The Minnesota Taxpayers Association warns that constitutional amendments that limit the state’s budget choices would have negative impacts and unintended consequences.
“Constitutional amendments that constrain fiscal decision making have popular appeal but their philosophical problems and the practical mischief they can introduce into state and local fiscal systems make this poor policy,” its November/December newsletter said. The Minnesota Taxpayers Association is a non-partisan, nonprofit organization created “to advance economy and efficiency in government.”
Its analysis critiques both the supermajority amendment, which requires a 60 percent vote in both the House and Senate to raise state taxes, and an amendment that would limit general fund spending to 98 percent of forecasted revenue.
The Minnesota Taxpayers Association said that the supermajority requirement would create roadblocks to substantial tax reform. Major reforms involve a complex package of tradeoffs, including changes to tax bases and rates - some of which increase revenue. Adding a supermajority requirement into the mix “transforms the merely difficult into the nearly impossible,” the association wrote.
Its research review found little or no difference between supermajority and non-supermajority states when comparing their revenue growth. The association concluded that supermajority requirements were at best unnecessary and, “At worst, they can severely hamstring the ability of government to modify tax policy in response to demographic conditions, economic realities, and federal changes.”
Another constitutional amendment would limit general fund spending to 98 percent of estimated revenue. Surpluses would go into a budget reserve that would have limits placed on it: it could only be used for emergency spending, subject to a supermajority vote. Reserves reaching a certain size would trigger a sales tax rate cut, although the Legislature could pass an alternative tax cut. The Minnesota Taxpayers Association said this amendment would ratchet spending down, effectively mandating an all-cuts approach to budget shortfalls.
Take the FY 2012-13 budget as an example. To solve the $5 billion shortfall, state leaders used approximately $3 billion in one-time money and over $2 billion in spending cuts. The Minnesota Taxpayers Association said the final budget would have been very different had the revenue-limiting amendment been in place since the start of the recession. In that case, the state would have had to cut an additional $1.7 billion from the budget — while at the same time, budget reserves could have reached a level to require tax cuts.
In addition, the amendment could undermine government redesign and reform. History shows that surpluses can pave the way for reform, and the amendment would take surplus money out of play for such purposes. The amendment also would complicate efforts to transfer duties between the state and local governments.
Lastly, the amendment would encourage greater use of dedicated funds, the association said. Legislators would want to protect popular programs, and they could avoid the general fund revenue limit by funding programs through fees or other dedicated revenue.
Overall, MTA expressed concern about creating momentum for constitutional budget amendments. Learning from other states’ experiences, repeated amendments can clutter a state’s foundational document with contradictory provisions, and “create an incomprehensible state/local fiscal system severely constraining governments’ flexibility to respond to changing circumstances and conditions.”
-Scott Russell
