Mr. Dahle Goes to St. Paul

While the State faces the daunting task of cutting over $900 million from the budget this year and who knows how many billions next year, it would seem easy to look over the State’s allocations and start whacking away. Believe me, it’s not that easy.
Let’s look at one particular item, buried deep in the Judiciary budget: the Sentence to Serve Program, just one of the items on the Governor’s chopping block. This program takes prisoners out of the local jails and allows them to “work off” part of their jail time, as well as other direct costs. The city of LeCenter has used the Sentence to Serve program several times. The prisoners there helped paint the city owned swimming pool, cleaned up debris along Highway 99, helped with brush chipping, worked at the city/county recycling center, painted city buildings, and picked up trash at the local parks. These probationers work hard. They finish their work with a real sense of accomplishment. Today a city council woman from Waterville shared a story with me of a recently released prisoner who asked her for directions to the local park he had worked on a few years ago. He was proud of the work he had done and was eager to revisit the fruits of his labor.
These tangible benefits are totally lost in the monetary considerations of a budget crisis. It is so important that we as a State take a holistic and systematic view of the costs and benefits of any program. There is so much at stake.

I recently held a town meeting in a small town on the Western side of my Senate district. As the town meeting turned its focus to the budget crisis, one gentleman stood up claiming to have all of the answers regarding Minnesota’s budget woes. He said he had a proposal for “solving the state’s budget deficit without raising taxes.” I said I was interested in his “list” and he said he would be sure to send it to me. Sure enough, a few days ago I received a document outlining what some of those cuts might look like. Here is a small sampling of some of what Minnesota could expect (and I quote):

• Eliminate intrusive and ineffective home visiting and mental health screening programs
• Eliminate Early Childhood Professional Development
• Eliminate Kindergarten Readiness Assessment and Intervention Programs
• Eliminate Preschool screening and ECFE (Early Childhood Family Education)
• Eliminate Early Childhood Literacy
• Eliminate After School Community Learning Grants
• Repeal the public school staff development mandate
• Reduce the number of MNSCU campuses
• Require the DNR to fully self-fund via fees
• Eliminate Local Government Aid
• Reduce Court appropriations and increase attorney’s annual license
• Reduce Human Rights Department funding
• Provide Health Insurance subsidies, not Health care services and payments

No thank you. If this list is a solution, count me out. The cuts to early childhood education alone would set this state back 30 years creating a host of problems for years to come. We need to reaffirm the connection between intelligent investments and the public benefits we receive in return. We are a state of community minded people who care about our children, our neighbors, the elderly, and the poor. We value these public assets and most of us are more than willing to pay for them.

The document to which I refer comes from the Minnesota Budget Solutions Coalition which includes organizations such as the Minnesota Majority, Taxpayers League of Minnesota, Minnesota Family Council, and NFIB Minnesota Chapter… to name a few.

Imagine Junior working and saving for years, pocketing part of the money he earns on his paper route, hoping to squirrel away enough money for a down payment on his college education. That’s a nice story until Dad breaks open the piggy bank to skim off some funds that he says aren’t being used.
The same story is being played out in the Minnesota state budget. Workers forward part of their hard earned pay into dedicated funds only to see the Governor raiding their piggy banks to transfer the money to the General Fund. Last year the Governor proposed eliminating the Health Care Access Fund and transferring all provider tax revenues into the general fund. Why should the Health Care Access Fund serve as a slush fund to pay for projects unrelated to health care or to balance the state’s budget?
This year we learned the Governor’s supplemental Budget was to transfer $267,000 from the snowmobile dedicated account and another $400,000 from the ATV account to the General Fund. Only after organized outrage from these groups did the Governor back down from that proposal.
Electrical contractors are seeing a $1.5 million transfer from the Construction Codes and Licensing Division’s continuing education fund to the General fund. These dollars were paid for by electrical contractors from across the state to offset costs related to education courses, seminars and registration fees for necessary ongoing and required training.
Pick up the daily paper and you will read more of the same. The Star Tribune reported today the Governor’s supplemental budget calls for $1.2 million to be taken from the state’s Water Recreation Account – funds generated by the 860,000 boaters in the form of fee and boat registration – and transferred to the General Fund. Projects that include boat ramps and canoe and boat route management get axed.
More and more of our dedicated funds are not finding their way to their original and intended purpose. Those paying into these various funds are left holding a broken piggy bank with less incentive to continue paying. They are angry and rightfully so. Allowing this practice is a dangerous precedent and will lead to further raiding of our dedicated accounts.

This past Monday I had the opportunity to sit in on a joint session of the Montgomery city council and school board. Montgomery successfully passed a school bond referendum this past December. There’s no question the Montgomery Lonsdale school district was in need of a new facility and it was clear the Superintendent, Board, and Council members were excited about the city building a new high school. As we talked about the state budget crisis and the $1.2 billion shortfall facing the upcoming legislative session, one message was quite clear. Montgomery, both school and city, is not in a financial position to make significant budget cuts. Since 2003, Minnesota state investment in schools has dropped an inflation-adjusted 13 percent and schools like Montgomery Lonsdale has had difficulty making ends meet.
The city faces similar financial strain. In 2009, Montgomery lost $71,353 in Local Government Aid (LGA) though unallotment. The 2010 cuts will total $164,408. Needed improvements for streets and infrastructure may have to wait. The weak economy has dramatically softened the real estate market and as local assessments continue to catch up to the effects of the economy, property values will continue to adjust. Last year, residential homestead property values overall fell in cities. On top of that, commercial and industrial property values are on the decline. As a result, cities could see more of the burden of their property tax levy shifting to homeowners in the foreseeable future.
How much more can we cut LGA to cities like Montgomery? What kind of community do we want to live in? How can we ensure our students are getting the best education if we continue to slash budgets while schools are barely holding on with a funding stream that relies on operating referendums? While schools can be placed on a failing list for not making Average Yearly Progress (AYP), perhaps we should place an entire state on the failing list for not properly investing in our students, our schools, and our communities. When a school is not making AYP, everyone rallies to address the problem. When a community sees the need for a new school, local citizens step up and deliver. We need that same effort, in bipartisan fashion, at the State Capitol come February.

The following report was written by Rob Hardy, school board chair for Cannon River STEM School, for northfield.org.

About 75 people gathered in the big room at ARTech charter school on Tuesday, January 5, for an evening of conversation with State Senator Kevin Dahle and State Representative David Bly. The main topic of the evening was education funding, and the impact on Minnesota public schools, and charter schools in particular, of the state budget crisis and the 27.5% holdback of state general education funds.

What is the 27% holdback? By statute, 10% of state per pupil education funding is held back from public schools in the state of Minnesota until after final enrollment figures are available for the school year. The money is generally paid to the schools in the first half of the following school year. This year, in an effort to address the state budget shortfall without raising taxes, Gov. Pawlenty increased the holdback to 27%. This means that 27% of the amount that schools have budgeted, and to which they are entitled according to the per pupil funding formula, is held back—payment to the schools is deferred.

This has put charter schools into a bind. Because 27% of their general education funding is being held back, schools are finding it necessary to secure loans in order to meet their expenses—to pay teachers. The interest payments then have to be included the school’s general education budget. In effect, funds that should have gone into the classroom are going into interest payments to banks—if, that is, the schools can secure loans at a time when banks are tightening credit.

Both legislators expressed their strong support for charter schools. The hard reality is that the state budget is facing a projected $5 billion shortfall in the next biennium. To this point, the stategy of Gov. Pawlenty has been to make cuts and accounting shifts, rather than to raise additional revenue.

See the entire story at http://northfield.org/

From the NDDC Website by Ross Currier: The Northfield Downtown Development Corportation E R Team (Economic Restructuring Committee) met with State Senator Kevin Dahle yesterday to talk about commercial property taxes. Our discussion focused on legislative action for 2010.

Commercial property taxes in downtown Northfield have risen over 300% in the past decade. At their current levels, they are literally threatening the economic viability of our historic commercial district as well as undermining small business retention, expansion, and recruitment.

Last year, working with Senator Dahle and Representative David Bly, the NDDC saw legislation to help address the commercial property tax issue in older commercial districts throughout Greater Minnesota introduced in both the Senate and House. With the challenge of balancing State revenues with expenditures during the session, the bills were not implemented.

There was another bill addressing commercial property taxes drafted in the Senate last year. This bill differed somewhat from our proposal, however, it would also have helped downtown Northfield.

At yesterday’s meeting, we decided to work with the other group of senators to draft and support a single bill to address commercial property taxes in both the Senate and House. Although the State continues to face financial challenges, we are hopeful that our unified efforts will achieve success in 2010.

A few weeks ago, I had my AP Students read an essay entitled “Bowling Alone,” by Robert Putnam. The premise of the essay is the idea that America is losing its social capital and that it has been on the decline for several years. Social capital refers to connections among individuals. It is the foundation for social communities.

Left intact, social capital has a stream of benefits, including safety and security, friendship and community, and a sense of civic identity. Putnam uses the analogy that even though more and more people are heading to the bowling alley these days, there is a decline in bowling leagues.

Politically speaking…voting, political knowledge, and grassroots political activism are all down. Americans sign 30 per cent fewer petitions and are 40 per cent less likely to join a consumer boycott, as compared to just a decade or two ago. Other social get-togethers have experienced a decline over the last 25 years. Attendance at club meetings have dropped 58 percent, family dinners are down 43 percent, and having friends over is down 35 percent since 1985 (Putnam 2000).
How far are we willing to go it alone? Have we lost our civic virtue? Have we lost our sense of community? As the state budget faces even more cuts, are cities and communities willing to let our hospitals and nursing homes close? Will we continue to invest in our schools, our main street, and our local food shelf? Do we care about our neighbors as fellow citizens? Is the mentality, “as long as I have mine” (insert job or health insurance here) the social norm?

Putnam states “a society of many virtuous but isolated individuals is not necessarily rich in social capital.” As a matter of fact, there is a range of evidence that communities with a good ’stock’ of such ’social capital’ are more likely to benefit from lower crime figures, better health, higher educational achievement, and better economic growth.

Yes, we can blame television, suburban sprawl, and the time constraints brought on with a two career family. However, generational change came out as a very significant factor. A “long civic generation,” born in the first third of the twentieth century, is passing from the American scene. Their children and grandchildren (baby boomers and Generation X-ers) are much less engaged in most forms of community life. For example, the growth in volunteering over the last ten years is due almost entirely to increased volunteering by retirees from the long civic generation.

As the New Year approaches, let’s consider what’s important to Minnesota: a state that embraces the importance of “the common good” and the virtues of civic responsibility and participation. This holiday season let’s not lose sight of our need to invest in social capital. Make time for the family meal, invite the neighbors over for some eggnog, attend a Holiday Concert, or make time to volunteer. And perhaps you can even find time to go bowling. Better yet, start a league.

During a legislative hearing last week, Minnesota finance officials warned lawmakers the state may need to borrow significant amounts of money this spring in order to meet its financial obligations. The action, which was prompted by lower-than-expected revenues, came just weeks after the state’s Department of Finance was forced to delay corporate and sales tax refunds for the second time in six months, citing concerns over the state’s cash flow situation.
These recent shortfalls underscore both the seriousness and immediacy of the state’s budget crisis.
Last session, the Legislature addressed the problem head on by crafting a responsible budget balancing plan that would have brought long-term stability to the state’s finances. Unfortunately, the Governor vetoed our proposal, and used his unallotment authority to drain our budget reserves and enact one-time spending cuts and shifts to push the problem into the future. As we’re seeing now, the Governor’s temporary fix did nothing to address the long-term fiscal challenges facing our state, and put us in a precarious position of having to borrow just to pay our bills.
While the extent of borrowing the state faces is unknown, Minnesota Management and Budget Commissioner Tom Hanson told lawmakers the state’s tax collections are already $223 million lower than officials predicted earlier this year. In the early 1980s, the state borrowed $1.66 billion over four years, which ultimately cost taxpayers more than $124 million in interest payments. In addition, this type of short-term borrowing will jeopardize the state’s credit rating, which means future borrowing for capital projects could be more expensive.
Minnesota Management and Budget has already begun taking actions to cope with the shortfall. Earlier this month, the state delayed $128 million in corporate tax refunds to 461 companies and $11.9 million in sales tax refunds to about 350 to 400 businesses until late December.
The financial issues facing the state now pale in comparison to the challenge that awaits lawmakers in the next biennium. Because the Governor rejected the Legislature’s long-term budget fix earlier this year, the state is expected to face a budget deficit that could top $7 billion in 2011.

On Tuesday, October 6, the Commerce Committee of the Minnesota Senate met for a rare out of session hearing. The topic was ‘regulation of financial institutions in Minnesota.” The hearing was called in response to a few high profile bank failures that have occurred in several of our Minnesota communities this past summer. Like so many banks across the country, Minnesota small banks made several big bets on real estate and according to the Federal Reserve, Minnesota ranks fifth nationally in the number of banks with excessive levels of bad loans. Should we expect more banks to fail? Is there a problem?
Nationally, in 2006, there were zero bank failures and 50 problem banks in this country. In 2009, there were 98 bank failures and 416 problem banks as of June of this year (FDIC). There are several federal and state agencies that supervise the nation’s 8195 banks. Banks are regulated by the FDIC and the Federal Government, while the Minnesota Dept. of Commerce regulates 320 of the 426 Minnesota Banks.
James LaPierre, Regional Director of the FDIC, said the current banking crisis has some similarities to the banking crisis of the late 1980’s when the farm belt was hit particularly hard due to plunging land and commodity prices. “The Fed is usually pretty good at taking away the punch bowl, just as the party is getting good.” But it didn’t happen this time.
Testimony from banks and credit unions say we have enough examiners and we have enough regulation in place. They argued that community bank and credit union regulators and examinations were not the problem. They point to the lack of regulation and oversight on other providers, such as brokers, appraisers, rating agencies, investment firms and the unregulated products like sub-prime mortgages and their derivatives. Others testified that local banks are not the problem. Foreclosures in this state typically have connections to large national lenders with little or no connections to their communities.
The Minnesota Senate will continue to take a close look at the health of the financial institutions in Minnesota. Bank customers need to trust the banks and the loans they provide are secure to move our economy forward. Banks and credit unions and customers need that confidence.

I was reading a letter to the editor a few weeks ago from a reader who was surprised to see the world had not ended as a result of Governor Tim Pawlenty’s unallotment solution to fix the budget deficit for the FY 2010-11 biennium. The writer cited a lack of crying and gnashing of teeth as proof that the Governor’s unprecedented actions were justified in these tough economic times. The truth is, many schools have had some difficulty securing short term loans to make ends meet due to delayed payments and many of the unallotment plans, such as general assistance medical care and higher education, will not go into effect until 2010. In addition, the unallotment solution did nothing to resolve the more looming problems of the future. The decision to rely heavily on one-time measures to fix the current deficit will have long term implications as Minnesota is facing persistent budget deficits.
According to the Minnesota Budget Project (July 2009) the deficit could increase substantially, depending on a number of factors:
• If delayed payments to school districts are repaid (and they should be), the deficit would increase by up to $1.8 billion.
• If General Assistance Medical Care is restored, a program for very low-income adults without children, the deficit would increase by up to $890 million.
• If the impact of inflation is taken into account, the deficit would increase by $1.4 billion.
• If the economy does not improve as was forecasted this past February, the deficit would increase by an unknown amount.
When the state’s next economic forecast is released – likely in early December, Minnesota could face another huge budget deficit for 2012-13 and may see additional deficit open up for the current biennium. Without additional federal stimulus funds, which lessened the impact of the current deficit, we face fewer resources to solve future deficits. We as lawmakers must solve the budget crisis with an eye to the future considering all budget-balancing solutions.