The way out of recession and a massive state budget deficit, Gov. Tim Pawlenty said Thursday, is to cut business taxes, use new education spending as an incentive for higher performance by teachers and students, and cut state spending on just about everything else, consolidating and restructuring government operations along the way.
That -- along with a reprise of his trademark "don't-raise-taxes" directive -- was the path presented by Pawlenty in his seventh State of the State message. It's a familiar path toward smaller government, not very different from the one Pawlenty has asked Minnesota to walk since 2003. He has met with increasing resistance from a Legislature that has seen gains in Pawlenty's DFL opposition in each of the past three elections.
Nevertheless, Pawlenty asked legislators Thursday for a fresh look at his ideas, not as partisans, but as Minnesotans. DFLers would do well to consider Pawlenty's proposals in that spirit, and in the light of the second supersized state revenue shortfall in this decade. In that light -- and without too much focus on details -- some of his ideas look promising.
That's a big bite at a time when the state deficit exceeds $5 billion. It's based on Pawlenty's position that business taxes are uncompetitively high in Minnesota. At a policy conference Wednesday, legislators heard Moody's economist Steven Cochrane disagree. He pegged state-imposed business costs in Minnesota as slightly below the U.S. average.
Yet tax policy experts have been advising for years that the corporate income tax is excessively volatile, easily dodged, expensive to collect and regressive. It falls disproportionately hard on consumers and laborers at the low end of the income spectrum. Some of the same can be said for other taxes paid by business.
That's why some DFLers, including House tax chair Ann Lenczewski, have been urging that Minnesota's budget rely less on corporate income taxes. An attention-getting move in that direction this year might be a strategic advantage for Minnesota.
The test for Pawlenty's business tax proposals -- and for any other legislative idea to stimulate the economy -- should lie in their track record. Does evidence show that they work? Have they been tested and found to achieve the positive results claimed for them?
Results are available for Q Comp, the now-voluntary teacher performance pay program that Pawlenty proposes to expand statewide. More than 60 districts and charter schools use the program now. If their experience has been favorable, Pawlenty is right to want the program to grow.
Similarly, Pawlenty is right to advocate for a larger state investment in education, and for spending that is tied to improved student performance. That's an attempt to maintain Minnesota's clearest economic advantage, its well-educated workforce. Legislators would do well to improve on his notion, and assure that money flows to proven tactics for getting more students through grade 12 and beyond. One obvious strategy: fund high-quality preschool for low-income children.
Legislators should share Pawlenty's interest in streamlining, modernizing and consolidating government's "back room" operations. They should be open to wage strictures for government employees as an alternative to layoffs. They should see and raise Pawlenty's bid to lift mandates on local governments.
If the GOP governor and DFL Legislature find common ground on those things, they will position themselves for creative collaboration on more. That should be among this session's goals. Pawlenty put it well yesterday: "The challenges we face are so large that we'll need the best ideas and best efforts from across the aisle, and across Minnesota."