So Governor Pawlenty is going to have to cut the budget himself to balance it. The question is how? He’s asked for public input at budgetideas@state.mn.us, and a lot of people have been sending him suggestions. We have little idea what those suggestions are because they haven’t been released in their entirety, but the ones that have been released, such as liquor sales on Sunday (which I support) and racino (which I do not), aren’t real solutions because the governor has to cut the budget; he can’t unilaterally change the law to increase revenue. Asking the public what to cut is a lot more difficult (if I was asked, I’d first suggest the governor stop being a stubborn, short-sighted, mean-spirited jerk; then I might suggest cutting IT costs by moving to open-source software like Linux and Open Office). Why is it more difficult to get answers from the public as to what to cut? One reason is that many people don’t know where the budget goes.
I think if you asked the general public where the state spent most of its money, you’d get some obviously correct answers (like public schools), but you’d probably also hear things like “welfare” and “free clinics” and “bureaucracy”. What’s true and what isn’t? Once again, the pesky bureaucracy comes through: Minnesota Management and Budget (MMB) has a short, simple budget overview document here. What does it say?
First, you have to define where the money is coming from. The majority of money the state collects, and the one that the legislature and governor wrangle over, is the General Fund, which mainly consists of sales taxes, income taxes from individuals and businesses, the statewide property tax on non-residential property, “sin” taxes, and a few more miscellaneous taxes. The state uses the General Fund to pay for most state services. There are some special funds like the Highway User Tax Distribution Fund (HUTDF), the fund that collects money from gas taxes and license tab fees and must be spent on roads per the state constitution, but the most important fund is the General Fund.
The number one destination for General Fund money is K-12 education, just shy of 40%. Most politicians on both sides are very resistant to cutting funding for schools, so if you want to balance the budget without hurting schools, 40% of all spending is immediately off the table for cuts. The next biggest chunk is Health and Human Services (HHS) funding, at almost 30%. This is health care for the sick, the poor (employed and not employed), the elderly, the disabled, people in nursing homes and assisted-living facilities, those kinds of things. The third-largest budget area is Local Government Aid (LGA) and other property tax credits, which is money sent from the state to cities and individuals to keep property taxes low, at just under 10%. The last area of the top four is higher education, our state colleges and universities, which is just under 9%.
To recap: K-12 education, HHS, LGA, and higher ed. Those four areas make up almost 90% of the entire state General Fund budget; everything else, like state parks, agricultural programs, environmental protection, prisons, and so forth make up the remainder.
What about some budget items that people think are big parts of the budget, like bureaucracy and welfare? Welfare is part of the HHS budget, but it is a very small part, and it makes up less than 2% of the state’s General Fund budget. If the state were to eliminate welfare completely, not only would it not come close to solving the budget deficit, but it would also mean that Minnesota would lose a good chunk of money from the federal government. Considering that for every dollar people and businesses in Minnesota send to the federal government in the form of federal taxes, we get about 73¢ back, it would be pretty foolish to lose federal funding and make that ratio worse. Similarly, the state bureaucracy is also a tiny portion of the budget, at 1.8%.
This is why there are no easy answers. Cutting the obvious targets would not solve the problem, and cutting the big targets means that there will be pain. Cut K-12 education and you get teacher layoffs and larger class sizes. Cut HHS spending and you get people losing health care. Cut LGA spending and either property taxes will go up or cities and counties will cut back on police officers, fire protection, libraries, and parks. Cut higher ed spending and tuition will go up at the University of Minnesota and Minnesota State Colleges and Universities.
So how should the budget be cut?