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Tobacco “fee” ruling part of larger problem

by Rebecca Otto
December 21, 2005

Yesterday's ruling striking down the so-called tobacco “fee” highlighted an ongoing problem at the State Capitol with fiscal management.

The “fee” was the sort of financial gimmick I spent a lot of time as a legislator working against, and it should come as no surprise that it’s placed our state budget on shaky ground.

Pushed by Governor Pawlenty last session, the “fee” was yet another way to say he was not raising “taxes.” It was part of more than a billion dollars in new “fees” in the last few years from an administration that has placed its pledge to a special interest group ahead of its duty to serve all citizens of the state of Minnesota.

As a result, our state is winding up with increasingly distorted fiscal policy driven more by “no-new-taxes” rhetoric than by sound financial principles.

An ongoing problem

Since the Governor says he wants to appeal this decision to the State Supreme Court, it bears a brief review of how we got to this point, because it's not an aberration. It's an ongoing problem.

I was in the House of Representatives in 2003 when we faced the original $4.5 billion dollar deficit. It was a tough session made tougher because we had a bunch of “no-new-taxes” pledge signers (a/k/a the “distort-state-fiscal-policy pledge”) in the legislature and our Governor and State Auditor were guilty signers as well.

I had been fighting this kind of rhetoric-driven fiscal policy ever since a school levy race I chaired and won in Forest Lake that was opposed by the Taxpayer’s League, so I knew they were about to trot out all sorts of financial smoke and mirrors.

I formed a tri-partisan coalition of Representatives and Senators that urged our colleagues in both bodies to take a more responsible look at the budget. Instead of worrying about the definition of taxes and fees, we needed to set what our priorities were as a state, and then adjust our expenditures and revenues accordingly. In short, we needed an honest discussion, not rhetoric.

Taking it to the streets

Part of this battle was informing the public about the true situation. To provide a balanced perspective, I brought together John Gunyou (Republican finance commissioner under Carlson) and Jay Kiedrowksi (Democrat finance commissioner under Perpich) for the very first time in a program sponsored by the White Bear Area Chamber of Commerce to talk about what good fiscal policy looks like. These two agreed on what sound fiscal policy is, and that we were not seeing it. They wound up traveling the state, and eventually testified before a Senate joint taxes and finance committee to inform the state budgeting process.

Back in the House, I continued the battle for sound fiscal policy by fighting the shifts and gimmicks that often wound up costing taxpayers more:

* Shifting school payments further into the future. It forced districts to do short term borrowing which we end up paying for.
* Draining of the $1.1 billion Tobacco Fund.
* I carried legislation that would put an end to the irresponsible practice of including inflation in our state’s revenue forecasts but not in our expense projections. Eventually, the Governor’s own revenue commissioner agreed with me that it was not sound fiscal policy.
* I opposed the large amount of bonding for roads which is another form of credit card spending, and a departure from our prudent, responsible, pay-as-you-go tradition.
* I opposed radical cuts of 43% to Local Government Aid proposed by the State Auditor, and even the slightly smaller cuts eventually passed, because of the losses we have already seen to basic local services like police and fire, and because these cuts would drive up property taxes, which the House Republicans knew, and which we are now seeing as well.

All these “fees” and shifts and gimmicks cost us our AAA bond rating, and this also has an increased cost. These types of rhetoric-driven policies may bandage things short-term, but are not in the best interests of the citizens in the long run.

To fee or not to fee

All of which brings us back to the tobacco “fee.” Last session, the no-new-taxes club decided they needed more revenue but they were desperate to avoid raising “taxes”, so they settled on a tobacco “fee.” And, today, it was determined that it was illegal.

This is precisely why we need a change in 2006 at the executive level of government, and especially the State Auditor’s Office. I envision a Minnesota that looks honestly at the state budget and how it relates to our local government, that implements long term financial planning driven by sound finances, not by political rhetoric. Our State Auditor should be focused on making sure that all of our communities are as efficient and effective as possible, and able to provide basic services to their citizens, not advocating for greater cuts to them at the state level which will force even greater increases in property taxes and more questionable shifts and gimmicks.

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