Support higher state reserves

The next time politicians campaign on giving you a tax rebate, don’t vote for them. It’s a cheap sales pitch, bamboozling you out of your savings for the benefit of a commission check, which in Ventura’s case was an election. When the governor pushed for a tax rebate, he ignored the advice of the state’s Council of Economic Advisors to increase the state’s budget reserve by more than $700 million to approximately $1.4 billion. The Council of Economic Advisors prudently recommends the state retain 5 percent of its forecasted biennium budget in case the state suffers a budget shortfall like the one we’re experiencing now. But instead of the recommended increase, the budget reserve was only increased $31 million and money that could’ve brought the state to safe levels was squandered in a heap of $300 tax rebates.

Minnesota’s $2 billion shortfall isn’t unique – 44 states reported revenue shortfalls this year. They expected the economy to continue expanding, bringing in increasingly larger tax revenues. Politicians like President George W. Bush predicted the economy would continue to grow for the next 10 years, even though the previous eight years constituted the longest period of economic growth in United States history. This is akin to Barry Bonds not only hitting three more home runs than McGwire’s previous record, but going on to more than double the record by hitting 166 homeruns in a season. Doesn’t seem like a safe bet, does it? Well, it wasn’t a safe bet for politicians either and unfortunately they were betting with our money to win our vote.

Budget reserves cushion the frequent shortfalls that impact governments. The budget has come up short for five of the last 11 biennia. A budget reserve enables the government to access funds interest-free. Over the last 20 years, the Minnesota government has paid hundreds of thousands of dollars in interest because it needed to borrow money to pay bills. The government inefficiently spends money by creating programs it has to abandon a few years later when recession strikes – only to recreate them when the money re-emerges.

The point here isn’t to complain about spilled milk but rather to note how the milk spilled in the first place and how we can prevent it from spilling again in the future. So, when someone cooks the books with “fuzzy math” to convince you that the money in the bank isn’t savings but rather disposable income that should be spent immediately, don’t vote for them. Instead pressure politicians to keep their hands off the books and let accountants and economic analysts do their jobs.