Mark Dayton leaves Minnesota with unsustainable spending levels, higher levels of debt, poor transparency and accountability of public agencies and more kicking the can down the road of some of the state’s biggest structural economic and fiscal challenges. But hey congratulations, taxpayer! You’ve paid such high taxes so that there is a budget surplus at least for the next few years!
Wednesday night Governor Dayton gave his final state of the state speech. He touted his 9 years of budget surpluses and higher spending on schools and infrastructure. What he left out was that our schools are no better for his having spent a whopping $2 Billion more during his tenure. Making an issue out of infrastructure spending is a complete falsehood since his Republican opposition never disagreed on spending more on roads on bridges, they only disagreed with him on imposing a regressive gas tax and thought using cash instead of more debt was a better idea. Even all DFL house members voted against increasing the gas tax!
But what do we know about Dayton’s administration in terms of its fiscal and economic record?
There is no doubt that Governor Dayton is a staunch progressive and he governs like one. He presided over tax increases that put a two-billion-dollar surplus in the state treasury and preceded to lock most of it down into a 2-different reserve accounts. This fiscal management style was not due only to him—a bipartisan group recommended capturing surpluses and holding them in large reserve funds after the budget crises of the Pawlenty years when the state was hit with recessionary waves. The establishment wanted budgetary (and tax) stability but Dayton saw it as an excuse to refuse to lower taxes once the crisis had passed.
In fact, Dayton fought any and all attempts to reform taxes to make Minnesota more competitive, to the extent that Minnesota now sticks out like a sore thumb on many tax policy charts
Spending took a giant leap during his administration. He likes to talk about how government was “underfunded” before his administration but the rate of increase has changed and it’s not on a sustainable path.
He believes that the state should borrow much more than they have in the past to fund not just government infrastructure but amenities, at the state and local level. Like spending, this too seems unsustainable in the present environment. We have all heard the argument that “money is cheap! Borrowing is “a good deal.” But interest rates are now going up after a 30 year run of low rates and this argument is out of date or will be by the time even this year’s group of bonds are let. Also federal tax policy with regard to municipal bond interest deductibility is changing with the Feds no longer interested in encouraging big projects like sports stadiums and civic centers.
In his recent speech before the Minnesota Chamber of Commerce, he complained that business is always complaining that Minnesota has a “bad business climate. “He likes to cite competing magazine rankings and touts the fact that Minnesota does well on many rankings about healthcare, infrastructure, and education---all because of government he says. But there is a darker reality that he won’t admit: Minnesota is losing its competitive edge with other states.
- During his tenure, Minnesota has gone from being home to 21 to 16 Fortune 500 companies. We are not replacing these massive job providers and taxpayers with new ones.
- Minnesota’s unemployment has historically tracked lower and its labor force participation rate has tracked higher than the national average. It is still true that we are above the national average, but the difference is no longer as big as it used to be. Minnesota’s GDP or growth rate has also lagged and has not recovered the ground it lost in the 2000s. If we were where we should be based on those earlier trends, our growth would be about 2.5% higher.
- The Center of the American Experiment economist John Phelan argues that we are seeing a decline in worker productivity in Minnesota, which traditionally has been one of the state’s most touted features. It’s not that people are working less hard and we aren’t losing population, although we are losing people to retirement and they apparently aren’t being replaced by younger, productive workers.
- The State Demographer reported a year ago that we are losing young adults and the younger cohort of retirees. Young people may go off to college or into the military, but they aren’t coming back to jobs in Minnesota. More retirees are leaving the state, although a portion do come back at a very advanced age. There are a lot of theories about these trends, but certainly, Minnesota’s high estate tax, inheritance tax, and taxes on veterans’ pensions and social security haven’t helped. Notably, the legislature and Governor passed an exemption for veterans’ pensions in 2016 and raised the threshold on social security income earners in 2017, but it may be too little, too late.
- Dayton uses extreme rhetoric about the wealthy and lumps asset owners like farmers and small and medium businesses and seniors living from retirement investments into that category. His tax policy seems driven to punish success. One of the first things he did when he had complete partisan control of government was to raise taxes on the highest tax bracket. Minnesota has the 3rd highest corporate taxes in the nation.
Dayton seems to have a nearly child-like belief in the goodness of government, yet his administration has racked up an impressive number of bad government examples. They are bad government because they don't have to do so much with personal failures of individuals as with systemic failures. There are many failures of his appointees to be accountable to the people of Minnesota, all the while cloaking their activities in good government-speak or finger-pointing.
Here is a list:
- MNSURE: Everybody agrees it’s a failure, even Dayton. The rollout was a disaster, Minnesota’s version of the “Affordable healthcare” was anything but. Now in its fourth year, a shocking number of working poor and middle-class people, especially the self-employed, have found themselves losing coverage because it is simply too expensive. Dayton’s last State of the State speech even pointed to a farm couple in the balcony who can’t afford their $33K Health insurance plan. His solution: allow people to buy into MNCare. The 1990s called and they want their Minnesota health care system back. It was much better and more affordable than MNSure.
- MNLARS: $100 Million and it still doesn’t work. MNLARS is the system for licensing and registering automobiles that was supposed to be upgraded years ago. Missed deadlines and overspending caused the Republican legislature to require DVS to put the upgrade out for bids. Hewlett Packard was contracted to do the work. Fast forward to 2012-3, with the DFL in control of House, Senate and the Governorship and the project got pulled back into government with assurances that it would save taxpayers money. The result was more cost overruns, more problems, and a shaky roll out that made MNSure look smooth by comparison.
- Child Welfare Abuse Report Failure. In the investigation into the death of 4-year-old Eric Dean in 2014, the Child Protection system in Minnesota was deemed a "colossal failure" by the Star Tribune. Although child protection is a problem in many states, a contributing factor was that of 15 reports of abuse or neglect; nine were "screened out" due to policies which had just recently been put into law by request of the CPS because they were already doing it that way. Another horrific case of abuse involving multiple reports over an extended period has just recently come to light and is the subject of another bill before the legislature this year which underscores how this problem is far from being solved.
- Elder Abuse and DHS Oversight Failure. In 2016, 97% of elder abuse reports in nursing homes (which ranged from theft to serious injury) were never investigated, according to a Star Tribune 5 part investigative story in 2017. The series provoked outrage, a legislative audit, hearings and proposed legislation this session.
- Medicaid Fraud. In 2012, Minnesota's Department of Human Services and Commissioner Lucinda Jesson was hauled before a US Congressional committee to explain the mishandling a $30 million payment from the UCare health plan. According to the Committee on Oversight and Government Reform's report "Minnesota provides a stunning example of how states are failing to properly ensure the appropriate use of taxpayer dollars spent on Medicaid managed care."
- Heating Aid Non-Profit Scandal. The Community Action scandal involved a non-profit which was supposed to be providing financial aid for home heating bills for the poor with state and federal grant money. There was a misuse of funds by the board of the organization and the Executive Director; Bill Davis wound up in jail. An MPR story by Tom Scheck in 2014 explained how the Dayton administration had merely looked the other way until whistleblowers and money troubles mounted.
- Vikings Stadium Ripoff. It's widely believed that Minnesota got hoodwinked by the billionaire owners of the Vikings, the Wilfs. Governor Dayton is not solely responsible for that since the legislature passed a bill funding the Stadium and giving the Wilfs and the NFL all sorts of tax breaks.
- Suite-Gate. If the stadium deal itself was not bad enough, in 2016, it was followed by a scandal involving members of the Minnesota Stadium Facilities Authority Board. Many of them treated a luxury suite that was supposed to be used for promotional purposes for booking events at the Stadium like their personal perk. Michele Kelm-Helgen, one of the co-chairs was one of Dayton’s top aides until she became co-chair of the MSFA.
- State Lottery Corruption. In 2012, Dayton selected Edwin Van Petten, former head of the Kansas Lottery to be Executive Director of the Minnesota State Lottery. Van Petten got caught in two controversies. The first was when he signed a contract with a company to provide lottery sales at gas pumps before getting legislative approval. When he testified before a Minnesota House committee, he claimed that the state might be forced to pay the penalty for breaking the contract. At first Governor Dayton backed up his appointee and vetoed a measure banning the expansion of gambling to gas pumps. But by the next year, a Star Tribune investigative report about gambling addiction put the costs of gambling front and center, and the Governor allowed the bill with the ban to become law. In 2016 Van Petten was forced to resign in response to a report by the Star Tribune that he had received more than $7,000 in "questionable" reimbursements for a timeshare he owned during stays at Las Vegas conferences.
- Unsustainable Public Pensions. In spite of having been State Auditor and having a sophisticated knowledge of the state of Minnesota's public pensions, Mark Dayton refused to reform the public pensions in any way that made workers pay in more or lowered the automatic increases that retirees get. This may have made him popular with current and retired government workers, but it came at the expense of the sustainability of the pension fund.