State budget trends: Unsustainable but not insurmountable

As if we haven't already had enough sobering reading material about the state of the state, the Budget Trends Study Commission released its report [Download pdf] to the Minnesota Legislature today.

The report contains a fair amount of the familiar if you've been following the drumbeat of the Two Toms (Stinson and Gillaspy):

• A major, long-range demographic shift will include greater diversity and an aging population. 
• A growing economically dependent population will rely more heavily on fewer wage earners.
• Long term expenditures —health costs in particular — are growing at a faster rate than state revenues.
• The state economy has begun under-performing relative to the nation.

The litany of issues is followed in the executive summary by the slightly softening statement, "The challenges of the future are not insurmountable but they are real." Even if we knew it already, it's painful to read the unvarnished analysis that "Minnesota is on an unsustainable course in terms of revenue and expenditure growth." And, "If Minnesota wishes to have the prosperity it had in past decades, the solutions will need to be robust, effective, and immediate."

Couple the disturbing trends with the current budget shortfall and near-term economic picture, and it's clear no unilateral cost cutting or tax raising will be sufficient to change the present course. (And doing both is hardly going to be popular. For example, the black humor suggestion: Raise taxes on the elderly and poor until they move to Texas.)

Rather than presenting groundbreaking approaches, the report identifies gaps, suggests tools and advises taking the long view in managing toward a better balance of state revenues and expenditures. But reaching this balance, the report says, will be much more difficult than it sounds.

The Commission offers recommendations in three broad areas: Providing better information to make informed budget and policy decisions; achieving a long-term balance of state revenues and expenditures; and managing state budget volatility. The ideas advanced are best viewed as a framework for gradual improvement, not a menu of fixes.

One theme worth raising here is the public's complicity in creating the budgetary imbalance. Our twin appetites for low taxes and high services have helped sustain our quality of life. 

Until there are significant changes in public expectations, state officials will repeatedly scramble to balance the budget but will not have the time or resources to address the state’s competitive position and seek opportunities for future prosperity.

The scramble is now under way.

 — Charlie Quimby