A State That Works—Again
In his first inaugural address, Ronald Reagan declared that “Government is not the solution to our problem; government is the problem.” Minnesota was not immune to the anti-government sentiment that gripped American politics in the final decades of the twentieth century and that culminated with the 2002 election of Tim Pawlenty—the first Minnesota governor to sign a pledge not to increase taxes under any circumstances.
Part 1 of this series looked back to the iconic 1973 Time Magazine article proclaiming “the good life in Minnesota” and the policies of Governor Wendell Anderson that made Minnesota a “A State That Works.” This article will examine Minnesota’s experiment with “no new tax” fiscal policy and the state’s subsequent course correction.
True to his pledge, Governor Pawlenty successfully blocked almost every increase in state taxes.* Despite the election of a progressive governor in 2010, a right wing legislature successfully maintained the anti-tax agenda through the 2011-2012 legislative session. In the decade that followed Pawlenty’s election as governor, real per capita state and local government spending fell by seven percent—the fourth highest rate of decline among the fifty states. Despite an increased need for public expenditures resulting from an aging population and other trends, government in Minnesota shrank.
Proponents of the anti-tax, anti-government agenda projected that their policies would produce growth and prosperity. Unfortunately, that’s not what happened. In the decade preceding Minnesota’s experiment with “no new tax” fiscal policy (1992-2002), Minnesota surpassed the national average in GDP, employment, personal income, and median household income growth. Since 2002, Minnesota has lagged behind the national average in all four categories. Add to these dismal trends a decade of recurring budget deficits and two state government shutdowns.
During the 2013 legislative session, Minnesota returned to a progressive vision for the future, similar to what the 1973 Time article celebrated. As Anderson did four decades ago, a progressive governor and legislature did what they said they would do on the campaign trail: increase investments in key assets through a more fair tax system.
As a result, state funding for public school operating costs increased, partially replacing a sharp decline in state assistance over the preceding decade that led to school budget cuts and escalating property taxes. State dollars for all-day kindergarten and early childhood education—policies long endorsed by non-partisan experts—were approved. Tuition at state colleges and universities was capped after a decade of steep increases—thereby helping to make education more affordable for more students. A new homestead credit refund targeted property tax relief to homeowners based on the ability to pay. The number of uninsured Minnesotans will likely be cut in half through the new MNsure program. Other initiatives focused on job training and affordable housing.
The policies approved by progressive state policymakers in 2013 for the 2014-15 biennium are by no means a carbon copy of the policies pursued by Wendy Anderson in the early 1970s, nor should they be. After all, the challenges confronting the state in 2013 are not the same as in 1973. Nor is the state spending increase approved in 2013 anywhere near the size of the increases approved during the Anderson era; in fact, even after the budget increases approved in 2013, real per capita state general fund spending will still be over 10 percent less than it was a decade ago, at the beginning of Minnesota’s “no new tax” experiment. Furthermore, state and local government own-source revenue as a percent of statewide personal income in the current biennium will likely be less than it was in 1973.†
Nonetheless, the budget approved during the 2013 session represents a return to Governor Anderson’s vision of government as a positive force for good, as informed state leaders increased public resources and directed those dollars toward policies that in the long-term will make Minnesota a more prosperous state and a better place to live.
*The most notable exceptions were a 2008 gas tax increase which was enacted by overriding Governor Pawlenty’s veto and a 2006 cigarette tax increase which had to be designated as a “fee” in order to get Pawlenty to support it.
†This conclusion is based on an analysis of state and local government own-source revenue data from the U.S. Census Bureau and Minnesota Management & Budget combined with personal income data from the U.S. Bureau of Economic Analysis.