News Analysis: Journalist Bob Carney Jr. Fact Checks Mark Dayton's Revised (9/21/10) budget plan, and still finds a shortfall of $792 million to 1.243 billion, even with zero repayment of School Aid shifts

• Carney provides a free download spreadsheet at www.republicancontract.com

• Dayton's plan is an improvement, but a further revision is still needed

• Next episodes of Tom, and Mark, and the other Tom and me will be on the budget

Contact: Bob Carney Jr. -- (612)-824-4479 (home and business)

                                          (612)-710-2212 (cell)

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For an archive of all news releases, and more information, please visit: www.republicancontract.com

Minneapolis, MN, September 22, 2010 -- In my continuing capacity as a journalist covering this year's campaign for Governor, today I released an updated FACT CHECK spreadsheet, based on Senator Mark Dayton's revised budget. My spreadsheet can be downloaded from: www.republicancontract.com.

Senator Dayton acknowledges himself that his revised budget still falls about $900 million short. However, I have concluded an additional $1.273 billion must be DISALLOWED, resulting in a shortfall of $2.163 billion. I classify an additional $452 million in a "prove it" category -- these dollar amounts sound plausible, but proof is either lacking, or not solid, that these dollar amounts can be relied on. If the "prove it" money also is subtracted from Dayton's budget, the shortfall is $2.614 billion.

Dayton has also recently said he can't promise paying back the shift in K-12 money that traces back to Governor Pawlenty's illegal unallotments in mid-2009. If Dayton were to agree to defer the entire payback amount beyond the current biennium, the shortfall improves as follows:

• From $2.163 billion to $792 million, if DISALLOWED dollars are subtracted.

• From $2.614 billion to $1.243 billion, if DISALLOWED and "prove it" dollars are subtracted.

Given the magnitude of the budget problem, I think we need to assume going forward that none of the School aid money can be or will be repaid next biennium. Therefore, just from a math point of view -- ignoring political realities -- Dayton's budget shortfall appears to be in a range from $792 million to $1.243 billion. Frankly, this is significant progress from Dayton's earlier budget. I demonstrated in my original, comprehensive August 27th FACT CHECK news release that Dayton's original budget plan was simply impossible.

 

DISALLOWED line items, in brief

I - 3. Dayton claims he can gain increased revenue of $500 million from "snowbirds," people who live less than half the year in Minnesota, and who now pay no state income tax. DISALLOWED – Dayton presents no evidence or procedure; MN DOR Commissioner Ward Einess said a $500 million savings is “exceedingly optimistic; driving more people to be “100% Former Minnesotans” may be counter-productive. Note: Wisconsin tax law does appear to be similar to what Dayton proposes.

II - 4. A new state run casino, at or near the Mall of America, producing $300 million -- DISALLOWED – Casinos don't just appear. Even if the Legislature were to approve this, it is almost certain the casino wouldn't be completed in time to contribute anything towards the next biennium's deficit.

III - 3. Reduce Private Contracting. State agencies spent over $850 million on outsourced professional and technical services during the 2008-09 biennium. Cutting this outsourcing in half would thus save $425 million. DISALLOWED – Very simply – who would do the work that was being done by the approximately one half of the people who are being terminated? If you cut your funding by 50%, you cut your resources by about the same. HELLO?! Dayton presents no evidence that the work could be done as economically internally, as opposed to outsourcing. No net savings can be assumed.

III - 11. Establish a Voluntary Framework for Regional School Transportation, saving $48 million. DISALLOWED – Sounds like a good idea -- but the savings would go to individual school districts – it would not reduce the State's deficit.

 

The political reality -- could they?  would they?

First, would the Legislature enact Dayton's plan for a higher tax bracket?

Dayton's plan calls for a fourth and top income tax rate of 10.95% for taxable income above $130,000 (individuals) and $150,000 (married filing jointly.) Here's what needs to happen next:

1. Dayton should consider proposing that this rate be a temporary surcharge. This was done during the Quie Administration. A top rate set to expire in four years would be a lot easier to pass. It will allow time to see the effect of the new rate. If the economy does recover -- and I personally think any improvement will be very slow -- then the rate could properly be eliminated after four years.

2. Dayton should himself call on all Legislative candidates to state their position on this fourth rate.

• Are they for it or against it?

• What top rate (if any) would they accept as a permanent rate?

• What top rate (if any) would they accept as a temporary, four year surcharge?

3. Both Horner and all Republicans should also demand that Legislative candidates, and especially DFLers, take a position on Dayton's plan. I think we can assume few or no Republicans would support it. If the plan is a non-starter, Minnesota voters deserve to know this before we vote.

Second, would the Legislature enact the rest of Dayton's plan -- when he finishes it?

Even assuming Dayton can firm up his "prove it" dollar amounts, he still needs to come up with an additional $792 million to balance the budget -- still with zero repayment of K-12 unallotment dollars. Assuming Dayton does deliver a balanced budget on the third try, Legislative candidates again must be polled on each line item -- to see if they will support it.

 

The bottom line

If Dayton can get commitments on a complete budget from DFL Legislators and candidates representing a majority in both Houses -- say 55% minimum in each chamber -- then he and the DFLers have a case to make to the voters of Minnesota. Dayton and the DFL can say: "like it or not -- here's our plan, It balances, and we can and will deliver on it."  Dayton and the DFLers might win, and if they did, they would have a mandate.

If Dayton and the DFL can't do this, or won't do this, then in my judgment Dayton's campaign will have lost all credibility. His initial budget was an impossibility, and he still has a long way to go from his "take two," post-primary, revised budget to the one I just described in the last paragraph. Horner and Emmer would be the only plausible candidates at that point.

I'm sorry to say that I am convinced Emmer would use unallotment power in what I see as an unconstitutional way to impose his budget. As a practical matter, I think he would start from a strong legal and political position, if the Republicans hold more than a third of the seats in either chamber, and if they maintain party discipline. I raised this as a danger during my own campaign for the Republican nomination. More on this prospect when I FACT CHECK Emmer's budget.

Of the three budgets, Horner's is still missing a lot of detail, but in outline it appears to be the most politically workable approach. More on that prospect when I FACT CHECK Horner's budget.

Below is the Summary spreadsheet from my new Free Download FACT CHECK of Dayton's Budget. It is in the form of .jpeg photos.

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