Commentary; Posted: 2/12/03

Answers to budget questions

Rep. Ray Vandeveer
Guest Columnist

There have been many questions about Minnesotaís budget deficit, its causes, and what can be done about it. Here are a few questions and answers about what is ahead for Minnesota taxpayers.

Q: What is a budget deficit and how is it determined

Twice each year, the Department of Finance gives lawmakers their prediction on how incoming tax payments line up with the stateís spending obligations.

Most recently, forecasters predicted that Minnesota would be more than $4 billion short of projections by 2005, if we continue current spending and income levels. In addition $356 million of this must be cut from the state spending before the end of this fiscal year in June.

Q: What caused this shortfall?

The economic slowdown due to the terrorist attacks is a big factor in the reversal. Investors, families and businesses were cautious about their spending, the stock market plummeted, and many people lost their jobs.

Nevertheless, revenue to the state in the next two years is expected to be up 6 percent over the previous two. Built-in spending, however, is projected to grow by 14 percent. For almost 10 years state government was flush with cash, and in many cases expanded spending to match. In that time period, Minnesotaís budget has almost doubled.

Q: Is this huge deficit unique to Minnesota?

It is estimated that states face a combined $60 billion in deficits for the next two years. Many states have already raised taxes or cut spending to balance their budgets.

Minnesota was fortunate to have had one of the largest reserve balances in the nation. Unfortunately, most of those reserves were used last year, to delay making hard choices until after the 2002 elections.

Q: What options are being considered?

The Governor has put forth a plan that solves the immediate deficit by permanently cutting spending in some areas and adding some one-time spending cuts that will only affect the remainder of this year.

The combination provides a $136 million reserve that acts like a ìbudget cushionî until the end of June, and the permanent budget reductions will carry over to help reduce the remaining $4.1 billion deficit for 2004-2005.

The House adopted a similar proposal and will try to reach agreement with the Senate. If we can not agree, the Governor will most probably make the cuts unilaterally (a process known as unallotment).

Q: How will it be determined where the larger cuts will come from?

In order to make the significant reductions in spending and expectations, we need to completely redefine state governmentís core functions and then prioritize spending in those areas.

Q: Will budget cuts affect my family?

House lawmakers remain committed to protecting K-12 classrooms, nursing homes and our most vulnerable citizens, while balancing the budget-without increasing taxes on hard working Minnesotans. Minnesota taxpayers are consistently at the top of any state tax comparison, and higher taxes could actually fuel more job losses.

If you have ideas that will save the state money or will improve the function of government, feel free to email me at rep.ray.Vandeveer@house.mn or send a message to House leadership through our website at www.house.mn/gop .

Writer Ray Vandeveer serves House District 52A which includes the Forest Lake, Centerville, Hugo, Columbus, Linwood and Scandia areas. He lives in Forest Lake.

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