Capitol Update for January 16, 2009

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This week’s update from lobbyist John Tuma:

“Ya, and I used to be the Queen Elizabeth!”
– A Montana shop clerk in the little hamlet of Elliston on the Continental Divide, July 20, 1983.*

During Al Quie’s four years as governor of Minnesota, he presided over the state’s most brutal government fiscal crisis since the Great Depression.  During 1981 and 1982, his last two years as governor, he presided over six special sessions that strained the patience of this kind and gentle Lutheran farm boy who earned a reputation as a statesman during his long service in the U.S. House of Representatives.  The political strife was so deep he chose to forego seeking reelection after only serving one term.  The political strife simply just wore him out.

The choice not to seek reelection allowed him to fulfill a personal goal he had dreamed of for years.  He grew up riding horse on the rural landscape of Rice County where his imagination would often take him to the long trail rides of our pioneer forefathers on the western frontier.  From the seeds of this imagination grew a dream to someday ride the Continental Divide from Montana to New Mexico.  Taking several weeks at a time over a nine-year period, he was able to accomplish this astounding goal, riding with many of his old boyhood and newfound horse enthusiast friends.  You can read about this journey in his self-published book Riding the Divide.  As a review, it is a delightful read if you’re into trail riding.

One of the enchanting stories from this trip occurred on one of his first legs in the Montana Rockies soon after leaving office.  While visiting with Governor Schwinden of Montana at one of the last governors’ conferences Quie attended, he confided his desire to ride the Continental Divide.  The Montana governor was fascinated with this quest and told Quie to give him a call when he reached the little town of Elliston just outside of the Montana capitol.  Schwinden said he’d love to come visit Quie’s posse if he could.  After several weeks on the trail in the days before the proliferation of cell phones, Quie entered the little hamlet of Elliston which is made up of a saloon and a little grocery store.  Not having shaved or showered for several days, he looked the role of a mountain man trapper wandering in from the back country.

Entering the little store, he realized there was no public phone and kindly asked the clerk if she could call the governor of Montana explaining that he was a former governor of Minnesota.  Her response looking at this disheveled grizzly bear of a man in riding clothing was “Ya, and I used to be the Queen Elizabeth!”  It was a humbling reminder he was no longer in power, but after four years of brutal recognition in the bruising political crisis, it was almost sweet relief to be the unknown mountain man.

Given the challenging cuts they’ll need to make in the 2009 session, no doubt many of the present political leaders are hoping they can go unrecognized for awhile.  The budget crisis facing Governor Pawlenty and the 201 legislators is the worst since the Great Depression, eclipsing even the budget crisis faced by Governor Quie in the early 1980s and a budget crisis they faced back in 2003.  The early 1980s budget crisis was significant, but only made memorable by the fact that the state government lacked many of the budgeting tools that are present today.  Actually, that crisis was the impetus for creating improved budget reserves, long-term forecasting and the fiscal note process those of us who work at the Legislature now take for granted.

Unfortunately, the early 80s budget crisis does not compare to that which we face today.  The 2009 budget shortfall is the first time since the early 1960s that the state’s actual revenue collections will decline from the previous biennium.  The scope and size of the 2009 budget far outstrips anything faced by legislators in the early 1980s or 1960s.  The state’s economic forecasters predict that if our revenues and spending remain the same for the next fiscal budget starting in July 2009 and going through June 2011, we will face a shortfall of $4.847 billion.

You may remember that the 2003 budget shortfall was also in the $4 billion category.  The difference was that most of our budget reserves were intact and we had $1 billion in one-time revenue from the tobacco litigation settlements.  Comparatively, the 2009 budget deficit does not take into account inflation, which the state’s economists estimate would be around $650 million for the future biennium. On top of that, you could add another $650 million to restore the budget reserve to pre-2008 levels and $350 million to restore the cashflow account to historic levels as well.  If you include all that, which makes a far better comparison to the 2003 budget shortfall, the tab for a complete budget solution in 2009 is just shy of $6.5 billion.  That is approximately 18% of our present biennial budget.

All this is based on the November forecast.  The Legislature actually balances the budget off the February forecast which will come out at the end of that month.  Early indications are that the February forecast will only deteriorate further.  Since the November forecast, the job loss predictions have nearly tripled from 20,000 jobs to more than 58,000 jobs expected to be lost by the end of 2009.  The net general fund revenue for November and December 2008 were 4.5% less than the November forecast.  General fund receipts for Nov/Dec 2008 are 6.7% less than Nov/Dec 2007.

In the midst of this budget crisis, Governor Pawlenty delivered his State of the State address to a packed House chamber on Thursday.  As suspected, the majority of his speech addressed this historic crisis.  His main proposals were $1 billion plus in new business tax cuts and education reform spending.  These proposals were frankly baffling to the DFL majority leaders who couldn’t understand why he would be adding to the deficit problem with new spending proposals. They wanted some hint of a roadmap to get out of this crisis, but were only handed a deeper problem.  If you view his speech in the context of national politics it makes more sense.  It appeared to be an attempt at a Reagan style image from the early 1980s of tax cuts to stimulate the economy.  Unfortunately, the state cannot deficit spend like Reagan could.  Therefore, this means his budget will likely propose deep cuts outside of military, public safety and education spending, which he seemed to indicate are off the cutting table.

The closest he came to mentioning environmental issues was promotion of his “green jobs” initiative.  This initiative was heavy on business tax breaks for industries bringing jobs related to “new opportunities in energy from wind, solar, biomass, biogas, geothermal, biofuels and energy conservation…”  He made no other mention of environmental initiatives in his speech.  The lack of mentioning environmental programs is probably good news in the era of a budget crisis because if mentioned it would likely mean only possible cuts.  We will know more when his budget comes out in two weeks.  There was also no mention of the constitutional amendment dedicating new sales tax revenue to water, parks, conservation and arts.  We’ll take that as a positive sign of a hands-off approach to the dollars the voters have set aside for these purposes.

The Legislature started to make some of its first steps towards managing these new constitutionally dedicated resources this week.  The House Cultural and Outdoor Resources Committee, chaired by Rep. Mary Murphy (DFL-Hermantown), had its first hearing on Monday.  As a new committee, the chair had members of the audience present 90 second introductions and then each of the committee members commented on why they wanted to be members of the committee.  She assigned all the members and lobbyists with the task of providing her with a picture doing our favorite activity as it relates to the purposes of the constitutional amendment (my photos will be of fishing and hiking) and also to talk to three individuals from different age ranges on why they voted yes for the amendment.  By the way, if you haven’t already guessed, Rep. Murphy is a veteran schoolteacher.

On the Senate side, the Environment, Energy and Natural Resources Budget Division had its first meeting on Tuesday.  Chair Ellen Anderson indicated there will be three subcommittees which will address the constitutional amendment funding within her jurisdiction. Senator Saxhaug’s Natural Resources Subcommittee will oversee the Lessard Outdoor Heritage Council recommendations for the conservation portion of the dedicated funds.  Two new subcommittees will soon be named by the chair to oversee the water portion and the parks and trails portion of the dedicated funding.

The Senate committee also reviewed the governor’s unilateral cuts to the DNR and PCA to insure the last biennium’s budget is balanced.  The DNR’s budget was reduced by $5.3 million and PCA had a $1.4 million reduction.  Again, this was a disproportionate share of cuts to the environment compared to other areas of the budget.  Given the budget crisis we face, the voters of this great state have bestowed on us a wonderful gift to preserve long-term investments in the great outdoors for our future generations.  It also shows we will have significant challenges during the session to preserve these investments and come to an appropriate understanding of what the Constitution means when it says these new funds should supplement and not replace our existing investments in these areas.

The depth of this budget crisis will require new thinking, and the old ways of talking about why your program should be preserved no longer hold.  We are fortunate to have constitutional protection for a portion of our environmental investments, but other traditional conservation and environment programs will likely see significant cuts.  This session will require our leaders to be statesmen.  Though our governor did not wow the mostly DFL audience at his Thursday State of the State address, he did lead off with a message much more conciliatory than his 2008 State of the State address in St. Cloud, where he defiantly waved his veto pen in the air as a threat.  One of his opening statements this year was reminiscent of MEP’s messaging from a couple years back when he stated “Today, we’re not Democrats, we’re not Republicans, we’re Minnesotans and we’re all here because we love and care about Minnesota.”  Hopefully this is a little of that famous Al Quie statesmanship coming out in Governor Pawlenty, but let’s hope it doesn’t take six special sessions to reach a solution to this historic budget crisis.

*Riding the Divide by Al Quie with Carol Pettitt, self-published August 2003.  Also quotes obtained from Riding into the Sunset: Al Quie, a Life of Faith, Service and Civility by Mitch Pearlstein.

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