In 2010 when Republican’s won control of the Minnesota House & Senate, they had a mess on their hands. A $6 Billion deficit. Reserve and cash flow accounts were drained. Despite the election of Mark Dayton, a liberal Democratic Governor, the majority performed well. Yet, like so many other election 2012 mysteries, a majority of voters rejected the Republicans. Now, Minnesotans can look forward to the tax and spend trifecta of all Democratic rule for the first time since 1990. There is already talk of a new sales tax on services (legal, accounting, public relations work, etc.) and other crazy ideas to fund more big government in Minnesota.
Meanwhile, Republican rule continues in North Dakota. There is no battle in Bismarck about how to solve a deficit problem since the state is awash in cash, the fruits of a robust economy led by a legendary oil boom and another recording year for growers. There is a super minority of Democrats who yield very little power. So the only debate is really between conservative Republicans and liberal Republicans.
The big news this week was the budget proposal from Governor Jack Dalrymple. It’s prompted some of the same questions we have heard through much of the Hoeven-Dalrymple and now Dalrymple-Wrigley years. Are we spending too much? Are tax payers getting enough of their money back? I’m saving much of my opinion on the matter for a future column and the radio show, but here is Governor Dalrymple’s responses from our interview on his budget proposal:
Hennen Q: Write your own headline about the budget.
Dalrymple A: Well I think it’s good news for the people of North Dakota. We can cut taxes even further. We can fund our priorities and pay for a lot of new infrastructure investments, and we can still continue to build up some very good reserves to protect us against any kind of a rainy day. So, it doesn’t get much better than that. I don’t know that there’s another state in the country that has a budget situation like we’ve got.
Hennen Q: What are you able to do that 99% of your colleagues can’t?
Dalrymple A: Well it’s really a number of things Scott. I mean, to be able to lower taxes, to be able to provide more property tax relief, more income tax relief, help senior citizens with their homestead tax credit. To be able to do all that, and at the same time turn around and make major investments in roads and highways and educational buildings and other things for the future. That’s as good as it gets, and we just think that now is the time to use those cash reserves to make these wise investments that we know will pay back to us again and again for years to come. That is not to mean that we’re going to spend down our reserves. On the contrary, our reserves will actually grow stronger. I think it’s what every state would dream would happen to their economy and it has happened to ours. We have to be responsible. We have to be careful that we do not build up a baseline spending. By that I mean the spending on ongoing programs that are various state agencies. Those we need to keep well under control, because we will have to continue paying for them far into the future. So there, we’ve been cautious. When it comes to cash reserves, we think infrastructure investments is the way to go.
Hennen Q: What about the argument that there’s too much spending here and the increases are dangerous?
Dalrymple A: Well, again I have to go back and try to educate people on the difference between an ongoing budget expenditure and a one-time investment in something like a highway project. In the ongoing budget area, our year-to-year increase… if you take out the fact that the federal government is forcing us to pay a greater share of the medicaid expenses, and you also take out the fact that our school enrollment growth is taking off on us… take those two items out, which are really not within our discretion. They’re just things that happen to you. Then, our ongoing budget is going up at a rate of 5.2% per year. We think that is responsible under these circumstances. We think that does not put us in a hole down the road. Now, will I spend $100 million on a flood control project or on a major highway project? Yes, I think those are things that pay back to us they keep people from being damaged by flood waters. They make it possible for people in commerce to do more things in your state. Those things are in a different category.
Hennen Q: Some of the response from the democratic side has been a criticism of the $25 million in corporate tax reduction that’s included. Mac Schneider, the new democratic leader, said “We’re talking about tax cuts for Walmart. We think those tax cuts should go to North Dakota property owners.”
Dalrymple A: Well I think that when you provide tax relief, you have to be careful to maintain a balanced tax system where everybody and every business is paying some tax. We have a sales tax, we have a motor vehicle excise tax, we have individual income tax, we have corporate tax. One of the beauties of our tax system is that we spread out the taxation over a wide number of sources. That makes is less painful for everybody. And to cut taxes in one category and not in another is dangerous, because you begin to lose the balance in your tax system.
The Governor is right. No other state has the rosy budget picture that North Dakota has today. The big question that will dominate the political debate again this session is whether it’s responsible to continue the increases in spending, just because the money is pouring in. However the vast majority of North Dakota citizens seem quite content to continue down a similar path to the last decade. Meanwhile, we’ll find out what the change in Minnesota means for taxpayers there. Hang on to your pocketbooks in the land of 10,000 taxes.
Scott Hennen hosts a daily radio talk show from 11am to 2pm on AM 1100 “The Flag from Fargo, ND and WBKK AM 820 in Bemidji, Minn plus heard from 2 to 5pm on AM 1090 KTGO in Tioga/Williston, N.D. Listen at ScottHennen.com, join him on Facebook and Twitter too.