Government should tighten its belt to close projected budget gap
Minnesota’s office of Management and Budget releases two big revenue forecasts every year that detail the state’s budget picture – one in February and one the first week of December. The latest budget forecast was released on Tuesday, Dec 1.
It contains a mixed bag: As of this moment, Minnesota has a budget surplus of $641 million….so far. That’s the good news.
However, we have a projected budget deficit of $1.27 billion when the new budget cycle begins on July 1 of 2021, but that is better than the $4.7 billion deficit predicted earlier this year.
The coronavirus outbreak and subsequent business restrictions have certainly been difficult for individual families and businesses. But our diversified economy and hard-working Minnesotans have helped our state budget to mostly weather the storm —— so far.
So how will we close that budget shortfall?
As the Chair of the State Government Finance, Policy and Elections Committee (a budget committee), I will have a role.
We can make significant progress simply by reining in government’s out of control bureaucracy. The size of state government and our executive branch have ballooned beyond understanding in recent years.
We already asked Gov. Walz to instruct his agencies to find 5% savings within their budgets, though so far I have not seen action on that request. That will make our job a little harder, but I will still expect every state government agency to go through their budget with a fine-tooth comb to help us find savings and close the deficit. That is the standard that Minnesotans are facing, and that is the standard I will hold state government to as well.
As we debate the next state budget, I expect we will hear a chorus of voices saying the only path forward is to raise taxes. A new report from the nonpartisan think tank Center of the American experiment explains why we must reject those voices.
The report, titled “Closing Minnesota’s Budget Deficit,” makes the case that the deficit should be closed with restructuring and spending cuts rather than tax increases. Minnesotans are already paying a disproportionately high percentage of their income to feed a growing state government.
Minnesota already has the fifth-highest top rate for personal income taxes in the country. But what is more shocking is that our lowest rate is higher than 25 other states’ highest rates! High taxes have the opposite intended effect: of 26 economic papers reviewed by the nonpartisan Tax Foundation, 88% found higher taxes had a negative impact on economic growth.
The stronger relationship – the one that the legislature, Gov. Walz, and other policymakers must focus on – is the relationship between GDP and state revenues. In other words, the most effective way to improve state revenues and close the budget gap is by getting our economy firing on all cylinders again. That means allowing businesses to safely open their doors, while they work hard to make sure the health and wellbeing of their customers and employees is a top priority.
If we can do those two things — get businesses back up and running safely and tighten government’s belt — then I am confident we will be able to close our budget shortfall while still maintaining critical services and keeping our promise to our vulnerable neighbors.
If you have any questions about the budget forecast or any feedback about the approaches we should take, please reach out to me any time at sen.mary.kiffmeyer@senate.mn
It is a privilege to serve as your state Senator!