State's budget woes point to need for long-term reform
Gov. Pawlenty's administration recently reported that, beginning next spring, the state may be forced to borrow money to pay ongoing bills. This is because of lower-than-expected revenue collections.
This news comes on the heels of word that the administration will delay corporate refunds to 461 companies and sales tax refunds of up to 400 businesses until the end of the year. This was the second such delay in six months -- again stemming from the state's poor cash flow situation.
As you can imagine, many Minnesota businesses have concerns about cash flow, too. Most can ill-afford delays in refunds that they were banking on to pay their own bills. It's a tribute to their sense of civic duty that the response to this has been fairly muted. However, it's a stretch for the administration to repeatedly hold out paying refunds simply because it's easy to delay cutting a check. If anything, in the interest of stimulating the economy, Minnesota businesses ought to be getting repaid sooner.
At this point, Tom Hanson, the governor's commissioner in charge of the budget, doesn't know the full extent of the expected borrowing. He pointed out that revenue collections are already running $223 million lower than projections.
Borrowing money to pay ongoing bills makes the state's budget situation even worse. Servicing the debt on that borrowing adds to the state's expenditures. It also puts Minnesota's favorable credit rating in jeopardy, which would mean higher interest payments for those things that we should be investing in, like infrastructure.
In the real world, no one would recommend that a family put everyday expenses on a credit card. (Some do it anyway, and at their financial peril.) It's a really bad sign when a state government does it.
This situation is another in a growing list of symptoms of a state budget that is structurally unbalanced. For the sake of Minnesota's long-term viability, it is imperative that both the governor and the Legislature work out a sustainable budget solution that enshrines a simple, yet vital concept: You can't spend more than you take in.
For the last few years, this has been accomplished by the use of budget shifts, delayed payments, shifting financial burdens to other levels of government, and unallotment with vague promises to repay. In truth, that's not real balance -- it's sweeping problems under the rug.
Arriving at a true and honest budget will take hard decisions. Last year, the Legislature took a shot at it in the form of a balanced budget bill that made substantial cuts and raised some revenue in a responsible and straightforward manner. This was vetoed amidst a partisan firestorm that ill-served both political parties.
It's time -- long past time, actually -- to set aside political differences to do right by the citizens of Minnesota. With a divided state government, the sacrifice, compromise, and agreement that will need to happen can't come from just one side of the aisle. It's time to work together and solve this, the biggest financial crisis in our lifetimes.