Republican leaders in the State Legislature held a “birthday party” for Governor Dayton’s budget proposal, which was unveiled one month ago today. It was a full-fledged extravaganza with cupcakes and candles and gift-wrapped talking points aplenty.
Of course, their GOP’s own budget proposal for the biennium is still in the womb with an unknown due date. But one thing is clear: they don’t think taxes should be raised at all to close the state’s projected $1.095 billion deficit for 2014-15.
So let’s take a look at a couple very basic scenarios of what an “all-cuts” solution to the budget deficit could mean.
Each of these scenarios essentially looks at across-the-board cuts (it’s unlikely that an actual GOP proposal would work this way, but we’re just trying to illustrate some of the potential impacts). Keep in mind as you’re looking at these options that the baseline budget for the state does not include inflation, so you can add an additional $890 million to the cuts — effectively meaning that an “all-cuts” approach would cut nearly $2 billion in real spending from the budget.
The first scenario would hold K-12 education harmless from the budget cuts. Choosing this option would require an across-the-board cut of 5.5% to the other areas of the budget in order to achieve $1.1 billion in savings. Holding K-12 harmless under this option could take two forms. Either you could leave K-12 untouched (no cuts and no school shift payback) or you could play an accounting shell game and cut funding by 5% and apply that to the shift balance (and $824 million cut/shift payback).
The second scenario (as suggested by a commenter here) would apply a 5% cut across-the-board and use any excess balance to pay back part of the school shift. Such a scenario, would generate a $667 million shift payback, but the 5% cut to K-12 would be larger than the shift payback, resulting in a net $92 million cut to K-12.
Certainly, either option would continue squeezing some waste and inefficiency out of state government, but it would also have very real other impacts. Cuts of this magnitude in Health and Human Services would limit the ability of those programs to service folks in need. Cuts of this magnitude to higher education is going to make college less affordable for students. Cuts of this magnitude to public safety are going to result in layoffs in our corrections and court systems. Cuts in aid to local governments are going to put further pressure on property taxes. Efforts to stop invasive aquatic species would be placed at risk. Programs to encourage new business start-ups would be weakened.
There are plenty of things that could be reasonably objected to in the Dayton budget. But there’s plenty of reasonable objections to an “all-cuts” approach, too. The GOP leadership owes it to the state to put their choices on the table and let us see what their priorities are.
[Image courtesy All About Cupcakes]
During his State of the State address a couple of weeks ago, Governor Mark Dayton asked for critics of his budget plan to come up with their own “Plan C” (Plan A being the Governor’s budget, and Plan B being a spending-cut only response to the projected $1.095 billion deficit).
So, I’ve taken a shot at it — call it the Brick City Budget. (The StarTribune did as well.) These are the things I tried to do:
- Minimize middle-class impacts as it relates to sales tax changes
- Make a meaningful payment towards the remaining K-12 school funding shifts
- Minimize negative impacts that come with expansion of sales taxes to B2B services
|Income Tax 4th bracket||1,098.8||1,098.8|
|Property tax refund||(1,438.6)||–|
|Business sales tax||3,200.0||782.3|
|Consumer sales tax||1,060.0||1,116.8|
|Sales tax rate reduction||(2,137.5)||(649.6)|
|Rental car tax||15.0||15.0|
|Net corp income tax changes||4.9||4.9|
|Other revenue changes||(38.8)||(38.8)|
|Income tax cut||–||(650.0)|
|$ in millions; amounts represent change from the November 2012 forecast|
There are some significant changes to the Governor’s proposal. Let’s take them one-by-one.
First, I remove entirely the $500 per homeowner property tax relief the Governor proposed. While I applaud the Governor’s instincts and recognition of escalating property taxes as an issue, this is not an efficient way to address the problem and it leaves our overly complex property tax system untouched.
Second, I change the new base sales tax rate from 6.85% to 6.25% instead of 5.5%. This was done to facilitate some of the other changes listed below.
Third, I remove most of the Governor’s proposed business service sales tax expansion. The remaining categories being taxed (management & other consulting, business support services, office administrative services, specialized deign services, and facilities support among them) are less likely to put Minnesota businesses at a disadvantage compared to competing firms as well as being less likely to disadvantage small businesses versus large businesses. The new revenue raise by this tax is less than a quarter of the Governor’s proposal, and covers a smaller range of B2B services than similar business sales tax expansion proposals from the Republican governors of Ohio, Nebraska, and Louisiana.
Fourth, I keep clothing exempt from sales tax.
Fifth, I remove the so-called “snowbird” tax that would be levied on gains from stocks and bonds and dividends earned by people who reside in Minnesota for less than half of the year.
Sixth, I would change the composition of Dayton’s increase in “sin taxes”. Dayton’s increases are solely in cigarettes and tobacco — I would add an increase in Minnesota’s liquor excise tax of $75 million and reduce the increase in cigarettes and tobacco.
Finally, I would offer $650 million in income tax relief to be implemented through cuts in the rates of the lowest two tax brackets. This would primarily be designed to help offset the impacts of the sales tax expansion for lower- and middle-income tax payers, although all taxpayers would benefit from this change as tax rates on a married couple’s first $135,000 in income would be cut by this proposal.
In total, the Brick City Budget would net about $114 million less than Gov. Dayton’s proposal.
|Property Tax Aid & Credit||117.1||60.0|
|Environment & Energy||17.6||7.5|
|$ in millions; amounts represent change from the November 2012 forecast|
On the spending side of the ledger, the major change is in K-12 education. Instead of increasing the basic formula rate $52 per pupil at an expense of $119 million for the biennium, I instead pay back $275 million of the outstanding $1.1 billion school shift, while keeping the Governor’s investments in optional all-day kindergarten and increased funding for special education and early childhood programs. While some school officials rightly point out that the basic formula rate has lagged inflation for the last decade, political realities dictate that the state needs to make some headway on getting the shift behind it in a reasonable timeframe.
Most other categories of the budget see reductions from the Dayton proposal — in fact, excluding K-12, spending in my proposal is $200 million lower than Dayton’s, while still making significant investments in critical areas. While investments in local government aid are less than half of the governor’s proposed levels, a $60 million increase should help relieve some pressure in local budgets. Meanwhile, the $50 million reduction in higher education could be expected to come largely out of the University of Minnesota’s budget, pending completion of the review of their administrative staffing and expenses.
This Brick City “Plan C” is an attempt to rectify some of the weaknesses of the Dayton budget proposal. Like any budget, it involves significant tradeoffs, and not all of the options available are good ones and all are open to debate. What do you think? Leave your comments below.
(The figures above represent my best attempt to calculate what the numbers would be, which is not always straightforward. Any errors, as such, are inadvertent.)
Governor Dayton’s budget proposal has a lot of moving pieces. Let’s look at the components of the plan, and see whether they make sense or not.
GOOD: This is an honest budget, with a minimum of gimmicks
Whether you approve of Dayton’s proposals or not, the Governor did live up to his word of eschewing the sorts of budgetary gimmicks, shifts, and one-time maneuvers of recent state budgets. Dayton has paid for his spending priorities through increased taxes instead of using other dubious means to avoid making the hard decisions. The only questionable tactic here is his decision not to pay back any of the remaining $1.1 billion in K-12 shifts from the previous two budgets in the 2014-15 biennium (Dayton does propose repaying the remaining portion of the shift in the 2016-17 biennium). Such a payback is not required, but most observers were expecting at least a partial payment in 2014-15, and failure to address this issue has been one of the key components of Republican criticism of the bill so far.
BAD: Adding a sales tax on clothing items over $100
Dayton’s proposal would apply sales tax to the value of an individual clothing item over $100. This proposal makes a lot of sense from a pure economic perspective. 45 other states and the District of Columbia have some form of sales tax on clothing. Much of the rhetoric from opponents has been a bit overheated (like the notion that you can’t buy a decent winter coat for under $100). The political reality, though, is that this particular exemption is very popular and a key driver of tourism for the Mall of America. DFLers would be wise not spend political capital on trying to push this through.
GOOD: Expansion of the sales tax to many consumer services and a lowering of the sales tax rate to 5.5%
Expansion of the sales tax to cover many consumer services makes good economic sense in a lot of ways. It reflects the reality that our economy has fundamentally changed. Consumer spending on services is now larger than that on goods, and is spending on services is projected to continue to grow. As purchases of goods continue to shrink, the sales tax collected will continue to shrink. Not expanding the sales tax base to include services inevitably means either increases in the sales tax rate on goods or continuing reductions in government spending. Broadening the base to capture services should also mean less volatility in sales tax receipts going forward. Spending on big-ticket goods like furniture tends to decline noticeably during recessions, but people still need to get their haircut. This should help avoid major budget deficits like we’ve seen in recent cycles. Finally, taxing services as well as goods makes sense from a fairness perspective. Take the basic example of getting a movie to watch in your home. If you visit a Redbox or order a pay-per-view movie from a cable provider, you will pay sales tax on the transaction today, but you won’t if you order pay-per-view from a satellite provider. Dayton’s proposal would make all of these transactions taxable at 5.5%. The end result of these changes may mean that most families would end up paying the same amount in sales taxes on their consumer purchases as they did before, as a result of the rate being reduced by 20%.
BAD: Expansion of the sales tax to many business-to-business services
This is where Dayton’s claims about the sales tax reform not increasing the amount of money spent by consumers get tricky. The net impact of the sales tax reform is an increase of about $2.1 billion in revenue to the state. If consumers aren’t paying it, then who is? Businesses, via business-to-business (B2B) services, such as legal, accounting, and advertising. There are several problems with moving to tax these sorts of services, but let’s talk about a couple of the most prominent. The first problem is known as “tax pyramiding”. This means that the additional sales taxes paid by businesses will be passed along to consumers. For instance, groceries are still exempt from sales taxes under the Dayton proposal. However, if a grocery store pays sales tax on work it does with an advertising agency, those costs will go into the store’s overhead and be passed along to consumers through higher prices. This means that consumers will effectively be paying sales taxes on groceries even though there’s no sales tax charged at the final register. The second problem is that many states don’t tax such B2B services. With an increasing ability to outsource many business services outside the state, such a move does put local businesses at some risk of being at a competitive disadvantage. While there are reasonable arguments to be made in favor of taxing B2B services (such as the potential for distortion of activity and labor markets, the fact that businesses already pay sales taxes on many of their goods purchased, and the potential for tax evasion), we should be cautious not to overstep here. Consumers will likely end up footing a very real portion of that $2.1 billion in increase sales tax revenue. It is not realistic to expect businesses will eat that additional expense.
GOOD: Restoration of the renter’s tax credit
Dayton’s budget restores full funding of the renter’s tax credit (cut as part of last session’s budget deal). This is a big win for low- and middle-income folks who don’t own their own home.
IN-BETWEEN: Property tax relief
Dayton made good on his pledge to help homeowners deal with rapidly growing property tax bills. The problem here is that the solution, a $500 rebate, is a decidedly imperfect way to go about it. Minnesota has the most complex property tax system in the country, and the guts of the system were left unchanged. Minnesotans deserve more coherent property tax reform instead of just slapping on a rebate to paper over some of the problems.
What are your thoughts? Share them in the comments below.
[Edit made 11 a.m. 1/25 to clarify wording on the school shift]
This morning, Governor Mark Dayton released his long-awaited 2014-15 budget proposal. And, true to his word, there’s a lot to chew on here. Dayton’s proposal contains fundamental tax reform and some new spending initiatives that are sure to raise some eyebrows. In this post, we’ll summarize the proposal. In the coming days, we’ll get into more detail on the merits and problems with specific elements of the plan.
The November economic forecast from Minnesota Management and Budget projected $35.8 billion in revenue and $36.9 billion in expenses under current law for the 2014-15 biennium. Dayton’s proposal wipes out that $1.1 billion deficit by increasing revenue by a new $2.1 billion and increasing spending by a smaller amount: $1 billion. Total spending for the biennium totals $37.9 billion, much lower than what some GOP sources were floating prior to the proposal being announced.
Revenue: Net increase $2.1 billion
Dayton has put together a comprehensive tax reform plan in his proposal, with a lot of moving pieces. Let’s break it down by the type of tax.
Individual income taxes: Dayton would add a new top bracket to Minnesota’s individual income tax code, a marginal rate of 9.85% on taxable income over $250,000 (couples) or $150,000 (individuals). This proposal would raise $1.1 billion in 2014-15. Dayton also proposes a new property tax rebate, which would give back up to $500 on each property. This proposal would cost $1.4 billion for the biennium. Net impact: -$300 million.
Sales taxes: This is the largest component of the tax reform plan. Dayton’s proposal would remove many of the exceptions from the state’s sales tax code. Consumer and business services (except for a very limited set) would now be taxed. This includes legal services, accounting services, haircuts, auto repair, etc. Most goods would also now be taxed. Remaining goods exceptions would be food, prescription drugs, and clothing (items that cost under $100). In return for broadening the base of the sales tax, the rate would be reduced from 6.875 percent to 5.5 percent. Dayton Administration estimates show that this change would work out to be essentially neutral for most families. Opponents of the provision have already called out that the sales tax charged on business services will be baked into consumer prices, leading to a net increase in what consumers pay. Also included is a 0.25% sales tax increase for the seven-county metro area designed to fund transit projects. Net impact: $2.1 billion.
Corporate income taxes: Dayton proposes cutting the corporate income tax rate from 9.8% to 8.4%. Such a change would drop Minnesota to the 12th highest corporate income tax rate. To pay for the rate change, Dayton’s proposal would eliminate tax breaks for foreign operating companies and foreign royalty payments, making the reform essentially revenue neutral. Net impact: $5 million.
Cigarette taxes: Cigarette taxes would be raised by 94 cents per pack under the Dayton proposal, reaching $2.54 per pack. Net impact: $370 million.
Spending: Net increase $1 billion.
Most of Governor Dayton’s proposed new spending goes to education. Let’s see how it breaks down:
E-12 Education: The two largest components here are a significant increase to special education funding ($125 million) and a 2% increase in the basic education formula ($118 million, or $52 per student). Additionally, Dayton proposes additional funding for all-day kindergarten ($40 million). Finally, early education programs get a major boost ($93 million in total, with the largest single element being $44 million in Early Learning Scholarships which fund pre-school for low income families). Dayton does not propose paying off any of the remaining K-12 shift in the next biennium, waiting to pay it off until the 2016-17 budget. Net impact: $344 million.
Higher Education: Dayton proposes an $80 million expansion of the State Grants program, which will allow 5,000 additional students to enter the program, and increase the payout to 90,000 students already on it. Additionally, Dayton proposes $80 million in expanded funding for MnSCU to expand internship and apprentice programs, improve facilities and equipment, and retain faculty (assuming required administrative cuts are made). Dayton also was going to propose an additional $80 million in funding for the University of Minnesota, but is withholding support for that increase pending the Legislature’s requested review of administrative costs. Net impact: $170 million ($250 million if the U of M makes it back in).
Health and Human Services: Programs receiving increased funding in this part of the budget include child permanency and mental health programs ($44 million), the Statewide Health Improvement Plan ($40 million), and funding for the health care exchange ($29 million). Net impact: $128 million.
Local Aids and Credits: Dayton’s proposal would increase aid to cities and counties by $120 million.
Where are the spending cuts, you may ask? Dayton points to last session’s budget, where $4 billion in spending reductions were achieved ($2 billion in cuts, $1 billion in additional reductions since the budget was passed, and $1 billion in inflation not added to department budgets). In his 2014-15 proposal, Dayton cites an additional $225 million in reductions, much of which comes in the Health and Human Services budget, such as $74 million in savings from restructuring in the long term services program and $65 million in negotiated savings with service providers and drug companies. Additionally, inflation totaling $890 million was not included in the budget for the various departments.
Additional details on the proposal can be found at the Minnesota Management and Budget website.
The 2013 legislative session kicks off next week, and there’s a long list of things that the newly-minted Democratic majorities should look at as their top priorities.
#1: Fix the budget. It’s long past time for the folks in St. Paul to get on with it and take care of the structural problems in the state budget. No more stalling, no more half-measures, no more one-time fixes or gimmicks to solve this year’s $1.1 billion projected deficit. This means:
1a.) Get a plan in place to pay back the school shifts. My talks with local school district officials indicate that they are more interested in certainty at this point, so we need not necessarily pay back the entire $1.1 billion still remaining (this is on top of the $1.1 billion deficit) in one budget cycle. A bipartisan commitment, though, to repaying $275 million a year for the next four years should be sufficient.
1b.) Real tax reform. The elements required here are pretty simple, but the devil is in the details. First, broaden the base of the sales tax by removing distorting exemptions on some categories of goods and services — it should be possible to broaden the base, lower the rate, and still end up revenue-neutral to revenue-positive. Second, recognize that the sales tax changes are regressive, so cut income taxes on lower- and middle-income taxpayers. Third, remove unnecessary tax expenditures (credits and deductions) that essentially function as handouts via the tax code. This should free up additional revenue that can be applied to across-the-board rate reductions in both the individual income and corporate income taxes. And that’s all before addressing our overly complex property tax system. It may be too much to ask legislators to fix that in 2013, too, but we can hope.
1c.) Accountability in state spending. State government needs to do a much better job of measuring effectiveness of state programs, and requiring reforms for programs that don’t measure up. Additionally, there are programs that just aren’t needed any more. It’s time to end them, now. That said, we should be wary of sound-bite proposals like legislative Republicans proposed last session that imposed across-the-board cuts without an analysis of the work required.
#2: Improve the job-creation environment in the state. An odd-year bonding bill seems unlikely at this point, but the Legislature can take some concrete steps to improve conditions for job creation in the state. A commitment to infrastructure is paramount. For starters, the legislature can begin indexing the gasoline tax to inflation in order to maintain its buying power. (Minnesota’s gasoline tax, even with the increase passed after the 35W bridge collapse, has less purchasing power than it did 20 years ago and our road and bridge construction needs are much more significant.) Renewing our commitment to our public universities is vital as well. Even though enrollment is up 23,000 over that time, funding for the University of Minnesota system and MnSCU has declined back to Ventura Administration levels. This is a significant factor in the doubling of college tuition over the last decade. In return, those institutions should provide concrete plans on how they can reform their operations and become more efficient. The U of M, in particular, has some administrative bloat that needs to be addressed.
#3: Support implementation of the Affordable Care Act. Minnesota’s health insurance exchange, required as part of the Affordable Care Act, is scheduled to go live in October to enable enrollment in plans starting on January 1, 2014. It is critical that the Department of Commerce have the necessary resources to finish development and provide ongoing support for the exchange.
#4: Government accountability, campaign finance and election reform. There’s a gaping hole in the finance disclosures that our elected officials have to provide. If they work as an independent contractor or consultant, legislators don’t have to disclose who they work for. That’s a problem, as demonstrated during the campaign in the case of Senator David Hann. Unlike some, I don’t have a problem with Hann chairing the committee with critical oversight on health insurance while being licensed to sell it. But I do have a problem with not knowing who’s paying Hann’s salary outside of the Capitol so I can fairly judge his actions in the legislature. Same goes for anyone else. It’s time to require folks in those categories to disclose who they’re getting paid by (over a limit, say $2,500). From a campaign finance perspective, it’s time to bring some additional sunshine into the process and require additional disclosures. I would recommend moving to a four times per year model (quarterly in odd years, then Q1, pre-primary, pre-general, and year-end in even years). Finally, even though the Voter ID constitutional amendment failed, there are things that can be done in the realm of election law to improve perceptions of fraud incidence and improve access to the polls. Such provisions should include the introduction of early voting (how about the two Saturdays before Election Day), automatic voter registration of holders of drivers licenses and identification cards, and a close look at the electronic poll book concept as an alternative to voter ID requirements.
Certainly, these won’t be the only items that come up — social issues like a push for recognition of same-sex marriage will undoubtedly be discussed (and eventually, I believe it should and will be passed) — but these are what should be at the top of the list.
[UPDATE, 1/4]: Let me clarify a few points regarding Hann’s relationship with Boys & Tyler Financial. Hann has completed his licensing requirements with the state of Minnesota, but has not been enrolled as an agent by an insurance company. Until that has been completed, Hann cannot sell insurance in the state. Hann works on a contract basis with Boys & Tyler, and claims to earn no compensation for that relationship. (Under current law, Hann would not be required to disclose any income earned on a contract basis.) This seems to be an arrangement designed to fight efforts at disclosure, and leads me to believe that all contract employment/consulting relationships should be disclosed instead of those surpassing the dollar limit originally indicated in the post.
[State Capitol picture courtesy of Minnesota House of Representatives Public Information Services.]
We’re entering budget season for counties and cities. In the next three weeks, these local governmental entities will be setting their preliminary property tax levies for 2013. The preliminary levy is the highest amount of taxes that the city or county can collect for 2013 — they do have the option of collecting less than that amount when they approve the final levy in early December.
Local units of government take great pride in announcing that they aren’t raising your taxes — they pretty much seem to make that announcement every year, in fact. How is this possible? Can it be true? As you might suspect, the answer here is “not exactly”. Let’s take a step back and see how this works.
The basic tax calculation for an individual property is pretty simple: the value of the property multiplied by the tax rate (also called a mill rate). Since the local unit of government has to levy a specific dollar amount for their entire community, though, there’s two ways they can go about the process of determining that final number — they can either go based on the total levy amount and work back into the mill rate or they can start with the mill rate and work up to the number they need. In reality, local governments combine the two methods to get to a final answer.
Let’s take a look at what happens here. Here’s a community of 10 houses. We’ll call this community “Sampleville”. The 10 homes in Sampleville have a collective value of $3 million, and pay a combined $6,000 in property taxes based on a mill rate of 0.2%. (For wonks out there: this is going to be a really simplified example.)
What happens in Year 2? Let’s look at an example of what many cities and counties are experiencing today — declines in property values. Let’s assume a 10% reduction in property values, and let’s also say that an 11th home is built in the community. Since times are hard, this home has a less than average value of $150,000. If the mill rate stays the same, Sampleville generates $300 fewer property tax dollars, even with the addition of the new house.
The Sampleville City Council has some decisions to make at this point. They can choose to keep the mill rate the same and cut their budget by 5%. Or they can do what many local government units have done — keep their overall levy amount the same. After all, Sampleville largely has to provide the same services in Year 2 as they did in Year 1. They may even have to provide more of some services as there are now more people living in the community. Under this scenario, Sampleville has to raise the mill rate to make up the difference. They only have to raise the rate by 5.26%, because of the new house being added to tax base, though.
Even though the mill rate has increased, the Sampleville City Council goes back to its residents and says: “No tax increase!” Why? They will say it is because they left the overall tax levy the same — and all residents who were here in Year 1 will pay less in property taxes in Year 2 than they did in Year 1. (Never mind that they are taking a larger percentage of your property value in Year 2 than they did in Year 1.)
But what if Year 2 is a good economic year? If property values grow by 10% instead of shrink by 10%, we see a different story.
If no changes are made to the mill rate, tax collections go up by $900. What does the Sampleville City Council (and most units of local government) do under these situations? Go back to their residents and say: “No tax increase!” (and start planning things to do with the additional $900). Why? Because they left your mill rate alone. The Council will tell you that the reason your taxes went up is a result of your property value increasing, not an active decision by government.
You may have realized at this point that the Sampleville City Council is changing the rules of the game midstream here. You may also be realizing that many local units of government in Carver County (and across the state) operate the same way. If you change the standard by which you declare a “tax increase”, it’s pretty easy to make it look like you’re not increasing taxes.
This isn’t meant as some sort of anti-tax screed. In times like we are in today, decisions to keep local levies flat by raising the mill rate can frequently be justified. But we have to be fair and call a spade a spade. If keeping the mill rate flat during good times and collecting the additional revenue from increase property values isn’t a tax increase, then raising the mill rate during bad times to make up for declining property values is a tax increase. Period. We should expect our local government officials to not try to muddy the waters on this point.
Legislative Republicans are mad. Really mad. Their top priority for this year’s session fell to Governor Mark Dayton’s veto pen yesterday — their package of business tax cuts.
In fact, here’s what State Senator Julianne Ortman had to say about this yesterday:
“He vetoed our highest priority,” said Ortman said, who also is deputy majority leader. “I think there will be consequences. I think that he has lost the trust of many of my colleagues in the Legislature.”
That may well be true, of course. The real question is if such anger is justified.
Is it unusual for one side or the other to get shut out on their top priority for a session? Hardly. All you have to do is go all the way back to last year — when Gov. Dayton’s top priority was to close the state’s sizable deficit using a balanced package that consisted of about 75% spending cuts and 25% revenue increases. Did he get that? No way — the final deal instead borrowed from our schools and sold out future tobacco settlement revenues.
Yet, despite that, Dayton has worked with Republicans and agreed to compromise on some significant issues — including permitting and health and human services reforms. Dayton has also indicated willingness to sign some elements of the Republicans’ tax bill into law.
That’s the nature of divided government. Your top priority is probably going to be real low on the other side’s list. But the job description isn’t to punt when the top priority is off-the-table. Real leaders double down their efforts in those times and do the best they can for their party and their state. Too many Republicans seem content at this point to walk away with nothing — no tax bill, no bonding bill, and no Vikings stadium. Minnesotans should expect better.
For the first time since 1995, voters in the Eastern Carver County School District have defeated a referendum put forward by the School Board and Administration. Let’s dig in and try to figure out the key factors that led to the defeat of the referendum.
We’ll get the easy one out of the way first — the economy is lousy right now and this is a really bad time to be advocating for a tax increase. No further elaboration is required here. If you look at school referendums around the state, requests to renew existing levies did very well, while requests for additional funding fared much worse. Of the seven metro area technology referendums asking for new or increased amounts, four passed (Anoka-Hennepin, Edina, Mahtomedi, and Spring Lake Park) while three (District 112, Inver Grove Heights, and Stillwater) failed.
A second critical factor in the defeat of the referendum was the failure of the district to provide critical supporting information to voters. It took the District a couple of weeks after the School Board approved the referendum to get basic information on the District’s website. Detailed information showing specifically how the money would be spent came far too late in the process. Certainly, this information must have been available at the time the School Board was considering whether or not to put the referendum on the ballot.
Additionally, the district failed to articulate some of the complexities of school financing. That left the district in being forced to defensively respond to things like John Brunette’s letter to the editor as opposed to proactively explaining the factors that go into our school property taxes. After digging into the information and requesting data from the district, I felt there was a compelling case in favor of the referendum. But I can understand how some voters didn’t get the message.
The district clearly also needs to address that there is a substantial portion of the community that have real issues with some previous decisions that were made and wants to see substantive changes. They do not trust the district to make decisions in their families’ best interest. I’ve tried to point out, both here and at the Chaska Herald website, that the decision-makers who made those controversial decisions aren’t around any more, and it’s not entirely fair to blame the new Board (recall, that a majority of the Board was replaced just one year ago) and the new Superintendent for those decisions.
Nonetheless, this is a problem that needs to be dealt with. Most prominently among these issues are the real and perceived inequities between the two high schools. Voter turnout in Chaska was 20%, versus Chanhassen’s 13%. There’s clearly a reason for that. Anecdotally, there were a significant number of Chaska parents who indicated their “no” vote was designed to send a message to the district regarding these issues. Similarly, there were a number of Chaska parents energized to go to the polls to try and get funding to help close these gaps.
Another element is the perception (related to the above issue) that Chanhassen High School was either not needed and/or too luxurious. As for the “not needed” part, the numbers don’t lie there.
Between Chaska High School, Pioneer Ridge, and the two middle schools, secondary school capacity in the district was simply not sufficient. Perhaps the district could have limped along for a couple more years, but there was no way around adding more capacity. Lower grade levels show that increased enrollment is coming, and as the economy gets back on track, additional growth in the western part of the district will have the two high schools operating at higher capacities in a few years.
As for whether or not Chanhassen High School was built too expensively, opinions can differ on that. Recall, though, that voters approved the $92 million price-tag for that facility. It was not forced on to the taxpayers of the district by the School Board or the administration.
And regardless of your opinion on any of these issues, I would argue that it’s not productive to go back and re-litigate them. Sending a message by voting “no” on a referendum may make you feel good, but it doesn’t solve the problems the district faces.
There are other ways to hold school districts accountable other than just voting “no”. We can get engaged in the yearly budget process. We can get involved in our children’s classrooms. We can attend school board meetings and have discussions with the administration on critical issues.
Where do we go from here? How should the district respond to the challenges that lie ahead from a budget perspective — and more importantly, from a trust perspective? I’ve got some ideas, and I’ll be sharing them over the next few weeks.
In recent days, we’ve seen Minnesota Republicans ramp up rhetoric against school boards who have put levy referendums on the ballot this November. It’s expected that there will be over 130 such ballot questions this November, from all corners of the state. This would be the largest number of school levy referendums in a single year in state history.
Unhappy with what such a spate of referendums would imply about state levels of funding for education, several of them have started to spout off. For instance, Rep. Pat Garofalo, the chair of the House Education Finance Committee said “Unfortunately, we have some school boards that are using people’s generosity to engage in the fleecing of taxpayers, and that’s just not acceptable.” He’s threatening — along with other members of the House Republican caucus — to publicly attack particular referendums they think are out-of-bounds. Meanwhile, Rep. Steve Drazkowski recently urged voters in his district to oppose referendum votes in the Lewiston-Altura and St. Charles districts.
Garofalo and Drazkowski both cite changes in the recently-passed budget as making such referendums unnecessary — specifically a $50 increase in the per-pupil formula in each of the next two years and one-time increases in compensatory funds. While I’m not here to pass judgment on any of the merits of a specific district’s referendum, what is clear is that such attacks by Republican politicians on locally-elected school boards are hypocritical on many levels.
First off, locally-elected school boards don’t have the variety of accounting tricks and gimmicks at their disposal the same way Republican politicians like Garofalo and Drazkowski do. They don’t have the ability to shift when they pay expenses at their whim like the politicians in St. Paul have done each of the last two sessions. And despite the happy talk from Garofalo and Drazkowski, the implementation of the additional school shift will do far more damage to school district finances than can be recouped through the changes to the funding formulas. Here in Carver County, the Eastern Carver County School District will see a net loss in funding of $3.6 million over the next two years because of the Republican budget. Total state borrowing from public schools now totals over $2 billion.
Second, Legislative Republicans who chafe under federal mandates are now passing that same treatment down to local officials. Garofalo trumpets the need for local control of schools, but now threatens to stick his nose into the business of school districts outside of his home in Farmington. Since when does he know better than the folks in, say, Thief River Falls about their local needs? Drazkowski, meanwhile, has supported legislation that would stop implementation of the Affordable Care Act in Minnesota and a constitutional amendment that would allow state nullification of federal statutes. Drazkowski and Carver County’s own Ernie Leidiger backed a bill that would have mandated a pay freeze on teachers. Funny — Garofalo, Drazkowski, and Leidiger all bleat about their support for “local control” of schools on their websites.
Finally, the notion offered by Garofalo that most of these districts are looking for additional funds is just flat-out not factual. If you look at the list complied by the Minnesota School Boards Association, most of the levy questions are actually renewals of existing levies, which would maintain existing tax levels, not increase them.
[NOTE: I have not taken a position on the District 112 technology referendum as of yet and will not until I see additional information on specifically how the levy dollars are intended to be used.]