January 14, 2009: Legislative Report #5
Budget Trends Report
Kevin Goodno and Jay Kiedrowski, co-chairs of the 2009 Budget Trends Study Commission, presented their report on Tuesday morning January 13, 2009 10:30 AM at the House hearing room 200. Ann Lenczewski (DFL) 40-B chaired the joint meeting of House Taxes and Finance committees. Tax revenue volatility, demographics, and spending trends were the three subjects of interest to Nick and me during the meeting.
VOLATILITY
Tax revenue volatility continues to become a greater issue in the state for decades to come. As national economic boom and bust cycles continue ever larger, longer and more frequently, Minnesota leadership must plan state spending with the expectation of revenue interruptions. Minnesota cannot maintain a steady stream of ever-growing income to Minnesota coffers. Thus, the state leadership must make hard choices to plan for hard times by cutting expectations of state generosity, cutting increased spending, and prepare to ride out the predictable down cycles over time.
DEMOGRAPHICS
Demographics are a large part of Minnesota’s future economic troubles. Minnesota cannot maintain the existing state promises, and commitments to recipients of state revenue. Over time, the aging population, demographic shifts, fluctuation of property values, diminished revenue from current sources are some events affecting state revenue receipts.
SPENDING TRENDS
Spending trends such as; habits, purchasing sources (like the internet over local retail locations), purchasing lower cost products, and cutting back on purchases in general, all contribute to lower state revenue. The Study Trends Commission proposed some concepts such as extending sales tax to food, clothing, the internet, labor, and medical services.
Three examples are:
- You visit Cub Foods and purchase $175.00 of groceries a week for your family. The annual increase to your food budget through a sales tax is $591.76.
- Someone takes you to court for some event and your legal fees are $4,225.00, a sales tax of $274.63 increases the bill.
- You are injured and need emergency care. The bill comes to $13,500.00. Your out of pocket additional sales tax cost is $877.50.
Some comments expressed by the legislative members occurred about short-term federal support for Minnesota’s budget shortfalls. The legislative members seemed relieved the federal government is intending to rescue our state from the pains of mismanagement that has brought Minnesota short over $5,000,000,000.00.
My perspective is the state Legislature must recognize the reduction in personal recourses of the citizens, in real dollars. Reduce state spending to reflect real world private economics. Live within the revenue afforded by “We the People”. Expanding revenue streams only provides the state a false sense of receipts and thus state spending increases accordingly.