Jim Robins is a former Minnesota Senate Majority researcher assigned to taxes, metropolitan and local government, and transportation issues. He currently operates www.ScooterMaxi.com.
Minnesota has a long tradition of under-utilizing state revenue opportunities available from beyond its borders. Nowhere is this more evident than when it comes to return on federal taxes paid. So, it wasn’t surprising that the recent Minnesota Budget Trends Study Commission report didn’t address this deficiency.
No doubt, we have a long-term budget problem that must be resolved by matching revenues with expenditures, but realistically we’ll need to go beyond the report’s recommendations to get there. Generating more federal help might be more politically feasible than some of the painful fiscal recommendations, such as avoiding anticipated accounting shifts.
We used to say prosperous Minnesota should pay more than it gets back because we can afford it, but we just aren’t that darn special anymore. While our economy today now looks a lot more like most others, our federal payback certainly does not.
Based on Tax Foundation data [PDF](compiled from the annual Consolidated Federal Funds Report), Minnesota’s federal tax dollar return “deficit” is sliding deeper. In FY-1985, this deficit was just less than $600 million / $504 per capita / with a 90-cent return per $1 sent in. By FY-1995, the deficit was $5.5 billion / $1,175 per capita / with a 78-cent return. By FY-2005 (the most recent data available), the deficit had climbed to $9.5 billion / $1,513 per capita / and a meager 72-cent return. Minnesota’s return ranks fifth worst in the nation.
By any measure, a recurring $9.5 billion return gap is hurting this state’s economy and triggers long-term hurdles to balancing the state budget.
Soon we will see the second coming of WPA out of Washington, D.C. Our state leaders should press harder for our share of one-time federal revenues to trigger an employment spark and improve our bottom line.
Our smartest return in Minnesota could come from energy conservation grants for federal, state and local government buildings, as well as low-income residences. That strategy can spark recovery while lowering our fixed costs and wasted energy use in the long run. As the new stimulus plan takes shape in Congress our representatives should push to expand on this form of investment not only for its economic efficiency, but because it will garner disproportionate benefit to our extreme-weather state.
— Jim Robins
Another question that needs to be addressed is how to pay for transit operations with a reliable funding source that will grow to reflect greater transit use. At the moment, transit ridership increases result in fare increases and/or cutbacks in frequency of service to reduce net Metro Transit operating costs. That's crazy! Will someone at Growth and Justice please research possible ways to provide reliable funding for transit operations, so that increasing transit ridership will be rewarded, not punished, as is currently the case?
Posted by: Anne White | January 22, 2009 at 10:21 AM