1

Common Cents

About Common Cents

• Funded by the Bush Foundation• Share information and perspectives about

Minnesota’s fiscal situation• 50+ workshops around the state

• State budget balancing• Tax reform

2

Common Cents

About the Citizens League

• Nonpartisan nonprofit for 60 years• Vision is to create the common ground where

“we the People” can achieve the common good• Principle: People who are affected by a

problem should have the opportunity to define it and weigh in on how it’s solved

3

Common CentsWhy We Are Here

1) Better understand the trends and challenges facing Minnesota’s budget

2) Share your vision and values

3) Provide input on your priorities

4) Inform the Bush Foundation’s work

4

Common Cents

Why We Are Here

5) Model meaningful civic discussion on important issues

--expect disagreement

--mixed views at tables

--feel free to respectfully disagree

5

Q1. The state has had a history of recurring budget shortfalls. Why do you think that is? (choose up to two)

6

0%0%0%0%0%0%0% 1. The economy

2. People want more than they’re willing to pay for

3. Special interests are too influential

4. Short-term political decisions ignore long-term fiscal problems

5. Government is inefficient

6. Tax & spending structure doesn’t match today’s economy

7. We haven't raised adequate taxes

Common Cents

State Budget Shortfalls

2012-13: $0

Projected 2014-15: $1.1-$2.6 billion

7

8

The 2014-15 Budget:Is it a shortfall or an increase? Both!

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

K-12 Higher Ed Property tax aids and credits Health and human services All other

in m

illio

ns

’12-’13 ex-penditures

’12-’13 rev-enues

’14-’15 rev-enues

’14-’15 ex-penditures

$35.1 billion $35.1 billion$37.9 billion $36.8 billion

State General Fund, FY 2012-13: $35 Billion

9

Source: Minnesota Management & Budget

Over Next 25 Years, State Spending Will Outpace Revenue

10

Health Care Education All Other Total Spending Revenue0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0% 8.5%

4.8%

2.7%

5.4%

3.9%

% Annual Growth Rate (Compounded)

Source: Budget Trends Study Commission Report, 2009. Source: Analysis from Minnesota Management & Budget (MMB)

11

Why Is This Happening?

1. Minnesota is aging2. Labor force growth is slowing

Population 65+ is Increasing Dramatically

12

Source: Bush Foundation. MNCompass from U.S. Census Bureau and State Demographic Center Projections.

Minnesota Workers Will Have to Support More Dependents

13

Source: Budget Trends Study Commission, 2009.

14

• Spending (service) cuts

• Higher taxes

• Redesign government services so they are more cost-effective

• Economic growth–grow the tax base

• Temporary measures like accounting changes or borrowing

Five Options to Balance the Budget

Spending

15

Common Cents

Total MN State and Local SpendingSlightly Less than US Average (2008)

16

Per $1,000 of Personal Income. Source: Bureau of the Census, Survey of Gov’t Finances, 2008.

K-12

Higher Education

Highways

Public Safety

Natural Resources

Health & Human Services

Total Expenditures

$- $50.00 $100.00 $150.00 $200.00 $250.00

$45.69

$18.04

$12.40

$17.54

$2.42

$48.29

$229.31

$42.95

$18.33

$16.54

$13.47

$2.65

$55.50

$224.82

MNU.S.

Spending on Medical Care is Largest Piece of HHS Budget

17

19601962

19641966

19681970

19721974

19761978

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20080

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

MN Public Assistance, 1960-2008, 2008 dollars

medical care income maintenance

Elderly Population in Need of Long Term Care Will Grow Significantly

18

Costs projected to grow from $1 billion of state budget today to$5 billion by 2035; MN taxpayers pay half of these costs.

K-12 per Pupil Spending Increased by $2,000

19

19911993

19951997

19992001

20032005

20072009

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

LocalState

Shown in 2006 Dollars. Source: Minnesota Department of Finance.

Q2. Over the next ten years, where would you spend LESS state money? (choose up to three)

20

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%1. K-12 education

2. Higher education

3. Health care for the low income Minnesotans

4. Long-term care

5. Property tax credits and aids

6. Capital improvements

7. Economic development

8. Across-the-board cuts in state employees/agencies

9. Public safety

10. None of the above

Common Cents

Taxes and Revenues

21

Total MN Taxes Slightly Higher than US Average (2008)

22

Total State and Local Taxes (per $1,000 of personal income)

Property

Individual Income

Sales

Corporate Income

Total Taxes

$- $20.00 $40.00 $60.00 $80.00 $100.00 $120.00

$34.43

$31.03

$26.14

$4.81

$111.72

$30.40

$35.63

$21.39

$4.77

$113.28

MinnesotaUS

Source: Bureau of the Census, Survey of Gov’t Finances, 2008.

MN State & Local Taxes 11.5% of Household Income (2013 est.)

23

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2013 (Est.)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

12.0%13.0% 12.0% 11.3% 11.4% 11.5%

Minnesota Effective Tax Rates, All State & Local Taxes

Source: Minnesota Department of Revenue Tax Incidence Study, 2011. Figure E-1.

The Picture Is Different by Income Levels

24

Source: Minnesota Department of Revenue, Tax Incidence Study, 2011. Table 1-5.

First Second Third Fourth Fifth Sixth Seventh Eighth Ninth Tenth0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

32.5%

13.3% 11.8% 12.3% 12.2%10.3%

Total State & Local Tax Rate

Effective Tax Rates by Population Decile, 2008

Q3. Under what circumstances, if any, would you personally be willing to pay higher taxes?

(choose up to two)

25

0%

0%

0%

0%

0%

0%

0% 1. If it’s clear we get more for our money

2. If the overall tax structure is fair

3. For certain services only

4. For certain types of taxes only

5. I’m willing to pay more given the budget situation

6. I am not willing; I am taxed enough

7. Other

Common Cents

Redesign

26

Reform Often Involves Tough Choices

1. Loss of jobs

2. Consolidations that closing places people identify with (e.g., nursing homes, schools) or replace their elected officials (e.g., local to regional park districts)

3. Risk of misuse of funds (e.g., military cash cards)

4. Perceived or real diminution of services

5. Possibility of failure

27

Q4. Let’s say a reform proposal saves money and/or improves services in the aggregate. In principle, which, if any, of these possible negative consequences would concern you the most? (choose up to two)

28

0%

0%

0%

0%

0%

0%

0%

0%

0%1. Loss of jobs

2. Reduced services or benefits for some

3. Reduced pay and/or benefits for employees

4. Less convenience

5. Less local representation

6. Misuse of funds

7. Failure

8. Other

9. None – we need to be willing to accept such consequences.

Common Cents

Group Exercises

29

Common Cents

30

• Your charge: To Reach Consensus at your table on how to balance the 2014-15 budget by eliminating the $3 billion shortfall

• Remember: Minnesota has a budget that is not balanced over the long-run

• Ideas: You can use any that were discussed, or create your own

• Tools: 20 poker chips; worksheet

31

Budget Balancing-The 2012-13 Deal

Common Cents

32

Demographics

Q6. What is your gender?

33

0%

0% 1. Male

2. Female

Q7. How old are you?

34

0%

0%

0%

0%

0% 1. Under 18

2. 19-35

3. 36-50

4. 51-65

5. 66+

Q8. What ethnicity best represents you?

35

0%

0%

0%

0%

0%

0%

0% 1. American Indian or Alaskan Native

2. Asian

3. Black or African American

4. Hispanic or Latino

5. Multiracial

6. White or Caucasian (non-Hispanic)

7. Other

Q9. What best describes your political leanings?

36

0%

0%

0%

0%

0%

0%

0% 1. Conservative

2. Liberal

3. Libertarian

4. Socialist

5. Moderate

6. Mix

7. Other

Q10. Do you have any children under 18 at home?

37

0%

0% 1. Yes

2. No

Q11. Which of these statements about income best represents you?

38

0%

0%

0% 1. It’s hard to make ends meet each month.

2. I’m reasonably comfortable with my income – for now.

3. I’m financially comfortable and have few worries about the future.

39

Thank you!