As predicted by yours truly about this time a year ago, the DFL squandered a $18B “surplus” [1]
The DFL is contratulating itself that it still has a surplus of a couple billion dollars – which is a little like jumping from the top of the IDS building, opening your eyes and seeing the 20th floor, and thinking “Hey, I’m at the 20th floor, I guess I’m OK”.
The DFL has spent the state into debt.
Minnesota passed a humungous budget in the last session. To make that possible, they drew from other funds well outside of general funds, such as special revenue funds and money from the federal government.
For Health and Human Services spending, for example, lawmakers loosened eligibility and working requirements for cash assistance programs. The cost of these changes — which is about $50 million — is currently being funded by federal TANF dollars until the 2027 fiscal year.
And it’s actually much worse than that:
Once the state starts paying for these with state dollars in 2028, spending will go up. And if current events are any indication, the cost of these new changes will likely have blown past $50 million by then.
Additionally, lawmakers also allocated over $2 billion in extra funding to Medicaid. Until 2027, over half of the money will come from the Health Care Access Fund (HCAF) — a special revenue fund that has historically been used for MinnesotaCare. If at any point in the future, HCAF cannot sustain this new Medicaid spending, it will have to be shifted to the general fund.
And, go figure – the economically-illiterate DFL have killed a bunch of the golden geese (aka ripe suck citizens) that usually pay for DFL gigantism:
For one, Minnesota heavily relies on income taxation. But our income tax system is highly progressive. So, the state disproportionately relies on a small portion of the state’s high-earning individuals, which is in itself a problem.
Unfortunately, this problem was made worse last session, when lawmakers passed targeted “tax cuts” that have eliminated or reduced income tax liability for select taxpayers, such as social security income recipients and low-income parents with children. This has narrowed the individual income tax base even further.
And let’s not forget that high-income earners have already been fleeing Minnesota and going to low-tax states like Florida.
The recent changes to the tax system do not just narrow the income tax base, however. According to MCFE, these targeted tax cuts and tax redesigns have substituted less volatile sources of income tax revenue — such as salaries and social security — with the most volatile sources — such as corporate income — putting the state further in a precarious position.
I”m not in on the DFL’s planning, but I suspect it involves reliance on two things:
- Hoping the Biden Administration convincing the Fed to keep interest rates low (through the election, anyway) convinces enough gullible voters that the ecomony is just great, and
- Sending out an endless diet (as it were) of photos of Peggy Flanagan feeding Tim Walz donuts and corn dogs.
After all, that [2] is what got them through 2022.
[1] Which was a bit of a mirage, to be honest – made up of limited-time Federal stimulus money and taxation of economic activity spurred by other government-stimulated spending.
[2] Well, and that whole Roe V.Wade thing, of course.
Two of my friends, are both high net worth types. Like Howard Root, both were raised in middle class families, went to college in the state and one even started a company, with 27 employees. They are both moving to different cities in Texas. Funny! The one with his own company had ten of his employees ask if they could keep their jobs if they moved, too.
Hoping the Biden Administration convincing the Fed to keep interest rates low
Interest rates are not low. They were raised from basically 0 to over 5% in the last 20 months. What you might mean (and write) is that the Biden Administration is going to convince the Fed to (aggressively) lower interest rates in an election year.
Which is exactly what is going to happen.
As I’ve noted before, the DFL would do very well to read Genesis 41, and what Joseph did during the seven years of plenty in Egypt. Hint; he saved a portion of the crop so the people of Egypt would not starve. If only the DFL had realized that good years are a great time to save instead of spend….
Or, at least equally important in a representative democracy, let the people save.
Let the people save, yes, and with the ~$17.5 billion in debt that the state has, maybe….pay some of it off so that future generations aren’t so badly burdened?
Yeah, I know, that’s crazy talk.
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