Thursday, May 03, 2007

Here's your chance to balance the budget

Well, the Minnesota budget, that is.

Minnesota Public Radio has a semi-nifty interactive feature that lets you decide priorities, taxes and spending for the state. Even if you're not from Minnesota, it's still an educational exercise.

This biennium the job is made easier by the state's projected $2 billion surplus. You're making decisions on whether to increase spending or cut taxes, not making tough calls about where to cut back.

There are a few drawbacks that make it less than satisfying. First, you only have certain choices for how much to spend on each item. For instance, you're given a choice between sticking $50 million in reserves or $700 million -- nothing in between. And the particular programs funded at each spending level is decided for you, so you don't get to choose your priorities as specifically as I would like. For instance, if you want to increase the number of public defenders, you also have to increase judicial salaries.

With those caveats, here's how my budget ended up. All numbers reflect changes from current spending, not totals.

It turns out I'm something of a tax-and-spend kind of guy. I used up the surplus and added another $465 million in income tax increases. But that's somewhat misleading. It's mostly because I chose to greatly increase budget reserves. Had I not done that, I would have avoided raising taxes and been left with a $300 million surplus.

E-12 education: Mostly unchanged. $38 million extra to help poor families send their kids to pre-school. Not only is this good for the kids, it's essentially subsidized day care for working families.

Health and human services: $300 million to provide health insurance coverage to most of the state's uninsured kids and low-income adults, as well as giving small businesses a break on insurance costs. COLA increases for nursing homes, and $48 million to child welfare programs.

Tax relief: $300 million to restore Pawlenty's cuts in local government aid. No direct property tax relief or rebates. The Jesse Checks drew down our rainy-day funds and led directly to the budget crunches of recent years. I have no desire to repeat that.

Higher education: $155 million to the University of Minnesota for merit pay and research, $125 million to community colleges (which offer a more affordable education to a larger swath of students) and a minor $25 million to student aid to help offset expected tuition increases.

Debt, state agencies and veterans: $200 million to provide COLA increases for state workers.

Agriculture and the environment: I dislike agricultural subsidies, but this didn't let me slash those. I boosted spending by $200 million to fund the Clean Water Legacy, a 10-year effort to clean up polluted waters.

Jobs, housing and the arts: No increase.

Transportation: $65 million more to the Highway Trust Fund. No more trying to build critical infrastructure on the cheap as Pawlenty has attempted -- and failed.

Prisons: $100 million for maintenance, COLA raises and rehabilitaton programs for prisoners.

Courts and public defenders: $120 million boost. I mostly wanted to increase funding for public defenders, a critical shortcoming in our legal system. To do that I also had to increase judicial pay.

Budget reserves: Socked away $700 million to get the reserves up to where they belong: 5 percent of the two-year budget.

Personal income taxes: Raised the top personal income tax rate from 7.85 percent to 8.5 percent, generating an extra $465 million. I could have left taxes alone and settled for a smaller contribution to the budget reserves. But I chose this option for two reasons: It merely returns tax rates to where they were in 1998, and the additional burden is very small: $90 a year for a single taxpayer earning $100,000.

Corporate income taxes: No change. Not needed.

Sales and sin taxes: No change. Not needed, and these taxes are regressive.

So while I spent the surplus and then some, what did I spend it on? Budget reserves, local government aid, prisons/courts, the environment, higher education and health coverage for the vulnerable. All appropriate places for government spending, IMO. This was because I saw an opportunity to make investments that will pay off in the long term. If I had not chosen that route, it would have been easy to balance the budget and provide a tax cut while still improving services in key areas. I would have been fine with that outcome.

Beyond the raw numbers, the exercise is useful in making you think about the tradeoffs between taxes and services. But it also assumes our tax money is being spent efficiently and wisely. That's not always a safe assumption.

Once you complete the budget, you can compare your budget to others'. I was in the mainstream in most of my choices. The exceptions were:

I spent more than most: health care, local government aid, paying state workers, environment, public safety, budget reserves.

I spent less than most: K-12 education, property tax relief, jobs/housing/arts.

The most interesting stat: More than 80 percent of participants agree that rebates are bad idea.

Give it a try and let me know how you make out.

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Blogger Dyre42 said...

That was interesting. I agree with you that it sucks not being able to save between 50 mill and 700 mill.

K-12 Education +$520 million
Pre-school +$200 million
Health Care +$30 million
University of Minnesota +$155 million
MnSCU +$125 million
Ag & the Environment +$85 million
Courts & Defenders +$100 million
Budget Reserves $50 million

I still had over 110 million left

If I'd had the option I'd have set pre school at +100 million and would have banked the difference so about 260 million would have gone into the budget reserves.

The overall idea was to promote job growth, offset some tax increases by sales tax decrease,increase education funding so that an educated workforce was available to new companies moving to the state, and that pre-school provided day care to the middle and lower class thereby further offsetting sin taxes while allowing those failies to get ahead by banking the money saved, buying a house sooner, etc etc.

5/04/2007 12:51 AM  
Blogger Sean Aqui said...

I figured any surplus went to the reserves, so had I not raised taxes I would have counted it as putting about $300 million in reserves.

I like your options and philosophy, except I didn't find the job-growth options compelling. And there are questions about just how much government can do in that regard anyway.

5/04/2007 7:44 AM  
Blogger Dyre42 said...

I'm curious though does Minnesota tax food but not clothes?

5/05/2007 1:57 AM  
Blogger Dyre42 said...

I admit that the corporate tax decrease was an experiment. Theoretically one wants those taxes to be in the median rather than the upper third. Of course since I don't live in the area it was kind of like playing a state version of Sim City.

A more flexible tool modeling Texas' budget would be interesting given the 17% food insecurity rate, 2nd worst schools in the nation, the high no. of ESL students, water quantity/quality issues, corruption, organized crime (gangs and Mexican Mafia), low health care coverage rates, and border insecurity. It'd be a much more difficult budget to manage.

5/05/2007 2:12 AM  
Anonymous Jon said...

Thanks for fully funding Clean Water Legacy; it's a shame that the legislature didn't follow your lead.

5/07/2007 11:15 AM  
Blogger Sean Aqui said...

Dyre: No tax on food or clothing in Minnesota.

I agree that this would be a much more interesting exercise in a state like Texas or California or even Mississippi.

Jon: Agreed. Although it *is* a lot of money. Well worth it, but I can understand why other, louder voices didn't want their oxen gored to pay for it.

5/07/2007 11:50 AM  

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