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Understanding Minnesota's Big Picture



Minnesota’s state-local fiscal system is no longer sensible in multiple respects. This is not surprising in light of the state’s seemingly endless fiscal crisis. Understanding Minnesota’s big picture is important in considering how best to resolve the fiscal crisis. Here are the top 10 elements in understanding the big picture. They are summarized here. To dig deeper, click on the Minnesota’s Big Picture Details link below. For an overview of the budget problem, key solution elements, and the shortfalls in the 2010 gubernatorial candidates’ announced policies for solving it, see the comprehensive presentation on Solving Minnesota’s Budget Problem.
  1. The budget problem originates in the state General Fund, but radiates down to local governments. This occurs because a large percentage of General Fund spending is paid to local governments, especially school districts, cities and counties, to help them pay for the services they provide.

  2. The budget problem is a large percentage of the state General Fund, but a much smaller percentage of total state and local spending. This is important in crafting a solution to the problem.

  3. The budget crisis evolved into its present serious magnitude over the past 12 years. Some of the factors have been unavoidable, but our responses have been inadequate. But some are self-inflicted problems. See How the Minnesota Miracle Became the Minnesota Debacle; What’s Wrong with the Minnesota Budget Process; and the Minnesota’s Budget Is Balanced Bamboozle.

  4. Economically and demographically, Minnesota now consists of one Metroplex and five Ruralplexes in a highly competitive global economy in the information age (see Minnesota's Big Picture Details). This reality contributes to the outdated status of Minnesota’s state-local tax and fiscal systems, governmental structure, and methods of providing governmental services.

  5. Minnesota’s tax system is outdated and in serious need of structural reform. This is technical reality. It is largely independent of the political questions of how high taxes should be in total, or in whether the rich should pay more, the same as, or less than the middle class as a percentage of income.

  6. Minnesota’s budget process is outdated and in serious need of structural reform. While fixing it will not solve the budget problem, it can help to make the next budget problem much less serious.

  7. Minnesota’s governmental structure is, and the methods by which governmental units provide public services frequently are, outdated. This creates a major opportunity for innovation to enable Minnesotans to enjoy improved public services at a lower cost in the long run, though without much immediate impact on the budget problem.

  8. Four approaches can and should be applied simultaneously to solving the budget problem: redesign; spending cuts; tax changes, with increases at least slightly exceeding cuts; and economic growth. Gubernatorial and legislative candidates who claim that a single approach can solve most or all of the problem are deluding themselves and misleading the public.

  9. Property tax and local aids system change offers an opportunity to save or redirect $1 billion or more of General Fund spending per year. This is among the best possible innovations – saving a bundle of state money, pushing decision making down to the local level, greatly encouraging innovation in governmental service delivery, and potentially helping get health care costs under control.

  10. Minnesota has great potential to save on future health care costs by adapting the federal reform to Minnesota. Minnesotans have a long history in health care innovation and Minnesota is home to recognized health care leaders. Rising health care costs are the single most troubling long term budgetary trend, and now is the time to tackle them.