Minnesota Governor Tim Pawlenty was in Iowa this weekend to headline an event organized by Iowans for Tax Relief. The crowd cheered the future presidential candidate after Pawlenty blasted the Obama administration and proposed one bad idea after another.
Pawlenty's "economic bill of rights" includes requiring Congress to balance the budget every year. Freezing or reducing federal spending every time revenue drops is great if you like turning recessions into depressions, but basic economic facts won't stop Pawlenty from pandering to the "Party of Hoover" set. I wonder whether Pawlenty's proposed balanced budget amendment still includes "exceptions for war, natural disasters and other emergencies."
Pawlenty also wants line-item veto powers for the president. The U.S. Supreme Court has already ruled that unconstitutional at the federal level, and it's unlikely Congress would ever approve a constitutional amendment on this matter.
In addition, Pawlenty favors extending the Bush tax cuts for the wealthiest Americans. Those tax cuts didn't prevent the most severe economic recession since World War II, but they did manage to massively increase our national debt and deficit while delivering most of the benefits to the top few percent of the population.
But wait, there's more to Pawlenty's wish list: "He also called for requiring a supermajority of Congress to raise taxes or the debt ceiling." Unfortunately, that would exacerbate our budget problems. When the Pew Center on the States examined state fiscal problems last year, a common feature of the states deemed "most like California" was a supermajority requirement for tax increases or budget decisions.
Speaking to the Iowans for Tax Relief crowd, Pawlenty bragged about getting Minnesota out of the top 10 states for taxes but glossed over other aspects of his record as governor. Iowa Republicans have hammered Democrats for supposedly "overspending," even though our state leaders have kept our budget balanced without depleting our state's reserve accounts. What would they say if they knew about Pawlenty's record?
During Pawlenty's first year as governor, the state drew down its reserves and relied too heavily on one-time revenue to address its budget problem. As a result, the state lost its Aaa bond rating from Moody's Investors Service; the state has yet to regain its Aaa rating from Moody's.
The 2009 report of the bi-partisan Minnesota Budget Trends Study Commission has recommended that the state build up its budget reserves and cash flow account in response to an increasingly unstable revenue outlook. All members of the Commission, including the five appointed by Governor Pawlenty, endorsed this recommendation.
Pawlenty and state legislators couldn't agree on an approach to balance the Minnesota budget. As a result, last year "Minnesota's [projected] budget gap was the largest in the nation on a per capita basis." Pawlenty can bash President Obama, but his state desperately needed the roughly $2.6 billion it received through the federal stimulus bill to help cover the shortfall. Even with the stimulus money, Minnesota was still billions of dollars short. So, in addition to some spending cuts, Pawlenty proposed "a bond issue that would be paid for by existing and forecast revenues from the tobacco settlement—a one-time fix disliked by some because it aimed to use long-term borrowing to pay for current state operations."
To be clear: Pawlenty wanted the state of Minnesota to borrow money to pay its bills. In contrast, Iowa's state borrowing program (I-JOBS) is funding capital investments in infrastructure. Last summer, Iowans for Tax Relief in effect ran the Republican campaign for a special election in Iowa House district 90. During that campaign, the Republican candidate made false and misleading claims about Iowa's state budget and borrowing. How ironic that the Iowans for Tax Relief crowd gave a standing ovation to a panderer with a much worse record of fiscal management.
Not only did Pawlenty want Minnesota to borrow money to pay its bills, he also decided that underfunding local governments and forcing them to draw down their own reserves was a good way to control spending for the 2010-2011 budget period. Yes, Pawlenty decided in 2009 that cutting aid to local governments by hundreds of millions of dollars was a good way to balance the state budget:
“Many [cities], if not all, have reserve funds, or rainy day funds, and they should use them,” Pawlenty said.
He also talked of the option cities have of raising property taxes to make up for any LGA [local government aid] cuts.
One of the Republican talking points against Iowa Governor Chet Culver is that his midyear budget cuts supposedly forced local governments to raise property taxes. Yet Pawlenty gets a free pass from his Iowa friends. Culver's across-the-board budget cut last October wasn't popular, but it did keep state government from overspending. In contrast, late last year Minnesota's cash flow was so poor that state officials considered short-term borrowing to meet budget obligations.
"It's a bad sign," said former state Finance Commissioner Peggy Ingison, now chief financial officer with Minneapolis public schools. "It signals you didn't have good fiscal discipline."
Minnesota has muddled through without borrowing money to pay bills so far, but prospects for later this year are dicey:
State budget officials updated lawmakers [April 12] on Minnesota's precarious cash-flow situation. They all but ruled out short-term borrowing for the 2010 budget year that ends June 30.
Budget director Jim Schowalter says "deep cash problems" loom for the 2011 fiscal year. Barring law changes, spending cuts and upticks in revenue, he says the state might have to take out short-term loans to meet its obligations.
The Minnesota Budget Bites blog takes a more detailed look at the state's "troublesome" picture for fiscal year 2011. BulliedPulpit posted a good rebuttal of "TPawnomics" at MN Progressive Project. The last thing our country needs is budget advice from Tim Pawlenty.