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Penny, President, Southern Minnesota Initiative Foundation
Civic Caucus, 8301
Creekside Circle #920, Bloomington, MN 55437
June 24, 2011
Verne Johnson (chair), Dave Broden, Janis Clay, Paul Gilje, Jim Hetland
(phone), Sallie Kemper, Ted Kolderie (phone), Dan Loritz, Tim McDonald,
Wayne Popham (phone), Clarence Shallbetter (phone), Fred Zimmerman
Summary of meeting:
Former Congressman Tim Penny offers his assessment of the causes and
possible solutions to the state budget dilemma. He also addresses the
larger challenge of today's political system, which as currently
structured inhibits efforts to reach compromise.
Welcome and introductions
- Tim Penny
is former DFL State Senator (1976-1982), and former DFL Congressman
serving in the US House from 1983-1995. He was known as a moderate
politician, and ran for governor in 2002 as a member of the Independence
Party. He is currently President of the Southern Minnesota Initiative
Foundation, and is a Senior Fellow at the University of Minnesota's
sides believe they have a mandate.
Both sides believe
they have a mandate, Penny said, simply because they hold an election
Governor Dayton has
the power of the governorship and the support of a strong plurality of
Minnesotans that wanted him to be in the governor's office. In the
Governor's view he has the mandate to hold to the priorities he laid forth
in his campaign: To protect public education, to protect the most
vulnerable, and to ask the wealthiest Minnesotans to "pay their fair
share." The budget he brought forth this year holds true to those
The Republicans having
won both chambers of the legislature feel they, too, have a mandate to
follow through on their campaign promises to hold spending to no more than
the revenue coming in the door, and to deliver a balanced budget with
spending restraints alone.
Regardless of the
mandates the elected officials thought they got, Penny continued, they
were in fact less mandates than mixed messages. They are only mandates in
part and in a very nuanced way. The Republican legislators and Governor
Dayton seem unwilling to admit to this fact: that we have a divided
government. After five months each side is "holding ground". It is clear
that the two sides ultimately must compromise--but how?
growing budget is driven by demographics and formulas.
The state is facing a
deficit that in part is driven by demographics and formulaic increases in
services, Penny said. For example when you have more students coming into
school and we fund the school system on a per-student basis, costs will
rise, no matter what is happening on the revenue side. Also we have used
gimmicks to balance past budgets so the deficit is worse than it would be
had past real shortfalls been addressed forthrightly.
short term, leaders should look to the "three percent solution".
"If there is a
solution that is promising," Penny commented in response to a question, "I
have to applaud Jim Mulder for offering one in yesterday's Star Tribune" (The
Three Percent Solution:
http://tinyurl.com/63d3wnh). "In it Mulder puts forward a balanced
approach for dealing with the immediate budget problem that covers all the
bases." For the longer term Minnesota needs to admit that we have
structural problems with entitlements and other programs like pensions.
* Make permanent a
$1.8 billion school funding shift.
* Enact a state budget
of about $35 billion, which is less than a three percent increase in
spending and represents reductions in projected spending of about $2.2
* Repeal selective
state tax loopholes and special tax breaks totaling about $933 million.
The two sides are
locked-in, Penny continued, and he thinks the Republicans have a very
intransigent caucus that is not willing to compromise with the Governor.
Both sides are basically preaching to their respective choirs and there is
not enough leadership on either side. "People are not stupid," Penny said,
"and I think most voters realize that both sides have been unwilling to
acknowledge some of these budgetary realities."
Legislature and Governor should establish a blue-ribbon commission for
While he was in the U.
S. Congress, Penny noted, he was an advocate at the national level for
fundamental reform in entitlements that clearly posed a growing hindrance
to fiscal stability. To a lesser degree than the federal government,
Minnesota also faces a serious, structural deficit. The major areas of
opportunity for cost containment for the state are K-12 education and
health care. "I do believe we are on a cost trajectory with these programs
that is not sustainable," he said, "and we need to rethink our commitments
to these programs."
We need to look at
appointing a long-term reform commission, he argued, that can find
long-term improvements. Over the short term, "My sense is on the spending
side Dayton needs to look at some of the proposals from Republicans that
deal with cost control," he said. "And on the revenue side, Republicans
will need to take a hard look at eliminating some tax credits that are
less than equitable."
Penny told the group
that he thinks the Republicans made a good faith effort to deal with some
cost containment, and believes Dayton has a history of thinking government
can be streamlined, and so he should show some openness there-but,
unfortunately, there's not enough commonality there to make major strides.
Minnesota needs stronger and more definitive leadership.
"We need leadership to
get this done," Penny stated. A commission for the long term can be a sign
of leadership because it demonstrates how you can make divided government
work. The 1982 federal Social Security commission could be used as a model
for such a commission. It included key leadership from the caucuses, the
executive branch, and the private sector. For a blue-ribbon committee to
work there must be buy-in from both political parties.
courts should not relieve the pressure on the situation.
Referring to the story
this morning of the 4th District Court's hearing of the suits
to continue state services during a shut-down, a participant noted there
are a couple of theories presented: One is that the court ought to
override the governor's veto and keep funds flowing. The other theory is
that this is a policy matter between the executive and legislature, and
should be left that way.
Penny responded that
he would prefer that the court stay out of it now at this stage because
intervening gives politicians a fallback-the feeling that it won't be that
bad because the court will inevitably save the day.
"I'm reluctant to see
the court step in because there has been no appropriation bill passed, and
therefore the government has no authority to run. Are there some services
that are so essential? Probably, but I don't want the court to take any
pressure off the politicians."
Intransigence has its roots in lower party participation.
Participation in the
Democratic Party caucuses-those Penny knows best from his political
days-has declined significantly, Penny said. "A few decades ago, when I
used to go to events there were farmers, professionals, small business
owners, and laborers. When you'd look at who was pro-choice or pro-life it
would be roughly 50/50. Now the small group that shows up is not as
diverse and is more ideological. The same is true for the Republicans.
These are the narrow groups that now select the candidates."
Also, he observed,
interest groups now are far more demanding and far less compromising.
Interest groups are more frequently saying that you are either with us all
the time or you're not with us at all.
"Today we're not
having a serious debate about these budget issues," he said, "instead
we're authorizing our interest groups to put on 30-second TV commercials
on the issues." For the Democrats these commercials say that we can just
tax away the problem. We cannot. For the Republicans, they say we're going
to hold spending to no more than what's coming in the door. But this
belies the fact that because of increases in demographics we cannot do
that either; since the programs are tied to demographics and we are tied
in to federal programs, spending cannot simply be cut to some arbitrary
figure. "So both sides are essentially lying to us."
are revenue options.
A participant asked
whether there is any possibility for "small knobs to be turned"-for
example, taxes levied on internet retailers or on soft drinks because of
the obesity problem.
Penny responded that
he has always thought that the notion of expanding the sales tax might be
something that both parties could support. "There are a lot of exemptions
in our sales tax," he observed. "However, I'm not sure you could get
agreement from some of the Republicans on that, given some of the
constraints they face. I also know that some Democrats have a lot of
heartburn over the effect that increasing the sales tax would have on
According to Penny,
another option to consider are short-term," blink-on blink-off" tax
increases only for the duration of the coming biennium.
Getting to better government will require reform.
How can we get back to
operating more like a republic with representative governing, a
participant asked, rather than purely "small-d" democratically where
everyone tries to say what should happen? Does this affect whether elected
officials accept more responsibility to act in the best interest of the
"You have to
understand that your constituency is greater than only those who voted for
you," Penny replied. We need election reform that allows you to donate to
a person in a state only if you are a registered voter in that state. We
also need to take partisanship out of the reapportionment process.
Three major reforms
can assist this-Instant Runoff Voting, campaign spending reform that gets
us collecting money only from voters that are from our state, and
non-partisan reapportionment by commission.
"Just to restate,"
Penny closed, "we have got to find a way to get a fix in the near term.
What's going on today is the result of a political system that is just not
structured for the kind of problems that we face today or for producing
the kind of solutions that are required for these problems."
political environment, he reiterated, a blue ribbon commission on
government programs is the best way to begin reforming government "toward