Proposed constitutional amendment would lead to more bad budgets

August 22, 2011

Minnesota is still reeling from a contentious legislative session and a state government shutdown. Now some policymakers are advocating for a constitutional amendment that would permanently undermine our ability to arrive at common-sense solutions to balancing the state’s budget. The amendment would guarantee gridlock by creating extra hurdles for passing a responsible budget, leading to more budget gimmicks as policymakers seek to fund critical state services.

Last Thursday, a group of Republican state representatives held a news conference to announce their 2012 legislative agenda. A major element is likely to be a constitutional amendment that would require a supermajority vote in both houses of the Legislature to raise taxes. With such a supermajority requirement in place, just a minority of legislators could block critical legislation, even if the legislation had broad public support.

Supporters of the amendment claim that raising the bar for increasing taxes will lead to better budget outcomes. But we already know that isn’t true. Minnesota has essentially been living with this restriction for years: we haven’t passed a statewide tax increase since Governor Pawlenty agreed to raise the tobacco tax in 2005. So we have seen first-hand what happens when policymakers are prevented from using all their budget-balancing tools. Fewer budgeting options leads to legislative gridlock, and ultimately pushes policymakers to agree to compromises that rely heavily on short-term budget gimmicks.

Advocates of the constitutional amendment want to force policymakers to concentrate on spending cuts to balance the state budget. Policymakers did agree to deep spending cuts in the 2011 Special Session. Over the next two years, the state will invest fewer general fund dollars in higher education, public safety, transportation, the environment, agriculture, and jobs and economic development than we did in the last two years.

However, many policymakers also understand that balancing the budget through cuts alone would eliminate vital investments that Minnesotans value. Cuts that deep would devastate families, erode our public infrastructure, and ultimately undermine the state’s long-term economic growth.

Just as water forges a new path when it encounters an obstacle, so policymakers find ways to meet the needs of their constituents. But the danger is that if state tax increases are essentially off the table, policymakers turn to less transparent funding methods to avoid spending cuts that would fundamentally damage Minnesota’s economy. Just this last session – after plenty of gridlock – lawmakers finally agreed to use $2.8 billion in timing shifts and borrowing from the future to balance the budget. They failed to find a permanent solution to the state’s ongoing needs, so the state will be back facing deficits in another two years, if not sooner.

Minnesotans are tired of the gimmicks and want policymakers to arrive at a permanent solution using a balanced approach, according to recent public opinion polls. For example, a recent survey commissioned by the Bush Foundation found that nearly two-thirds of Minnesotans felt that borrowing funds and delaying payments shouldn’t be used to pay for current budget deficits. And 57 percent agreed that policymakers should use both spending cuts and revenue increases to address any future deficits.

The state doesn’t need a constitutional amendment that limits the ability of policymakers to pass a responsible budget. And we know that the public doesn’t support the gridlock and gimmicks that flow from these kinds of restrictions. We do need to try something new to get our budget on the right track. That new idea is a balanced approach that relies on spending cuts and revenue increases to sustainably fund the state’s priorities.

-Christina Wessel


Join letter to Congress opposing Balanced Budget Amendment to Constitution

July 13, 2011

The fierce debate in Washington over how to reduce federal budget deficits has taken a dangerous new turn. Both the U.S. House and Senate are poised to vote as early as the week of July 18 on a Balanced Budget Amendment (BBA) to the U.S. Constitution that takes a one-sided approach to reducing federal budget deficits that would require dramatic reductions in critical services and do great economic damage.

The Minnesota Budget Project supports a responsible and balanced approach to federal deficit reduction that does not undermine the fragile economic recovery, that is equally divided between spending reductions and increases in revenue, and that does not increase poverty or inequality.

The proposed BBA would cap total federal spending at 18 percent of Gross Domestic Product (GDP), far below the 2010 level of 24 percent of GDP. Within a decade, the BBA could lead to a 70 percent reduction in funding for affordable housing, education, child care, Head Start, public health, veterans’ health care, environmental protection, health research, food and water safety, and more. For example, this hard spending cap would require cuts even deeper than those in the Ryan budget that passed the House in April, which slashes more than $1.5 trillion from health care through Medicaid and the Children’s Health Insurance Program (CHIP) over ten years.

The amendment would also require that any measure to raise revenues, increase the debt ceiling, or waive the balanced budget requirement be adopted by a supermajority vote in both the House and Senate. These severe restrictions would cause significant harm to the current fragile economic recovery and would make future recessions both deeper and longer by essentially tying the hands of the federal government’s ability to respond.

The Center on Budget and Policy Priorities is seeking organizations to join a sign-on letter to Congress opposing the Balanced Budget Amendment. The deadline to join the letter is Thursday, July 14. Time is short, so please join the Minnesota Budget Project and over 200 other organizations in asking Congress not to pass the BBA.

-Steve Francisco

New analysis highlights dangers of proposed constitutional amendments

May 5, 2011

The legislature has been busy introducing constitutional amendments that would place significant constraints on the state budgeting process. Many financial experts point out that placing these strict limits in the state constitution would have serious long-term economic consequences. By restricting the use of available resources, amendments like these would slow down Minnesota’s recovery from a recession and prevent lawmakers from making investments that will keep the state competitive. Bond rating agencies frown on these kinds of restrictions, so the state would also likely face higher borrowing costs for infrastructure projects.

And adding restrictions in the constitution would lead to gridlock and gimmicks as policymakers struggle to balance the budget with fewer tools in the toolbox. Just as water forges a new path when it encounters an obstacle, so elected officials will try to find ways to meet the needs of their constituents. The danger is that they will turn to less transparent methods to avoid spending cuts they fear would fundamentally damage Minnesota’s economy. Policymakers have clearly demonstrated that they don’t need a constitutional amendment to force spending cuts or prevent tax increases; elected officials already have the power to do that.

So far, three different constitutional amendments have been introduced:

  • House File 1598/Senate File 1384 would require a three-fifths supermajority vote in each body of the legislature in order to pass a tax increase.
  • House File 1612/Senate File 1364 would limit all spending in the biennium to the amount of all revenues collected in the previous biennium. Excess revenues could only be used for two purposes: to pay back one-time shifts and to provide for the public peace, safety or health as a result of a declared national security or peacetime emergency.
  • House File 1661/Senate File 1378 would limit general fund spending in the biennium to 98 percent of forecasted revenues, with the remainder going into a reserve account. Any spending above the 98 percent could only be used to respond to emergencies and would require a three-fifths majority vote in both bodies of the legislature. Once the reserve account reaches five percent of state revenues, a reduction in the sales tax would be triggered.

We have developed several resources that highlight the problems created by these constitutional amendments (these resources, and others, are also available on our website):

  • Our testimony discusses our opposition to House File 1612, which was scheduled for a hearing on Wednesday evening (but was pulled from the agenda at the last minute).
  • A new issue brief examines the details of House File 1612/Senate File 1364.
  • Another new issue brief looks at how a constitutional limit on state spending has hurt Colorado’s economy.
  • And our position statement highlights reasons why amendments such as these are harmful to the state.

In addition, Wednesday’s editorial from the Star Tribune opposes constitutional amendments limiting state budget decisions, noting how they would “tie lawmakers hands.”

This is a critical time to call your state legislators and let them know that you oppose these constitutional amendments as unnecessary fiscal restraints that will make it nearly impossible to recover from a recession, undermine long-term investments in our families and communities, and cause gridlock as policymakers struggle to negotiate budget compromises with an empty toolbox.

-Christina Wessel

Proposed constitutional amendments would create gridlock and hurt economic growth

April 29, 2011

Sometimes I listen to the news and think, “I’m sure glad we aren’t California.” Sure, we face big budget deficits, but not astronomical budget deficits. Plus, we don’t have a bunch of constitutional amendments that tie the hands of policymakers trying to come up with a solution. We can be thankful that our elected officials have a whole range of tools at their disposal, even if they don’t always use them.

Well, you might want to think again. Two constitutional amendments introduced in the House on Thursday could vastly increase the level of legislative gridlock as policymakers struggle to negotiate compromises with an empty toolbox.

The first amendment, House File 1612, proposes to limit all state spending in the current budget cycle to the amount of all revenues that were brought in the door during the previous two-year budget cycle – an idea that was first proposed by former Governor Pawlenty back in 2009 and went nowhere in the legislature.

What exactly does the amendment do? Thanks to the economic recovery, in the FY 2012-13 biennium the state is projected to bring in $2.2 billion more in revenue from all sources than it did in the FY 2010-11 biennium. Under the amendment, however, the state would be prohibited from using that revenue to meet our needs. Keep in mind that the $5 billion deficit the state is currently facing assumes the state will use that revenue. The amendment would increase the size of the budget deficit, meaning policymakers might consider even deeper cuts to higher education or that education would no longer escape with light cuts.

What if Minnesotans don’t want to cut the state budget that deeply, fearful of what slashing spending for education, higher education and economic development might do to the future economic health of the state? Too bad – our elected officials’ hands are tied. Spending beyond that restricted level is only allowed if there is a declared national security or peacetime emergency. And raising revenues wouldn’t help either. The amendment doesn’t let us use any new revenue for at least another two years.

The effect for Minnesota’s economy would be disastrous. When tax collections fall in an economic downturn, those recession-level revenues are locked in and the state is forced to slash vital public services that families and businesses rely on. As the economy improves, the state can’t reinvest any of that revenue growth until years later.

Colorado passed a version of this amendment in 1992. By 2005, after a campaign spearheaded by a Republican governor and many business leaders, a majority of Coloradans voted to suspend the amendment for five years to slow down cuts that were devastating education, higher education and public health. Yesterday, the Republican governor of Arizona vetoed a similar proposal saying, “We should learn from the State of Colorado that experimented with a similar mechanism, an experiment that failed.”

A second constitutional amendment was introduced on Thursday in the House that could make things even more difficult for policymakers looking to pass a balanced budget. House File 1598 would require a three-fifths vote in both bodies of the legislature to pass revenue increases. Remember, policymakers have two primary tools that can help the state balance the budget over the long-term – cutting spending and raising revenues. This amendment would essentially take one of those tools off the table, increasing gridlock as policymakers struggle to find common ground. (The amendment is scheduled for a hearing in the House Tax committee on Monday, May 2nd.)

This legislative session has shown us first-hand how challenging it is to resolve state deficits through an all-cuts approach. That task would become near impossible if these constitutional amendments were to take effect.

There are many other concerns with the proposed amendments that we’ll discuss in the coming days. Hopefully, policymakers will quickly begin to understand how permanently placing such restrictions in the state’s constitution would create gridlock and force radical spending reductions that would quickly erode the very qualities that have made Minnesota so successful in the past – a highly educated workforce and a strong public infrastructure. We’ve already proven that we don’t need constitutional amendments to get policymakers to cut spending.

-Christina Wessel

A preview of the Governor’s supplemental budget

February 15, 2010

The Governor will be releasing the details of his budget later this morning, but we already had a sneak peak of what’s to come in his State of the State speech last week. As we wait for the details, here are some initial thoughts.

Minnesota is not unique in facing budget shortfalls over the past few years. But a majority of states have taken a balanced approach to addressing these shortfalls, making budget cuts but also raising revenues. Relying on cuts alone makes it difficult for states to maintain adequate funding for health care, education, helping people who are out of work, and other services that Minnesotans are counting on more than ever in this tough economy.

The primary purpose of the Governor’s supplemental budget is to propose a solution to the state’s $1.2 billion deficit for the current biennium. We know the Governor’s plan will include significant budget cuts. In fact, the Governor warned that they will be “very dramatic and painful spending reductions.”

We believe that it is critical that policymakers pass a budget this year that lays out a permanent solution to our deficit problems. And we appreciate that the Governor is leading us in that direction. However, any cure isn’t necessarily a good cure. Doctors used to “bleed” their patients, hoping that they were helping them heal by removing impurities from the body. Instead, doctors were really weakening their patients, making it more unlikely for them to recover. Minnesota is sick, but slashing programs that work to strengthen our economy over the long-term isn’t going to help us recover. It may fix the budget gap, but it will disable us in the future.

Bottom line: permanent revenue increases should be part of the solution. That’s the only way be can develop a responsible solution to the budget problem while preserving services that strengthen our communities.

In his State of the State, the Governor outlined a package of tax cuts he’s planning to include in his budget proposal. Given the size of the state’s deficit, it is surprising that the Governor would want to further reduce the state’s resources. We’ll be looking at the specifics of these proposals to make sure there is accountability  – are the tax benefits specifically tied to job creation?

The Governor also mentioned his proposed constitutional amendment. As we’ve noted when this proposal first came out and when it was heard by the Senate Tax Committee, these kinds of amendments reduce accountability, undermine public participation in the budget process, have been rejected repeatedly by voters across the country and impede the state’s ability to provide adequate funding for services for the disabled, education, health care and transportation, and invest in our future prosperity.

We’ll have more analysis later this afternoon and in the days ahead after we see the details of the budget, which should be available at 11:00 today from the Minnesota Management and Budget web site.

-Nan Madden and Christina Wessel

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Senate committee to review Governor’s proposed constitutional amendment

December 7, 2009

The Senate Tax Committee is holding a hearing today about the recent November Forecast and the Governor’s proposed constitutional amendment to limit spending.

This Spending Limit Amendment is an extreme and inflexible tool that takes decision-making power out of the hands of the people and their representatives. I’m planning to testify, and here’s the gist of what I’ll be saying.

This constitutional amendment will create long-term harm to services needed by businesses, communities and families. Public investments in education, health care, workforce development, transportation and services for seniors and people with disabilities help build our state’s infrastructure and quality of life. Under this amendment, the legislature and governor will be powerless to maintain adequate funding for these services and invest in the future needs of our state. As a result, this amendment will make it harder to give businesses the tools they need to prosper, and limit opportunities for our families and workers.

This constitutional amendment tears down the foundations of our representative democracy. Minnesota has a proud tradition of strong civic engagement. Our elected representatives must constantly weigh public expectations for things such as a quality educational system, uncongested roads and safe and healthy communities, against concerns about the level of taxation. This amendment would hand this essential decision over to a formula instead of permitting a meaningful public debate to decide the appropriate balance.

This constitutional amendment undermines accountability. A representative system of government delegates authority to make the tough decisions, so they are clearly accountable for budget decisions. Under this constitutional amendment, lines of accountability are  stripped away. The constitutional amendment forfeits the authority to determine the size of the budget to a formula, making it difficult to identify who should be held responsible for the outcomes of budget decisions.

This constitutional amendment is unnecessary. Governor Pawlenty has described his success in slowing government spending to just over 2 percent a year and cutting spending for the first time in the state’s history. That demonstrates that this amendment is not necessary: the Governor has achieved his desired outcome without this amendment. It is not appropriate, however, to require all future governors and legislatures to achieve a similar result, regardless of what the desires of the public or the state’s needs may be.

Similar proposals have been defeated throughout the country. Since 2004, there have been serious efforts to enact strict spending and revenue limits based on rigid, arbitrary formulas in 25 states — and they have failed every time. These measures are modeled after Colorado’s so-called “Taxpayer Bill of Rights,” or TABOR. Colorado, the only state ever to adopt TABOR, suffered a serious deterioration in education, health care, and other services due to its rigid spending limits. That’s why a broad coalition of residents — including business leaders — came together to suspend it in 2005.

As Minnesota emerges from the current economic crisis, it will need the flexibility to make much-needed investments in education, health care, roads and bridges, and other areas. If adopted, the TABOR-like limits in the proposed constitutional amendment would prevent our state from making those investments, and leave it without the skilled workforce and solid infrastructure needed to prosper. The bottom line is that it’s never a good time to adopt rigid, arbitrary limits on our budget.

-Nan Madden

Pawlenty proposes legacy which undermines public debate on the budget

November 5, 2009

This morning, Governor Pawlenty announced a proposed constitutional amendment to limit state spending to the amount of revenues that were brought in the door during the previous two-year budget cycle. This proposal would limit the flexibility of policymakers to respond to changing circumstances and maintain funding for such areas as schools, health care and services that help the unemployed get back to work. And it also reacts to a non-issue in Minnesota – there is no taxpayer revolt or out-of-control spending in our state.

The exact language the Governor proposes: “Shall the Minnesota Constitution be amended to require that state government general fund expenditures be limited to the amount of actual general fund revenues received by the state in the previous two-year budget period?”

Governor Pawlenty immediately made clear that his proposal isn’t the Taxpayer’s Bill of Rights (TABOR), a tax and expenditure limiting proposal that has been circulating around the country. He’s right…it actually appears to be more strict in some ways. Tax and spending amendments like TABOR usually allow government expenditures to increase by some formula (usually inflation and population growth). Governor Pawlenty’s proposal wouldn’t allow any increase in spending until two years after the revenues increase. No increases. We collect $31 billion in FY 2010-11…we can only spend $31 billion in FY 2012-13.

What are the practical implications of his proposed amendment? Right now we are facing at least a $4 billion deficit for FY 2012-13. That assumes the state will be collecting a projected $34 billion in revenues in FY 2012-13. If the Governor’s constitutional amendment were in place, the state would only be allowed to the amount of revenues we collected in FY 2010-11 – about $31 billion. That would add an extra $3 billion to the $4 billion deficit – and suddenly policymakers would be forced to cut $7 billion from the state’s budget. $7 billion in budget cuts. On top of the painful cuts to services for the disabled, higher education, and health care that we saw in 2009. Policymakers would have to leave that extra $3 billion just sitting on the table until the FY 2014-15 biennium. Even if policymakers chose to raise revenues as part of a balanced approach to the budget shortfall, they would not be able to spend it until FY 2014-15.

Bottom line…this is a bad idea. The balance of revenues and expenditures in our state should not be rigidly set by the constitution because the economy, the population and other important aspects of our state are continually changing. Instead, Minnesota’s elected representatives must bear the responsibility of adjusting the balance of revenues and expenditures in response to an informed and public debate. A constitutionally-determined budget limit severely limits that debate and takes away the flexibility of future legislatures or local government officials to carry out their responsibility to react to unexpected circumstances and changing conditions and for the public to participate in the budgeting process. It is interesting the Governor is recommending this course just as he prepares to leave office – he would not have to govern under its arcane restrictions.

Budget expenditure limits aren’t even popular anymore. The Governor says this isn’t TABOR, but it sure is TABOR-like. Colorado was the first to adopt TABOR back in 1992. It has also been the last state (plus, Colorado voters acted to lessen its restrictions in 2005). Tax and spending limit ballot initiatives were just rejected on Tuesday in both Maine (60 percent opposed it) and Washington (55 percent opposed it). So far, serious efforts to pass similar initiatives have failed in 20 states. Growth & Justice just posted a blog on the failure of TABOR.

And its unlikely to be popular with Minnesotans. In fact, Minnesota voters have recently demonstrated that they support tax increases when they are needed – note the recent successes just this week of school referenda.

Although the Governor may be proposing this amendment, in Minnesota, he actually plays no role in amending the state’s constitution. The only path to the ballot is through the legislature. A constitutional amendment must be approved by both bodies of the legislature, just like any other session law. The Governor, however, does not need to sign it and cannot veto it. Once it has been passed by the legislature, it is placed on the ballot during the next general election. In order to succeed, a constitutional amendment must be approved by a majority of those voting in the election (not just a majority of those who vote on the amendment).

We developed materials about tax and spending limit proposals when this issue first came up in Minnesota in 2006 and the Center on Budget and Policy Priorities also has helpful resources.

-Christina Wessel

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