Taxing Horse Carts Is Next

One of the many reasons that green advocates have long used as a "reason" why high gas prices were a good thing is that it would get individuals out of their cars, lessening traffic and pollution and the whole host of other ills that they associate with cars. Well there is one very bad thing about that plan, as today's SL Tribune points out.

Burned by high gasoline prices, Americans are cutting back their driving. In several ways, that's a good thing - less air pollution, less consumption of oil, fewer traffic deaths. But in one way it's a problem. There is less tax money available for the federal and state governments to build new roads and repair existing ones.
That might not be a concern if U.S. highways were mostly new, but they're not. The Interstate Highway System was built half a century ago, and as we are seeing in Utah, much of it is worn out and in need of expansion. Think of I-15 in Utah County.
The federal government reported Monday that Americans drove 3.7 percent fewer miles in May than they did in the same month a year ago. Utahns cut their driving 4.4 percent.
As a result, there will be an estimated $5 billion deficit in the Federal Highway Trust Fund next year. Here's the reason: The federal gasoline tax is 18.4 cents per gallon. As motorists drive fewer miles and switch to vehicles that get better gas mileage, they burn fewer gallons of gasoline, which means less federal revenue for building and repairing highways.

I wonder how that is working out for my friends in Minnesota - remember we had a bridge fall down last year (more on that tomorrow) that was caused (according to local Democrat legislators) by a lack of money for road repairs....

The Minnesota Legislature this year increased the state gas tax by 8.5 cents, which is still being phased in.

Even with the rate increase, Gray said state transportation officials are predicting a drop in gas-tax collection, with a 0.6 percent drop forecasted each year in 2009, 2010, and 2011.

That can't beeeee....they promised us that this would bring more money into the fund....

OK - all snark aside, conservatives warned them this was coming. We said adding to the cost of driving would make people drive less. "That's a good thing" the legislature said. "No it's not" we relied - "gas tax revenues will fall" we said. Well what do you know....they raised taxes and we STILL don't have enough to fix our crumbling infrastructure.

Friday is the 1 year anniversary of the 35W bridge collapse. It is a warning to the rest of the country. However, in order to get more money from the gas tax, you are going to have to encourage MORE driving not less. Which means that you are going to have to tell one of your special interest groups to compromise. Either the environmentalists are going to have to give ground or the road construction unions are going to have to give.

We have to start demanding that our legislatures (state and federal) do what is best for the PEOPLE and not what is best for their special interest groups. It's that simple. Will they do so? Only if "we the people" demand it.

A Tale Of Two Very Different States

It really is eye opening to get into a new state for a long period of time so that you can see the difference between the way the state you live in (or in my case lived in for 14 years) and the one you are in now. Case in point is how the current economic downturn is being handled by the State of Utah versus how it's hitting the State of Minnesota. First Minnesota....thanks to a slowing economy, state revenues are down $530 million, the reserves (rainy day fund) is down $33 million and spending is up $64 million, leaving the state in the hole $935 million - a far cry from the $2.2 BILLION surplus that the state had at the end of FY 2006. That led some legislators to come flat out and say "I Told You So".

One year ago the economy was doing well and the Legislature was overflowing with ideas on how to spend the $2.2 billion state budget surplus. It was the first time in several years that we weren't facing a large deficit. A new cast of leaders was eager to validate its sweeping victory in the 2006 election by turning their campaign promises into promises kept.

In the midst of the spending frenzy, I wrote to constituents my belief that "we need to be prudent with spending and not leave ourselves in a tough situation if the economy takes a sudden downturn." There was at the time plenty of historical evidence to suggest such a downturn could take place.

Utah, on the other hand, took many of the steps that Rep. Beard laid out in his legislative update. I know Rep. Beard will not be surprised at the results of such prudence.

On Friday, the Utah State Tax Commission released preliminary year-end revenue numbers.

When you look at the numbers, you will notice we're collecting less revenue than originally projected. That is not a surprise (we're actually pleased it's not worse). We're still within the range we predicted last month.

No one wants to be right about bad news but legislative dinosaurs like me have been through enough economic cycles that we felt the downturn coming and planned ahead for it. We have some carry-forward money, a healthy Rainy Day fund and we socked away an additional $100 M for the Uniform School Fund. In addition, we crafted a FY 2009 budget that is significantly lower than the FY 2008 budget.

From the article in the Salt Lake Tribune:

"We intentionally reserved a large carry-forward because we anticipated a slowdown," Valentine said. "Utah is very well poised to weather any kind of economic downturn."

Some states are having to cut services because of dwindling tax revenues, said State Tax Commission spokesman Charlie Roberts. "We're in a lot better fiscal shape than most," Roberts said, pointing to Utah's fiscally conservative bent and efforts to foster a favorable business climate as contributing factors.

So, we need to pay attention, spend carefully, and act wisely - but we don't need to be afraid. In keeping with being the best managed state in the nation we have already asked state agencies to plan ahead on where and how they can cut, should that become a necessity. I'm hoping it won't.

The Minnesota Legislature can and should take a lesson from their bretheren in Utah. Economic cycles are the norm. A little prudent planning, forethought and a lot of self-discipline can (in the long run) save your state from being blown around by the inevitable economic storms of life. Just as a wise worker sets aside money (and spends wisely) in case of a loss of income, the state should be setting aside money and wisely spending their money - in case of a loss of income. That is supposedly what we pay the Legislature to do.

Lessons 3

While I certainly meant this to be a series, I never expected it to be a DAILY series....

Today's lesson comes to us from the great state of Florida where they have found a way to make health insurance affordable for the 3.8 million Floridians who do not have access to insurance.

But the Florida reform, which both houses of the legislature approved unanimously, renounces Mr. Obama's favored remedy: It nudges the government out of the health-care marketplace. Insurance companies will be permitted to sell stripped-down, no-frills policies exempted from the more than 50 mandates that Florida otherwise imposes, including for acupuncture and chiropractics. The new plans will be designed to cost as little as $150 a month, or less.

Emphasis mine. The Florida Legislature has figured out something that the Minnesota Legislature needs to figure out. Mandates make things cost more! It's really that simple!

Mr. Crist observed that state regulations increase the cost of health coverage, and thus rightly decided to do away with at least some of them. It's hard to believe, but this qualifies as a revelation in the policy world of health insurance. The new benefit packages will be introduced sometime next year and include minimum coverage for primary care and catastrophic expenses for major illness.

Of course, the defenders of government interference are not happy with this development.

Critics are already saying that, without mandates, the plan won't guarantee quality of care. That's purportedly why the states have imposed more than 1,900 specific-coverage obligations.

However, the WSJ writers give that objection the slashing it so richly deserves.

These government rules are imposed without regard for how much they will cost and who will bear the burden. In practice, the costs are disproportionately carried by lower- and middle-income workers, who already on average have more limited insurance coverage as part of their compensation, or none at all. When prices rise because of mandates, the less affluent are often forced to make an all-or-nothing choice between "Cadillac coverage," which involves just about everything, or going uninsured. In other words, they're prohibited from buying the lower-cost options that might be better suited to their needs.

A great example is from the Logical Household. No one in the Logical Household will EVER need treatment for Tay Sachs Disease or Sickle Cell Anemia. However, because of Minnesota state mandates, our insurance company is required to provide it to us! Now if we were to adopt a Jewish or African American child, that coverage would indeed be necessary, but as free people we should be ALLOWED to make that decision for ourselves! Not have the government decide it for us.

The people of Florida should be proud that their legislature took the biggest step to date in making insurance affordable to those who need it. Will the Minnesota Legislature be the next to make this bold decision? We can only hope!

Lessons 2

Yesterday I posted on lessons that the Minnesota Legislature could learn from their colleagues in Utah. Today we are shifting our focus across Lake Michigan to the state of the same name.

It's no fun to kick a state when it's down – especially when the local politicians are doing a fine job of it – but the latest news of Michigan's deepening budget woe is a national warning of what happens when you raise taxes in a weak economy.

Last year, Michigan faced a very steep budget shortfall. The governor's answer to that shortfall was to raise taxes.

Her tax plan raised the state income tax rate to 4.35% from 3.9%, and increased the state's tax on gross business receipts by 22%. Ms. Granholm argued that these new taxes would raise some $1.3 billion in new revenue that could be "invested" in social spending and new businesses and lead to a Michigan renaissance.

Did Governor Granholm's plan come to fruition? Nope...

Officials in Lansing reported this month that the state faces a revenue shortfall between $350 million and $550 million next budget year....Six months later (after the budget was enacted - ed) one-third of the expected revenues have vanished as the state's economy continues to struggle. Income tax collections are falling behind estimates, as are property tax receipts and those from the state's transaction tax on home sales.

Michigan is now in the 18th month of a state-wide recession, and the unemployment rate of 6.9% remains far above the national rate of 5%. Ms. Granholm blames the nationwide mortgage meltdown and higher energy prices for the job losses and disappearing revenues, but this Great Lakes state is in its own unique hole. Nearby Illinois (5.4% jobless rate) and even Ohio (5.6%) are doing better.

When it became apparent that Minnesota was going to be going from a $2 billion plus budget surplus to a $935 million shortfall, the DFL leadership's first instinct was to raise taxes. Those plans led one state rep to opine that it was impossible for the state to TAX (or borrow) it's way to prosperity. They ended the legislative session beaming with pride at "balancing" a budget that less than 12 months ago didn't need "balancing" - unless you consider the over collection of taxes a need to balance the budget.

Think about this.

The tax hikes have done nothing but accelerate the departures of families and businesses. Michigan ranks fourth of the 50 states in declining home values, and these days about two families leave for every family that moves in. Making matters worse is that property taxes are continuing to rise by the rate of overall inflation, while home values fall. Michigan natives grumble that the only reason more people aren't blazing a path out of the state is they can't sell their homes. Research by former Comerica economist David Littmann finds that about the only industry still growing in Michigan is government. Ms. Granholm's $44.8 billion budget this year further fattened agency payrolls.

Emphasis mine. The sad state of Michigan's economy should be a reminder to all state and national legislators of the folly of raising taxes in a tight economy. It should also be a stark lesson for Minnesota voters. Do we want to end up with an economy similar to the one they have in Michigan - where more people are leaving the state for sunnier, more taxpayer friendly climes - or do we want to have a thriving state where people want to move TO.

In the end, legislators need to realize that while there was grumbling about property taxes two years ago, there is very REAL ANGER now - people can't feed their families because the cost of everything has gone up so high....and THEN you throw taxes on top of it. We the People, don't want empty rhetoric. Say what you will do and then do it. If you can't deliver on your campaign promises then don't be surprised when the people rebel against you at the ballot box.

Lessons...

Minnesota is not the only state dealing with the high cost of road repairs.

We are faced with some sobering realities:

* Between 1990 and 2007 Utah experienced a 47.5 percent increase in population growth.

* During that same period of time, travel on Utah roads, measured in vehicle miles traveled on our roads (VMT), increased 78.5 percent.

* During those same years the State added only 4.2 percent more capacity to the highway system to accommodate this explosion of growth.

So what does this mean? In a word: congestion.

To exacerbate the problem:

* Since 2000 UDOT construction costs have increased 91 percent. In fact, recent reports show that steel has increased again by another 30 percent in the past few weeks alone.

* Funding for transportation was raided beginning 2001 when we experienced a downturn in the economy in order to keep public education funding whole. It took the legislature several years to bring funding levels back to pre-downturn totals. But demand for roads and the cost of construction outpaced our capacity to meet the demand several times over leaving us far behind.

However, unlike their Minnesota counterparts, the Utah Legislature is looking at ways outside of raising the gas tax to make up the shortfall in funding.

So what steps have we taken without raising taxes?

* We looked internally for other funding options within existing budgets. We found that between 10 to 20 percent of the revenue from sales tax within the state came from auto related sales (car sales, tires, oil changes, etc). Many of us in the Legislature felt that these tax dollars should be earmarked for roads and so we pushed legislation through to capture this money. It is in place today.

* We are looking at ways to focus economic development in areas where the transportation system in unbalanced. In Northern Utah I-15 is a log jam southbound to SLC in the AM and the opposite in the afternoon leaving half the system underutilized. When placing incentives for economic development we, as a legislature, need to be conscious of balancing the transportation system and encouraging job growth closer to where people live.

Emphasis mine. What a radical thought....moving the jobs to where the people are! Note the difference between what they are doing (encouraging development where the people are) there and what we are doing here - punishing drivers by raising the cost of licensing and driving and owning a car and forcing people into light rail corridors. Instead of tightening government control on the voting public, the Utah legislature is actually solving a problem while maintaining freedoms! That is outside the box thinking!

There are other ways of relieving congestion that require the assistance and cooperation of the business community. By offering staggered start times to employees (thus reducint the number of cars on the road all trying to get somewhere by 8am) or allowing staff to telecommute, you can reduce the number of cars on the road (thus reducing congestion AND greenhouse gas emissions). Offering tax incentives to businesses so that they can purchase the necessary equipment to allow telecommuting (you do need special voice and data equipment that maintains the security of your communications) you can encourage more businesses to think outside the box as well. Enlist the business community in the solution. THEY are the ones that know what their needs are and what the solutions to those needs are!

These are lessons that the Minnesota Legislature can learn Utah colleagues. This is the kind of forward thinking that our Founding Fathers used to make this great country.

That and how cool is it that the Utah State House and Senate have their own blogs! What a way to engage the electorate!

An Accomplishment To Be Proud Of?

During the press conference yesterday, announcing the budget deal, Speaker of the House Margaret Anderson Kelliher boasted that they had "balanced the budget". However is that really an accomplishment to be proud of?

Remember the headlines two years ago - the ones that excitedly reported a $2.2 billion dollar budget surplus? Remember all of the plans that many, including the Governor, had for spending all that money? Sure you say, but no one expected the economy to take such a sharp downturn...

Not so fast with that excuse my friends. Some legislators actually called for budgetary restraint over a year ago.

Friends and Neighbors,

The biggest news item from the State Capitol this week was that the projected budget surplus remained well above the $2 billion mark, even though it dropped a fraction of a percent from earlier forecasts. Earlier this session I explained how "a fraction" in state budget terms can actually be a huge amount of money, and that is true in this case. State economists lowered their surplus projection by $7 million,which to any of us is a fortune. But in terms of a $31.5 billion state budget, it's relative pocket change.

How will this affect the rest of the session? Probably not a whole lot. The forecast is that we will have just shy of $34 billion to spend, and that is the number we will use to set the state budget. The economists warned that there is still an amount of uncertainty in the economy (witness this week's unexpected fall in the stock market) and we need to be prudent with spending and not leave ourselves in a tough situation if the economy takes a sudden downturn.

Sadly, instead of listening to that wise council, the legislature went on a spending spree that put us in a situation where they had to depend on 11th hour negotiations in order to balance the budget in light of such an "unexpected" shortfall.

Given that this DFL led legislature took us from a $2.2 billion dollar budget surplus to nearly 1 Billion in debt, the news that they were able to "balance the budget" is not something to be proud of. It should be something that the voters take a long hard look at come November.

Thirteen Months Ago

Thirteen months ago, we had a $2.2 Billion surplus. This year - we are $935 million dollars in the hole. What has happened in that time? The DFL had just been given the reins of power and they went on a drunken spending spree.....

To all of you "conservatives" who stayed home in 2006 in order to "teach the party a lesson" I hope that you are proud of yourselves.