Wednesday — the day after tax filing deadline day — might have been the busiest day of the year in the mailroom at the Minnesota Department of Revenue. Yet both machines and humans appeared to be in good working order when this journalist barged in for a visit.
Tax operations director Dan Getschel recited impressive numbers as he showed me around: Even though 85 percent of Minnesota individual income taxpayers now file and pay electronically, his shop still processes 3 million pieces of mail each year, 500,000 of them individual income tax returns. On last year’s peak volume day, tax operations handled 48,515 paper deposits totaling $167,001,376.20. With the taxpaying population growing, this year is likely to see a higher peak; he’ll know in a few days.
It takes 55 people divided between two shifts to operate machines that sort, open and electronically scan the contents of all those envelopes. Getschel can’t imagine doing the job as well with fewer people, he said.
But if the Legislature’s Republican majorities have their way, he may have to. Budget bills now in conference committee take a whack at state agency funding — and they make no exception for the agency that collects those funds under the noble motto: “Working together to fund Minnesota’s future.”
Both the House and Senate would shrink the revenuers’ operating funds by about $12 million in 2018-19 compared with 2016-17’s $286 million. In addition, the House would order the department to implement a free electronic filing system that Commissioner Cynthia Bauerly says would take another $22.3 million from agency operations.
That $12 million haircut might sound like a minor trim. But agencies whose workload grows with Minnesota’s population and economy need more money each year to keep their level of service constant. Bauerly reports that each year there are more returns, more customers at eight storefront service offices around the state (and higher rent to pay for those facilities), more phone calls from confused taxpayers, more merchants to educate about sales tax remittance, more fraudsters stealing identities to try to get refunds to which they are not entitled …
In other words, the tax collection business is booming. And it’s increasingly hard to hire and keep the kind of workers who last year in routine reviews — not audits, mind you — spotted and saw to the correction of $64 million in errors made by individual tax filers, $17 million of which were in the taxpayers’ favor. That’s why Gov. Mark Dayton called for a biennium-over-biennium increase of $29 million for the Department of Revenue — $20 million of which Bauerly says is the sum required just to keep pace with routine growth. If the Legislature gets its way instead, she said, the result would be the loss of 200 jobs in the 1,350-employee agency and “months and months” of delays in processing returns.
Bauerly took that argument to the Capitol press corps on April 11 — and made herself a target for a GOP rebuttal.
“There seems to be some mismanagement going on if they need an additional $20 million just to keep things at status quo,” state Rep. Sarah Anderson, chair of the House’s state agency funding panel, told MPR. The Revenue Department’s budget had grown $30 million in the past six years, Anderson told me last week. “That’s a lot of money for an agency whose job doesn’t change from year to year.”
Bauerly explains that budget growth by citing the aforementioned increase in filers, phone calls, audits, lawsuits and the like. There was investment in automation that hastened refunds and freed up staffers for one-on-one service to taxpayers. There were also more errors corrected and fraud prevented, detected and prosecuted.
When that happens, the state collects more of the money it’s legally owed. The burden of paying for government is spread among the population in the way that lawmakers intended.
It’s been said that every dollar cut from the Revenue Department’s budget costs the state treasury $3 in lost revenue. Whether or not that’s precisely true, it calls into question the wisdom of cutting the Revenue Department as a cost-saving measure.
For me, the Bauerly-Anderson dust-up calls into question one thing more: the way state government forecasts future budgets.
That $1.5 billion surplus you’ve heard about for the next two years? It assumes that the spending set for much of state government in mid-2015 will hold steady through mid-2019 — with no increase in salaries, staffing levels, material costs, and (in most cases) no adjustment for the growth in the population or the economy.
That’s not the assumption that’s made on the revenue side of the forecast ledger. It also isn’t the way spending was forecast before 2002. But it was in the partisan self-interest of both DFLers and Republicans 15 years ago to make a looming deficit seem smaller than it really was. Removing inflation on the spending side of forecasts did that politically expedient trick.
But the trick wasn’t in democracy’s interest. It means that forecasts don’t tell citizens all they deserve to know about what it will cost to operate government two years from now, provided those operations don’t change. It allows politicians to boast about keeping a budget in the black that’s more accurately very close to red, and/or to claim that government is collecting more tax revenue than it needs to maintain today’s services.
Republicans sometimes argue that squeezing the budget at the Department of Revenue and other state agencies will make them more efficient. It’s an article of latter-day Republican faith that there is no government agency that cannot cough up some of its operating budget for the sake of a tax cut — and that no politically discernible ill effect will be ensue if it does.
But it was instructive to listen to Dan Getschel relate that his division has won national awards for efficiency and customer service. Other states send delegations to his shop to learn best practices, he said. Maintaining that quality matters a great deal to him. It ought to matter to the Legislature, too.
Lori Sturdevant is a Star Tribune editorial writer and columnist. She is at email@example.com.