Pawlenty's Shell Game

You have to admire the sales job executed by the Taxpayers League of Minnesota and their errand boy, Governor Tim Pawlenty, in the budget battle taking place at the Capitol during this legislative session. Prodded by the League’s no-new-taxes pledge that he signed in order to secure the Republican nomination last year, Pawlenty has deftly portrayed the state’s record $4.2 billion deficit solely as the work of irresponsible liberals whose spending has run amok, despite the best efforts of him and his fellow no-new-taxes allies in the Legislature.

In his State of the State Address, delivered in February, a month after he was sworn in, the Governor laid out an argument for slashing social programs that has been often repeated on talk shows and in the letters section of the daily papers. "The revenues coming into the State are projected to grow by 6.6 percent, which is a normal level in Minnesota’s modern history. What’s out of control is our government spending. Unless we change things, our state budget is expected to grow by 14.4 percent in the upcoming biennium," he said. "The deficit we face is caused by spending too much, not by taxing too little."

This last statement in particular is disingenuously misleading. The Governor is counting on Minnesotans forgetting the massive tax reform plan put together by the Republicans (when Pawlenty was the party’s minority leader in the Senate) and then-Governor Jesse Ventura. The most important provision in the plan shifted the main funding source for public education in Minnesota from local property taxes to the state’s general fund. This shift enabled conservative politicians to brag to their constituents that they had significantly cut property taxes. But how did Pawlenty, House Majority Leader Steve Sviggum, and Ventura propose for the state to pay for its massive new obligation to fund education? Why, they’d simply take it out of the budget surplus.

"Five months before they approved the plan, it was obvious there wasn’t going to be any surplus, because the economy had already turned," says Wayne Cox, executive director of Minnesota Citizens for Tax Justice. "In January of 2001, Alan Greenspan said that the nation’s economy was at a zero growth rate." Then-Senate Majority Leader Roger Moe and most DFL-ers opposed the plan, arguing that Ventura and the Republicans were relying on the mirage of a future surplus, but they rammed it through over Moe’s objections.

Now the state’s obligation for funding public education—projected at $1.96 billion--has come due, and there is obviously no surplus to pay for it. Contrary to Pawlenty’s State of the State claim, this cost is not due to more government spending—the education budget is roughly the same as it would have been if it were being funded by property taxes—but by taxing too little to meet the obligation the Governor knew was coming, and helped bring to bear on the state.

Now harken back to the 2002 legislative session. Both Pawlenty and Moe were running for Governor, and anxious to campaign on the mutual convenience of no tax increases or cuts in state programs. To facilitate that goal, they led their parties to hammer out a budget agreement that used an accounting gimmick to delay payments for education aids. "Usually, schools get 90 percent of their education aids in the current fiscal year and the rest the next year. But last year, the payments were changed so that the schools received 83 percent up front and 17 percent later," explains Nan Madden, Director of the Minnesota Budget Project, an initiative of the Minnesota Council For Nonprofits. This maneuver shifted $446 million off of last year’s budget over to outstanding obligations for the upcoming biennium.

According to a report put out by fiscal analysts from the Minnesota House, where Pawlenty’s party holds a majority, taking on funding for education will increase the state’s budget 5.7 percent this biennium. The accounting shift in education aids payments will add another 1.6 percent. The House estimated the total rise in this biennium’s budget to be 14.3 percent, a fraction less than Pawlenty’s State of the State number. Subtract the education takeover and the accounting shift—which together comprise 7.3 percent of the projected increase, and the state’s budget would be projected to swell by just seven percent this biennium. If Pawlenty’s claim of a 6.6 percent increase in revenues during this period is to be believed, legislators would only have had to cut 0.4 percent from existing programs to balance the budget—if two governmental actions supported by Pawlenty had no taken place.

Had the state kept property taxes as the primary source of education funding, for example, every penny of the one billion dollars he proposes to cut from health and human services—money that will deprive more than 60,000 Minnesotans of their health care—would be restored, with nearly a billion dollars left over. Remember that the next time you hear the Governor proclaim that the deficit is the result of "spending too much, not taxing too little."