Testimony on Spending Limit Amendment (House File 1612)
Testimony: House File 1612
Nan Madden, Minnesota Budget Project Director
Prepared for House Ways & Means Committee, May 4, 2011
The Minnesota Budget Project is an initiative of the Minnesota Council of Nonprofits. We provide independent research, analysis and advocacy on budget and tax issues.
I’d like to express our strong opposition to House File 1612, which would do real damage to the state’s economic future and limit flexibility in responding to changing demographics and needs.
The worst national recession of a lifetime and its aftermath has taken a toll on Minnesota. As in states across the nation, Minnesota suffered a collapse in state revenues and we face a challenge of how we meet our needs and invest in our future.
This proposal would ensure that, after an economic downturn, Minnesota would fall behind other states in the recovery. Under this amendment, even though the economy would improve, Minnesota would not be able to take advantage of the resulting increase in state revenues. Minnesota would not be able to invest in the building blocks of a strong economy, like a quality workforce, infrastructure, and safe and healthy communities.
Instead, we’d lock in the impact of the recession for another two years, and fall behind other states. Instead of getting Minnesotans back to work, we’d make it harder for them to access education and training to get into new jobs.
If this amendment were in place today, our budget challenge would be more severe. Based on our reading of the bill, Minnesota would have $2.2 billion of revenues in this biennium that we could not use to meet our needs – the only allowed use would be to pay back the school funding shift. This measure would make tough times tougher.
There is no need for this amendment. This body has passed a budget that makes deep cuts in spending and does not raise taxes. You did not need a constitutional amendment to convince you to take that stand.
We want efficient and effective government that is responsive to changing economic conditions and the needs of citizens. This measure would limit options when flexibility is needed most, and would likely result in greater use of accounting gimmicks and cost shifting to cities, counties and school districts to get around the amendment’s limits.
This proposal erodes transparency and accountability. It takes the decision about the size of government away from elected officials and turns it over to a rigid amendment. It makes it more difficult to hold elected officials accountable for their actions.
This measure could lead to a downgrading of the state’s credit rating, and result in higher costs for infrastructure projects. Increasingly, credit rating agencies are paying close attention to restrictions, restraints and arbitrary limits on state’s fiscal flexibility.
Colorado is the unfortunate poster child for this kind of policy. Their TABOR has some structural differences from House File 1612, but they are both constitutionally mandated strict limits that will likely produce similar disinvestments and unintended consequences.
After more than a decade of TABOR, Colorado fell far behind in investing in its future workforce. Because of the strict spending limits in their constitution, Colorado fell to 49th in its spending on K-12 education, had the lowest teacher salaries in the nation, and fell to 48th in state funding for higher education (measured as a share of personal income).
TABOR did not bring about the economic success its proponents promised. In the 2001 recession, Colorado lost more jobs than nearly all other states and faced one of the largest budget deficits. And their infrastructure also took a beating. This is why in 2005, a broad bipartisan coalition of Coloradans, including business leaders and their Republican former Governor Bill Owens, supported a time out from TABOR.
Combine this proposal with the supermajority for tax increases amendment, and we would take two big steps towards California, a state that has become practically ungovernable and that teeters on the brink of default. And the result in California has been a flood of even more constitutional amendments, as voters become frustrated with the state’s lack of investment in schools and other priority issues and policymakers struggle to govern under conflicting constitutional requirements.
Minnesota needs to made wise budget decisions. But turning crucial decisions over to a rigid amendment will not help us make those decisions. Please oppose House File 1612.
