“The leadership of Minnesota must and will find new solutions to public problems, and expanded alternatives to the strategies of cut and tax. Long-term solutions involve raising revenues through expanded economic activity, and redesigning government. We need to reconsider and restructure the way we provide state services. The answers will not come easily.”
Gov. Rudy Perpich, budget message, 1983
Gov. Tim Walz’s biennial budget proposal has created a political stir, both with respect to its ambition and the accompanying price tag. The governor has made it clear that his “One Minnesota” vision demands a rededication to the institutions, programs and progressive ideals that have been a hallmark of this state for decades. His budget conveys boldness and vision.
It also conveys tiredness and monotony.
That’s because the mechanisms Walz is calling upon to achieve his vision employ the same policy and rhetorical toolbox that has been used for decades — higher taxes, more redistribution of tax dollars, and expanded spending on government programs and systems that in many cases were designed half a century ago or more. And it’s all offered with a subtext that Minnesota’s businesses aren’t carrying their fair share of the load.
There seems to be little in the way of cost management, efficiency or redesign.
It’s a budget of great ambition but little introspection.
I moved to Minnesota in late 1991, so I was not around for Rudy Perpich’s tenure as governor. But when I ask longtime members of my organization for an example of a chief executive in state history who not only embraced policy entrepreneurship but was willing to risk political capital to pursue it, Perpich is the name that comes up most frequently.
Thirty-three years ago, the 1986 Tax Reform Act was signed into law by President Ronald Reagan. Like today, Minnesota faced a federal tax conformity challenge. Like today, the state needed to pursue tax and spending policies that positioned its economy for success in the face of domestic and global competitive challenges.
The November 1986 budget forecast predicted an $813 million biennial deficit while Revenue department officials estimated a $719 million tax windfall for the state from full federal conformity.
Out of curiosity, I looked up Perpich’s 1987 State of the State address to see what he had to say about all this.
With respect to taxes, the DFL governor asserted that the state’s actions over his previous four years to cut income taxes by 25 percent had not been enough. He called on Minnesota to “harness the momentum of federal tax reform to initiate a major overhaul of our entire tax system.”
He said his tax program would have several themes: “rate reduction, simplification and fairness” — a philosophy he said he also sought to apply to corporate taxation.
His objective was to ensure that “no longer will Minnesota tax rates be in the top 10 in any major tax categories” (a point he emphasized twice). His conformity plan would return “the entire state windfall” and ensure that 125,000 Minnesota low income families would no longer have state tax liability.
He emphasized the importance of streamlining tax forms — offering a plan for a short form comprised of 5 lines that most people could do “in less than 5 minutes.” He called for dramatic simplification of the state’s property tax system — “now the most complicated in the nation” — proposing to reduce the number of property tax classifications from 68 to 6.
With respect to spending, Perpich emphasized the critical importance of investing in a strong education system with a renewed focus on contributions to economic growth and job creation. He called for public/private partnerships in research and regional economic development, laying out a vision for the interconnectedness of the private sector and government institutions long before economic development buzzwords like “agglomeration economies” and “cluster effects” became mainstream.
To be sure, Gov. Walz faces disadvantages Gov. Perpich did not. The bipartisan 1986 tax reform was carefully constructed, unlike the slapdash tax bill of 2017, fraught with “tax games, roadblocks and glitches” as a recent article by 13 of the nation’s leading tax scholars concluded. State demographics were an economic propeller in the late 1980s, not an anchor as they are today. The federal/state finance relationship is now far less robust, with the constant threat of the federal government looking to divest even more responsibilities to states.
And the 1980s were not positioned on the knife edge of having to pay for swelling retirement obligations that are now poised to crowd out the delivery of government services.
But all that is all the more reason why it is so important to embrace the ideals behind Perpich’s message to legislators — as a plan of action rather than as easy applause lines as politicians everywhere are quick to do. It’s true the answers won’t come easily and will be even harder to implement. Like an aircraft carrier, our immense government has immense inertia.
But it’s time to get serious about putting the ship of state on a new course.
Mark Haveman is executive director of the Minnesota Center for Fiscal Excellence.