As with a lot of lakes this time of year, the news Minnesota budget officials released earlier this month seemed good on the surface. At first glance, it looks like a sheet of ice solid enough to drill the first fishing hole of the season. But the moment you test it out, a crack makes its way across the lake.
Minnesotans who appreciate political balance and fiscal responsibility had the same experience following that budget update. On the surface, there’s a seemingly stable surplus in the current budget cycle.
When you check to see if it’s solid, however, you discover we’re actually on very thin ice because our state is headed toward a deficit beginning in 18 months.
The rotten ice is a result of Minnesota Democrats’ $20 billion spending spree during the 2023 legislative session. Thanks to single-party control of state government, we went from a record-setting budget surplus toward a potential $2.3 billion deficit in just five months.
We should be thankful the Legislature doesn’t meet year-round.
Unfortunately, the projected budget hole is just the first sign of longer-term problems made worse earlier this year. Democrats piled on tax and fee hikes that everyone will feel. Higher taxes when you buy a car, fill your gas tank, renew your tabs, make purchases online or buy anything taxable in the metro area.
On top of the tax hikes, small-business owners, schools and local governments were crushed by a slew of expensive new regulations and unfunded mandates. The cost of these mandates gets passed down to hardworking folks in the form of higher prices and bigger property tax bills.
The appetite for permanent new spending was insatiable.
Democrats balked at the idea of using some of the record surplus to reduce our state’s high income tax rates, arguing that cutting even lower-income tax brackets might – gasp – benefit higher earners to some degree. Then they handed out tens of millions in subsidies to buy electric cars and electric bicycles regardless of your income level.
Unbothered by that inconsistency, DFLers also touted their “free tuition” plan for some students attending state colleges and universities. Then, months later, Gov. Walz eliminated college degree requirements for three-quarters of state jobs, leaving many to wonder about the value of these taxpayer-funded degrees.
All of this – reckless spending, red tape, higher taxes – will ultimately worsen our state’s biggest problem. We simply don’t have enough people to sustain the robust economic growth needed to keep spending money like it grows on trees.
Minnesota’s population growth is nearly non-existent, and there’s a chronic labor shortage. This started over a decade ago, but the trend has worsened since 2020.
During the pandemic, Minnesota lost more residents to other states than at any time in the past 30 years. Critically, more people aged 26 to 45 left Minnesota than came here.
Where are people going? Largely to states that let them keep more of what they earn.
As Minnesota’s population growth slows and our workforce shortage deepens, our status as a high-tax state and the budget instability wrought by this year’s spending spree will increasingly harm our economic future.
We don’t have to accept this trend as fate, but we need to face reality to change course.
Minnesotans need to decide what sort of state they want in 10 years: one that is contracting and saddled with an unsustainable budget or one that is growing and prosperous.
We’re on thin ice. Let’s make sure we don’t fall though.
John Reynolds is the Minnesota state director for the National Federation of Independent Business in St. Paul, which represents over 10,000 small businesses in Minnesota.
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