Lori Sturdevant: Legislative session could be idea-rich, cash-poor

Reform of big, Byzantine public systems is cyclical work. It generally takes years of hand-wringing, analyzing and politicking to build a head of steam for noticeable change.

At the statehouse, steam seems to be building nicely toward action on at least two major fronts this fall. Take these veteran legislators' words for it:

•State Rep. Mindy Greiling, DFL-Roseville, says bipartisan accord is within reach on a new, simpler funding formula for K-12 education, one better tied to what up-to-the-standards schooling actually costs.

All that's needed, she said, to sell the Legislature on the recommendations likely to come out of a task force she cochairs is (drum roll, please) more money. A cool $1 billion more per year, phased in over a few years, would do the job.

That should be state money, Greiling said, the success of two-thirds of last Tuesday's 99 school levy referendums notwithstanding. A lot of Minnesotans who voted themselves a property tax increase would rather pay for schools with state income and sales taxes, she said.

•Rep. Paul Thissen, DFL-Minneapolis, says he sees a high degree of consensus developing in two separate efforts aimed at assuring high-quality health care to all Minnesotans. Both a public-private task force and a legislative commission are closing in on essentially the same recommendations for reducing costs and getting every Minnesotan covered by affordable health insurance.

What's going to be needed, he said, to push their ideas into law is (you guessed it) more money, to help more low-income Minnesotans afford insurance coverage.

Similar signals are coming from folks running pilot preschool programs for low-income kids, and those aiming to end chronic homelessness in Minnesota: We've got our act together. We know what works. We've got heads nodding in both parties.

All we need is (all together now) more money, to take what works up to scale. We'd love it from the feds; we'll happily take it from foundations and enlightened individuals and corporations.

But when public work needs money, Minnesotans are acculturated to look first to state government.

They do so for the practical reason that whenever the economy was strong in the late 20th century, state tax collections tended to be very strong indeed. The tax structure Minnesota had before 2000 was prone to producing "surprise" state money when times were good (and falling on its face when recession came -- but state politicians tended to have amnesia about that).

So, almost out of habit, all would-be education and health care reformers' eyes will be on the state Finance Department's charts on Nov. 29, when the next state revenue forecast is expected to be released.

State economist Tom Stinson refuses to give sneak previews, so the amateur economists in the Capitol basement are left to speculate. We watched last week's spiking oil prices, falling dollar and wicked fallout from the subprime mortgage bust, and thought, "Uh-oh."

The post-2000 mix of taxes in this state remains very good at producing red ink when the economy hiccups. But it's been rendered a lot less capable of generating the good-times dividend that policy reformers love to see and spend.

The 1999-2000 clip in the top-bracket income tax rate has made it a lot more difficult for the state to get its hands on the only incomes that have been growing faster than inflation in this decade -- the incomes at the very top. Earners in the way-up-there category pay about 8 percent of their incomes in state and local taxes, compared with the 12 percent most middle-earners pay.

Of course, the surprise money that revenue forecasts used to find isn't the only kind that can fuel reform. There's also the planned-for kind that would come from a tax increase.

But in an election year? With a Republican National Convention coming to scrutinize Minnesota? And a nationally ambitious governor who has made tax resistance his calling card? Na-a-a-h.

Except: Last year, Gov. Tim Pawlenty seemed on the verge of agreeing to a change in foreign operating corporations' tax rules that would generate about $125 million per year for the state. He said something akin to what DFLers had been arguing for years: That's not a tax increase. It's the closing of an unintended tax law loophole.

If the bottom-line state budget number on Nov. 29 is negative, the hiss of hot air escaping from reform balloons will be heard in lots of places around this state.

And if Pawlenty wants to keep those balloons aloft, he'll signal that he's willing to close some loopholes, raise some fees or otherwise "enhance revenue" for reform's sake. If he makes common cause with reform-minded DFLers, he might even get them to refrain from spelling his ideas t-a-x.

Lori Sturdevant is a Star Tribune editorial writer and columnist. She is at lsturdevant@startribune.com.