Gov. Tim Pawlenty is committed to resolving the state budget shortfall with an emphasis on cutting spending and restructuring the delivery of public services. The process will not come without pain. It will require changes from established practices by the people responsible for them.
Minnesota businesses and their employees have been doing this type of restructuring for years. With every change is an attempt to deliver more value to customers without increasing prices.
That's now exactly what must be done by all state and local government units and any other organization that provides services at state taxpayers' expense. Tough medicine is necessary if Minnesota is to prevent worse financial straits just a few years down the line.
Two principles should guide policymakers as they seek a remedy to the fiscal crisis.
The goal is to balance the budget by using existing resources to preserve statewide priority services. This is imperative if Minnesota is to emerge stronger and maintain a competitive business environment in our global economy.
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And immediate steps must be taken to reduce expenses.
The challenge is immense. State government is staring at a projected $4.8 billion shortfall, and many believe the deficit will worsen with this month's financial forecast. The constitutional requirement to balance the budget means the governor and Legislature face difficult decisions.
The governor seeks to position Minnesota as a leader in the world marketplace. His focus is on target: work force development and business climate.
Minnesota must strengthen public education to better compete globally. Minnesota businesses are increasingly facing shortages of skilled employees. The path to improvement begins with increased rigor in both instructor credentials and classroom instruction.
Minnesota businesses must be on a competitive playing field. The governor's recommendation to reduce the corporate income tax rate is supported by Art Rolnick, senior vice president of the Minneapolis Federal Reserve, who says, "Anytime is a good time to fix a bad policy." Competitive business taxes are critical so Minnesota is prepared when the economy recovers.
Accounting shifts are certain to be considered to soften the budget-cutting pain, the most significant a possible transfer of $1.2 billion of K-12 payments to the next biennium. Accounting shifts alone cannot balance the ledger, and too many threaten a deeper financial crisis for 2012-13.
Policymakers are looking at the proposed federal stimulus package to help soften the impact of budget cuts. The amount is yet unknown, but serious consideration should be given whether to use this money as a one-time down payment or to replenish the state's general-fund reserves.
Balancing the budget requires a long-term view, as underscored by a report from the Budget Trends Study Commission. The state is expected to see a 30-percent increase in workers turning 62. The aging population will continue to grow for 12 years, putting "an incredible strain on the state's labor force, private- and public-sector employees, tax revenues and priorities for public spending moving forward."
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The first warning of the state's changing demographics, and their impacts on the state budget, came with the 1995 report, "An Agenda for Reform." Its recommended changes can no longer be ignored. Inherent in this alarm is a call for government to seek greater efficiencies in operations and to focus on truly statewide priorities.
The governor has provided a good start. Legislators must resist knee-jerk reactions to the short-term pain of Pawlenty's recommendations and, instead, seize the long-term view of how they and the governor can position Minnesota as a leader in the global economy.
Minnesota businesses across the state are taking steps to restructure and find greater efficiencies to reduce costs. State government must partner in this. Balancing the budget is not enough. We have to be ready to grow.
Ginny Morris is president of Hubbard Radio in the Twin Cities and is chairwoman of the Minnesota Chamber Board of Directors.
