Lori Sturdevant: Déjà vu: It's 2002 -- a year we'd best not redo

A been-here-before sensation kept slamming me last week at the Capitol. The economy is ailing, and the state budget is hemorrhaging red ink. Yet schools, nursing homes, cities, transit and others are clamoring for more money. Legislators are announcing ideas for draining reserves and spending dedicated-fund surpluses to satisfy the demand.

Is it still 2002?

On some legislative calendars, it must be. And mass amnesia must be fogging recollection of what happened the year after, when the hole in the state budget that was only temporarily patched in 2002 ripped open, bigger and uglier than before.

"It's like they're all on their own cruise ships to Fantasy Island," said Pam Wheelock. She was speaking about 2008 from her Minnesota Wild executive suite -- but it was much the same observation she made repeatedly in 2002, as finance commissioner for Gov. Jesse Ventura.

That year, the current biennial budget was short $2.3 billion. By comparison, this year's $938 million deficit seems, in Gov. Tim Pawlenty's words, "serious but solvable."

But correct the problem the way the Legislature did in 2002, with remedies that are politically easy to swallow, and today's lawmakers could have a bellyache of a problem come 2009. The precedent of 2002 is instructive -- as a guide to what not to do.

It was the last year of three-party governance at the Capitol, and it was the first time in Ventura's four-year term when the two-against-one game put him on the losing side. Ventura proposed an "eat your spinach" budget solution, with a sales tax expansion to services, a higher cigarette tax and some sobering spending cuts.

Legislative leaders -- two of whom were running for Ventura's job -- had a taste for political blood, not spinach. They saw an opportunity to isolate Ventura as a proponent of tax increases and seized it.

Republican Tim Pawlenty and DFLer Roger Moe both have fingerprints on the stopgap solution that the Legislature adopted. It was a hodgepodge of payment delays, speeded-up tax collections, reserve-fund expenditures, raids on supposedly dedicated funds, and the audacity of outlawing an accounting of inflation's expected impact on future government expenditures. No taxes were raised, and spending was cut only to the tune of about $375 million (coincidentally, almost as much as Pawlenty is proposing to cut this year).

Any adult who lived through 2003 in Minnesota knows the denouement. Pawlenty was elected; revenues were forecast to fall $4.5 billion short of expenses in 2004-05; a $1 billion tobacco-use prevention endowment was drained (so it can't be taken again), and spending on higher education, early childhood programs, local government services and much more got whacked, hard. Five years later, some of those services are still funded below 2002 levels.

For 2008 legislators, the lesson should be this: The pain of 2003 would have been much less severe if the 2002 Legislature had lived up to its responsibility. That election-year session owed Minnesota a sustainably balanced budget, and it did not deliver.

"That's their job," said Wheelock, talking about the 2002 and 2008 cast of Capitol characters interchangeably. "They need to craft a realistic plan that equally distributes the unhappiness for now and sustains the state until the economy improves.

"If they use one-time money now, they limit the number of strategies available to them to finally solve the problem," she said.

They'll also risk another dip in the state's bond rating and a real crisis a year from now. A deficit in the last quarter of a biennium would raise the prospect of an emergency tax increase or mean delay in school payments.

"Of course, I've said all that before, and nobody listened then," Wheelock said with a grim laugh.

At least one key legislator is listening now. House tax chair Ann Lenczewski, DFL-Bloomington, has proposed eliminating a raft of special-purpose corporate tax goodies, including Pawlenty's pet, JOBZ. The gain would allow the state to reduce the overall corporate income-tax rate a full percentage point while still putting an additional $170 million on the fiscal 2009 bottom line. Better still, that gain will keep on coming.

Pass the spinach.

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