Former Minnesota Gov. Tim Pawlenty, now head of the banking industry's Financial Services Roundtable, said that revenues will have to be "part of the mix" in the discussions regarding the "fiscal cliff" in Washington.
Pawlenty saying that discussing revenue is appropriate is a new message from the former governor, who spent eight years opposing new state revenues of nearly any type.
But on CNN Wednesday he said to fly the fiscal plane over the cliff: "One wing is what Speaker Boehner has said, which is we are going to have to work on revenues and put that on the table, the details are to be defined about that, but at least they are working on that and there’s some acknowledgement around that but the other wing of course is going to be structural, spending reform and containment and that’s going to have to include entitlement reform and so far there is less progress or less coming together on that issue."
Asked specifically if he would adopt President Obama's plan to let the Bush-era tax cuts expire for the wealthy and extend them for the rest of taxpayers, Pawlenty demurred that the Financial Services Roundtable "hasn't taken a specific position on that."
But he reiterated that: "most of my members would say they recognize that some revenues need to be part of the mix but they haven’t taken a position on what specifically would (generate them.)"
More than a dozen budget-rattled Minnesota mayors spent an hour Monday telling DFL Gov. Mark Dayton how to improve aid to cities and local governments.
One after another, mayors from across the state said years of reductions in aid created chaos in their budgets and hindered them from providing basic services.
“We need it desperately,” said Joyce Nyhus, mayor of Buffalo Lake, a city of 733 in Renville County.
The mayors made their case as Dayton and his top staffers are preparing a budget proposal for the next two years. Dayton’s new budget plan is likely to include a retooling of the state tax system and tax hikes to help pay for services.
As the economy slid, former Republican Gov. Tim Pawlenty and DFL lawmakers regularly trimmed aid to cities and counties to tame budget deficits. Many Republicans have been skeptical of the aid system for years, particularly as some of the biggest benefactors are communities with strong DFL ties. Lawmakers created the system decades ago to shift tax money from more affluent communities to urban and outstate areas where demand for basic service out-striped the local property tax base. Over time, critics argue, the system has gotten out of whack and encouraged runaway spending in some communities that get the money.
Worthington Mayor Alan Oberloh, who is running for state Senate, said the state needs to come up with a system that is more sustainable.
“It’s the least stable thing we can count on,” Oberloh said. City officials need a reliable aid system that “not every Legislature will come after with a knife.”
Mayors acknowledged that the system has failed to adjust as communities have grown or fallen behind.
Northfield Mayor Mary Rossing said the system is like “a bad screwdriver that no longer works.”
The mayors are part of a task force established by Revenue Commissioner Myron Frans to look at ways to improve the state aid system.
After the meeting, Dayton renewed his call for a DFL-controlled Legislature to allow him to implement changes. The governor has been a strong defender of aid to local governments, but so far there hasn't been any new money in the budget to boost aid. His proposals to increase taxes on high earners have gotten an icy reception from the GOP-controlled Legislature.
“Having a DFL majority in both bodies is really important because one body can block progress from happening,” Dayton said. “We will trade gridlock for progress.”
Minneapolis Mayor R.T. Rybak said city leaders realize they need to figure out ways to become more efficient, offering a proposal for a metrowide fire department as an example. But he said city leaders around the state will get behind Dayton’s reforms, which could make for a testy budget fight.
“There’s wind in your sails if your do this,” Rybak said.
Minnesota tax collections beat estimates by $145 million over the last three months as the strengthening economy caused consumer spending to rise.
The state took in $3.75 billion from taxes and other revenue in the first quarter of the 2013 fiscal year, 4 percent more than budget officials predicted, according to Minnesota Management and Budget.
All four major areas of revenue beat the estimates. Income tax collections were up $42 million, to $1.9 billion. Sales tax revenue edged up $17 million, to $1.02 billion. Corporate tax collections saw the largest percentage gain, up $41 million, or 15.3 percent.
An extra $45 million in other revenue came from an unexpected surplus from the workers’ compensation plan and stronger than expected mortgage and deed taxes from home sales and mortgage refinancing.
Since February, revenue has exceeded projections by $444 million.
Budget officials warned that the economic rebound has not met expectations, however.
“The U.S. economy has not performed as well as hoped since the end of the Great Recession,” according to Minnesota Management and Budget. “We have escaped the downward spiral.... But we have not, as yet, been able to shake off the economic inertia produced by the longest and deepest recession in the post-war period.”
Minnesota Management and Budget officials still see signs the economy will continue improving.
“Consumer confidence has increased, auto sales are more than 50 percent above their lows, and housing starts, while still at disturbingly low levels appear to be recovering,” according to the agency.
However, the agency said, slow global economic growth and political uncertainty at home and around the country could be a drag on growth through next year.
The upbeat revenue assessment does not include a look at state spending, so it does not paint a complete picture of the state’s budget.
A more nuanced look at state finances will come in early December when state officials release the state budget forecast.