough to hold education harmless when we have people in a crisis mode."
Ward, entering his second term, said program cuts and new revenue sources and revenue shifts should all be considered.
He said state spending should be sensible and wise and that cuts should be well thought out. The attitude of Minnesotans also will play a role in how we get through these tough times.
"We're going to bounce back," he said. "This isn't going to be forever."
Ward said the philosophy of no new taxes and tax cuts was sold as one that would spur job and economic growth. That hasn't worked, he said.
"If we still do the same things we've done we're going to get the same results," Ward said. "It (the no new taxes stance) put the tax burden back on the local property taxpayers."
Ward said the state should consider history and how we brought ourselves out of the Great Depression.
"All of those programs invested in our most valuable resource - our human capital resource," he said. "We need to be fiscally responsible with futuristic and positive vision."
Cuts, Ward said, should be well thought out. Lawmakers should remember that the education system directly affects our future work force.
"There's a huge negative downturn in not funding education," Ward said.
The retired teacher said the tax system is broken. Citing Minnesota Department of Revenue statistics he said that a household which earns $350,000 or more annually (the top 1 percent) pays 9.6 percent of its income to state and local taxes; a household which earns $150,000 annually or more pays 10.5 percent of its income to state and local taxes. A household that earn less than $150,000 annually pays 12 percent of its income to state and local taxes.
Rep. Larry Howes, R-Walker, a 10-year veteran of the state House, agreed with Ward that everything had to be on the table, but while he sees fees being raised he wasn't ready to advocate for tax increases.
"I would look at taxes but I'm not going to say that I would raise taxes," Howes said. "This is a time that you really don't want to raise taxes. It's difficult times. It's also a time that we want to re-examine every nickel we spend."
He emphasized the decisions will be difficult and that this is everyone's problem not just one political party's problem.
"We're going to get yelled at no matter what we do so let's just do it in the best way," Howes said.
Sen. Amy Klobuchar, D-Minn., heard of the details of the state budget deficit while she was on her way to a speaking engagement and plant tour in Baxter. She said the budget shortfalls being experienced by many states was a topic President-elect Barack Obama discussed with state governor's earlier this month. Federal money for infrastructure projects that are ready to go and targeted Medicaid funding could provide some help to the states.
Brainerd DFLer Don Samuelson, a former state representative and former longtime state senator, compared this year's problem to 1982 when the Legislature needed six special sessions to resolve a budget crisis. The political equation that year included a Democratic House and Senate and a Republican governor, Al Quie, who had announced he wasn't going to run for re-election. Samuelson said the compromise solution involved a rough equation of one-third raising revenue; one-third program cuts; and one-third shifting revenues.
"The governor didn't shoot at the Democrats for raising revenues," he said. "The Democrats didn't shoot at the governor for cutting programs. I think it was a good compromise. You might say it hurt everybody equally. It seems like a pretty good way for the Legislature to look at it."
Samuelson estimated that roughly 70 percent of the state budget is a combination of education and health care and 70 percent of health care is Medicaid money that goes to nursing homes.
"I think everything has to be on the table and it's all ugly," Samuelson said.
MIKE O'ROURKE may be reached at mike.orourke@brainerddispatch.com or 855-5860.
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