(00:00:00) We welcome to the studio our participants to the discussion Michael right the president chairman and chief executive officer of super value stores and Tom triplet the state finance commissioner for Minnesota and the topic is government spending and taxes to pay for it. Mr. Right is also chairman of the Minnesota Business Partnership the lobby Group which represents the state's largest private sector employers. And of course well known to many of us is the Minnesota Business Partnership campaign to cap legislative spending cap the increase in spending in Minnesota minnesotans for Minnesota was the name of the campaign and it called for a cap on state spending. It was marked at the legislature with mixed reviews including reviews from some dfl lawmakers asking for particular semester, right? Let's begin with you and talk about the status of the campaign for just a moment minnesotans for Minnesota what has been public reaction over the past couple. Months to the campaign by The Business (00:01:01) Partnership. Well, first of all, thank you for allowing me to be here and represent minnesotans for Minnesota and the Minnesota Business Partnership. I would say first of all that minnesotans for Minnesota is more than just the Minnesota Business Partnership. It encompassed many business organizations as well as numerous individuals throughout the state the purpose that we had in mind when we started the campaign was really a long-term project to inform the public in terms of the level of spending within the state of Minnesota by both local and state government. And the fact that this spending levels have been increasing rapidly over the years and really increasing it rates. Well beyond what we feel is our citizens ability to pay for them in the long run. (00:01:50) The Business Partnership was criticized in some circles for not being more specific. Did you take that as your strategy not being too specific? Where you wanted to see Cuts or reductions in increases being (00:02:03) made? Well, let's say that that what we proposed was a billion dollars of new spending. We thought that that was an enormous amount of new spending initiatives in the within the legislative process. They could have portion that in ways that would take care of the needs of the various state agencies and those requesting those funds. It was in fact equal to the amount of increase in the current biennium. So we didn't look at it as a cut. We looked at it as a way of holding down these increasing levels of additional spending (00:02:37) and with us is the state's Finance commissioner the man appointed by Governor Rudy perpich to keep tabs on what the state projects to be spending in the future the planning looks as though a mr. Triplett. It's going to be about a two billion dollar increase if lawmakers go ahead and approve the various items. They have before them now is the session draws to a close and yet We continue to hear the cries that budgets are being cut. How do we how do we blend those two facts? It's phenomenal Dan when you think about it the 2.1 billion dollar package to divide up among a variety of very needy and important programs and yet does the governor said the other day absolutely. Nobody in the state is happy. I mean, it's amazing all these funding increases that we're seeing across the board and yet we still have major problems in meeting the needs. So Mike and his colleagues are are correct in pointing out frankly the high degree of spending that's going on in the state and yet the Dilemma for the governor and lawmakers is that there's so many real needs whether it's education inner city problems. Whatever that are barely going to be met this session. So it's extremely frustrating for all of us. Mr. Wright. What was the evidence of any kind of public response to your campaign? We heard from the Speaker of the House the Senate majority leader, but what were what were other taxpayers saying about Campaign. (00:04:00) Well, I would say then that in general we received very favorable response. We received well over 20,000 calls from citizens of the state which we in turn directed back to the legislature into the governor as we said it's a long-term process because we need the public to be educated in terms of what's Happening spending wise because it equates directly to what they feel in the pocketbook with increases in taxes. (00:04:28) Let's allow the listeners to join this conversation. We're having with Michael Wright who is the chairman of the Minnesota Business Partnership and president of Supervalu stores, the nation's number two Food wholesaling business located in Minnesota and the commissioner of Finance for the state of Minnesota Tom triplet. The number that you can call in the Twin Cities with your question is two two seven six thousand 2276 thousand in the Twin Cities area outside the Twin Cities area with in Minnesota. You can call us toll-free. There's no charge for this call at Six five two 9701 806 five to ninety seven hundred and then anywhere you can hear our broadcast signal you can call us at two to seven six thousand by just putting the area code in front of that number six one two, so let's go to the telephone and get our first listener question for our guest Michael Wright and Tom triplet. Go ahead were listening for you. (00:05:26) I guess I'm really curious why we seem to always have money for sports stadiums hotels all the recreational facilities and yet we never have them for the homeless the retarded now, you're talking about moving out of their facilities and heart attacks is have tripled since last year and I'm just curious where all the money is going. So I'll listen to see what you have to say. (00:05:50) Well, I presume when you refer to your taxes, you're probably talking about your property taxes and that of course is the major tax issue remaining before the legislature. Before I talk on that though, let me speak to other issues relating to the homeless and the retarded and so forth. I think you're absolutely right in your concerns about this issue. In fact, the governor often says that when he submitted his budget in January, he assumes that his budget recommendations for human services will be the ceiling and his budget recommendations for education or often the floor. It's very easy for legislators to cut back on programs of Human Services because the constituencies are not the strongest the homeless do not have a lobby at the legislature for example, so the governor's response has been to put a significant amount of dollars into programs like affordable housing programs, like the year of the city designed to recognize that Minnesota is now facing some of those crucial Urban issues that have caused urban blight in many other large cities in the country at the same time. He supporting a program that will take Many mentally disabled people out of the state institutions and put them into Community settings where they'll receive better care. But to do that we have to redirect our resources and one of our major stumbling blocks has been the large amount of money that we send back each year to help Finance local government operations. And that's what the property tax relief program that the governor and legislators are working on is is so important right now (00:07:25) if I can chime in then I think that there's a little bit of a misconception here in that when people talk about budget cuts. They're really saying that when they put their wish list together of all the money they want from A legislature and when they don't receive everything they want they then claim they've been cut all of these different agencies are having increases in significant increases in spending coming up in this legislative session for the next biennium. I might add that I had a discussion last night with somebody who has a retarded child in a state institution in his Payment is that that's not something that the families of these individuals want and that in effect. What's going to happen is that the state will pour many many more millions of dollars into putting these people out the community rather than keeping them estate home. So we're actually creating more spending their let me also add that that our proposals from the business Community have been increased spending by billion dollars. We think that with prudent policies applied that that kind of an increase could satisfy the needs it might mean the re-evaluation some programs, but it wouldn't mean that anybody would go without what they need. (00:08:33) What's the business Partnerships reaction? Mr. Right to the lobby effort by a number of groups to get the commercial property taxes lowered in Minnesota and overall to get the property tax system simplify. (00:08:46) First of all, I would like to say that the from what we've seen of the governor's proposal in this area. It is long overdue and I think Tom just a minute ago recognized and mention the fact that so much of our state budget money goes back into the local communities. We're out of kilter in terms of the increases were seeing in property taxes at all levels. Now if we take commercial industrial property taxes and primarily commercial we're almost if not now the highest in the country in commercial property taxes for years, we have continued to increase a very large rates the property taxes on the business in order to buy down taxes on homesteads. That's fine. But at some point in time, you really kill off the goose that lays the golden egg because businesses move elsewhere and establish the jobs. I guess we continue to wonder when that's (00:09:39) going to happen. Mr. Right because some businesses granted not all continue to realize expansion. Minnesota and for some reason some private sector Enterprises continue apparently to go along and be content with paying those rates or if not content. They continue to agree to paying those level of commercial property (00:09:58) taxes. What do you got to look at it in a deeper sense? And that is that let's look at what has happened in terms of a number of corporate headquarters who elected recently to move out of the state recently Here Am hoist is announced they're going to Denver Apache Corporation is gone Honeywell bowl is gone. These are companies that had very nice employment staffs and jobs and they're gone gone forever and we don't see companies moving into the same extent. They're losing another comment is that if we look at our manufacturing base that from 83 to 87 are unionized manufacturing jobs in this state dropped twenty seven percent or about 97,000 270. Mm. (00:10:42) Tom triplet nificant. I'm sorry Tom triply. Do you agree that the Minnesota's ranking very high ranking for commercial and industrial property tax rates is indeed the kind of blanket on activity that mr. Wright and others argue. It is on this issue the governor believes that the partnership and others are is are correct on this. We do have a major problem. We do ranked number one in the country on the other hand as you noted. We have produced many more jobs in this state over the past five years and all of our adjoining States combined so it's a mixed bag, but we do agree with Mike and the partnership that we are now reaching that point that unless we provide some relief for a business property at the same time. We're providing relief for homes and apartments and so forth that we are rapidly reaching that point where it's going to be a detriment to job creation and job retention in Minnesota. Let's go back to the telephone. We have a few lines open that you can call with your question. And the telephone number in the Twin Cities is 2276 thousand 2276 thousand. Let's go back now for another. No question. It's your turn. Go ahead, (00:11:47) please I'd like to interject one thing we're talking about that just came on. The last question is you're talking about losing union jobs. And the question. I want to ask the Business Partnership man is are you proud of not paying wages that afford a man a living where there are too many jobs that have been created in the last six or eight years that pay four five six dollars an hour and the individual working at can't pay his bills beyond that. My original question was we hear one side say well taxes are too high expenses are too high. The other side says well, no, this is a the way we operate certain things are built into this state of ours our climate creates certain expenses in excess of say for instance, Arizona our roads maintaining our buildings Etc. But beyond that I have yet to see an in-depth study saying we're spending too much money per mile on road construction or road map. Since we're spending too much money per capita in our commercial department or whatever it is. And I think that the business Community would do a service to this state if they would do an in-depth study and say, well not only are we number one in taxes or number 7 and taxes are number eight. But our department of transportation is out of (00:13:07) alive. All right, let's get a response from Michael. (00:13:09) Right? Well very good question. But but the number of those Studies have not only been conducted that been published in. First of all, let me say that the study that we did in connection with Minnesota's for minnesotans said that if we continue on the trend were on right now per capita spending will go from approximately 20% to 23% by the early 90s. That means the state will take up 23 percent of your income. Now in terms of across-the-board spending in 1966, Minnesota ranked about 15 nationally in per capita spending ten years ago are approximately ten years. 1977 we had moved to 8th Place. I believe it is in the most recent study, which was 1987. We're in fourth place in per capita spending which indicates we're on our way to becoming the highest spending State per capita in the country. I think it's exactly the kind of question you asked and the only states that currently exceed Us in per capita spending our Alaska Wyoming and New York Alaskan Wyoming have a very small population basis with high energy resources that they've collected their money from and New York has its own special problems, but the way we're going right now, we're on our way to exceeding New York and catching up with the other two its enormous spending increases and I might add that other states in this region also have the same problems with road construction things, but the only other state in the Upper Midwest region, that's even on the top 10 list is Michigan and they have stayed in 10th place for the last 15 years. They have not increased their per capita. Up with a spending like we have (00:14:47) I suppose the question Tom triplet is what are we getting for? Our money? Minnesota is a high service state. There's no question about it. Mike is right that we do rank high on the amount of dollars. We spend per capita on the other hand over the past five years since this administration at least has been in office we have spent less than the national average. Our rate of growth is less than the national average. Does that mean we don't need to trim back in certain areas? Absolutely not we do and we should and we're in the process of doing that but the fact is that unless we meet hit on some of those basic questions regarding education support of inner-city programs helping the poor. We're not going to solve our long-term Problems by short-term spending constraints. What we have to have is a rational reasoned approach towards getting a handle on those high-cost items and that's what the governor's recommended and I think that's the direction the Nature will take this year. Let's go back to the telephone for a listener question. Go ahead. It's your turn. (00:15:50) Hello. Yes. Go ahead. I'm a wife of a middle manager at 3 a.m. And 3 a.m. Has systematically Begin, moving their people to Texas because of the business climate in Minnesota. I do not want to go to texts. We will our family will be moved. I do not want to go. I have my family here my church. I have a small business of my own. It's really a desperate situation for for a lot of us people. How many chapstick Factories do we have to build in Minnesota to replace 3M when they left they have put up their property in st. Paul the acreage that they've been holding is up for sale and Alan Jacobson from 3M has asked three of managers and their wives to write the legislators about the tax situation in Minnesota. He doesn't want to move 3M to Texas (00:16:54) either. All right, there is this cause-effect relationship that is raised as this caller has raised between 3M or a number of other companies. Is leaving because of the state tax climate Michael Wright is that cause effect relationship Justified (00:17:07) sure and you know 3M was very forthright in the early 70s and telling the state that what's happened is they've created an environment where there the cost structure of manufacturing and doing business here is much higher than it is elsewhere. They asked the state to re-evaluate it and do something about it quite frankly the state didn't 3M very quietly just said, but we tried we told you what our problems were and I think if you look they have not created a new plant in Minnesota for many years and the statistics. I saw said that their Austin facility, which is really I think research and kind of the business unit headquarters now has a thousand employees in a recent 3M publication set. It'll be as many as 3,500 to 4,000 employees by 2000 the year (00:17:51) 2000, but my inclination is to believe that there has to be some strategic planning involved in the decision to move out of state to not just tax (00:18:00) climate. Don't think it's necessarily all tax climate either Dan, but I think that the point is that the reason I think that many companies have not established new manufacturing facilities in the state not just 3M but others is because the cost of manufacturing the state is much higher than it is in almost any other state and well, we're not talking, Mississippi or Louisiana. We're talking, Illinois, Ohio, Michigan, Wisconsin, if you read the comments in the paper that our political leaders have it's very hostile toward (00:18:34) business sure by contrast though. The companies do seem to be very happy with the well educated highly motivated job (00:18:40) course is absolutely and we would you know, we enjoy being here but we compete with others who are in the same situation. We are located here and a lot of our businesses that we most of what we have right now are banks insurance companies and corporate headquarters, but we're losing that manufacturing base, especially the higher paid manufacturing (00:19:00) jobs, Tom. Put me add something here. Well, first of all, let me say that we're sorry to see anybody have to leave the state who doesn't want to and it's amazing Dan how many letters and calls we get from people expressing exactly the same feeling we love this state. We love the services we get here. We love the people and we hate to we hate to leave but fortunately as I said before over the past five years, we've created three hundred and forty thousand more jobs than we've lost for all those people who leave the state for whatever reason many more jobs have been created here. But the manufacturing base is shrinking Tom and that's happening all over the country din, but shrinking faster hero. It is not a shrinking faster here. We are not losing manufacturing jobs as a percentage of total employment any faster than the nation as a whole in fact in respect to some of our neighboring states. We're actually ahead on that count the loss of high-paying manufacturing jobs is a critical problem for the nation as a whole not just for the state of Minnesota. So Minnesota's becoming a state of Two classes the working class of the 52627 dollar an hour job and the top managers. And again that's symptomatic of national Trends unfortunately, and that's why the governor is so strongly committed to trying to reduce that disparity through programs such as Inner City development programs and and whatnot. You have to have that balance. You can't simply look at tax cuts and service wax as a way to solve your problems. It's not that simple. (00:20:31) We stayed in that we think that there is a deterioration of jobs in those higher paid manufacturing areas in the state of Minnesota. We think it's there because of the structure not just taxes but the entire business climate so to speak is structure. Now, let me also say that the Minnesota Business Partnership companies really do like Minnesota. I was born and raised here school here. I think it's a marvelous place to live in the people are great (00:20:56) workers by Supervalu decided to stay. (00:20:59) Let me let me tell Little story about that number of years ago. We were in need of building a new corporate headquarters. There were only two of us in the management team who were Minnesota residents the rest were all from out of state. We went through a very thorough study hired professionals from Chicago to say, where do we need virtue? We have this corporate headquarters. It was interesting that the report came back and said that it probably should be somewhere else except for the fact that to move a corporate headquarters is very very expensive. We operate on very low margins we couldn't afford to move but I think that in I am absolutely delighted we stayed okay because I love it here but the point is is that if somebody was going to move a corporate headquarters and you looked at all of the available places to move it to Minnesota wouldn't show up on the (00:21:50) list. I'm sure we'll get to that as we get to more collars with questions here. Let's go back to the telephone. It's your turn. Go ahead, please. (00:21:58) Yeah, it's you okay. Yeah, it seems to me that you're asking maybe the wrong questions because yesterday of a big hunk of the solution was presented at the Humphrey Institute with the survey that was four years in the making about what the defense budget is doing to our state is doing it all over the country, of course, which is why the manufacturing jobs are being lost but it was a it's a fantastic study which has been published and I don't see how anybody can discuss the Minnesota economy without without the study in their hands. It can be gotten from the Humphrey Institute. It can be gotten from the peace with jobs (00:22:41) campaign height. And as you point out that study was done by Economist Wilbur Mackey and received some news coverage yesterday. Well Tom triplet, I suppose the caller's point is in at another level of Taxation the federal tax and the point made by the study yesterday's were exporting dollars from Minnesota. That's Something we can't do much about. Yes. That's correct. In that sense. We do lose money as a percentage of federal taxes paid. We do receive more money than we pay in if you analyze various other Grant programs because we do take care of our elderly. We do take care of our poor. We tend to recoup more federal dollars in that sense, but the crawler is certainly right that on issues like defense and military spending and so forth. Minnesota is a loser in the whole purpose behind this sort of study was to come up with exactly that sort of analysis to help guide policy makers in attempting to influence what sorts of businesses should be developed and that's why for example, the governor spending so much time on developing research capability and capacity within the Minnesota sector. We have to look to the future. We cannot assume that where we've gotten our jobs in the past will continue tomorrow and the caller's absolutely right. Let's go back to the telephone for another. Shannon and it's your turn. Go ahead. Tom triplet and Michael Ryder (00:24:03) listening. Good afternoon. I'm a lifelong resident of the state of Minnesota and I've lived both and Ramsey in Hennepin County the two biggest counties in the state. Let me throw some statistics at you. I have never seen the county or Hennepin County in the last few years be at the rate of inflation. I think this year if memory serves me right their budget is 15 and a half percent higher than last year's I know that the state is but the times I've looked it's higher than the last year to it doesn't doesn't say with inflation Minneapolis papers been running a series of articles that one of the things that it stated was that welfare and up the county was 43 percent higher than the national average, but at the same time police and fire was 17% and 18% lower. They also ran an article on town homes or rental properties in Hennepin County their outcome was excused. That it was the highest in the country now, I don't know. I'd like this triplet what's going on and how I think we reach the threshold Point here a danger zone if you (00:25:11) will. All right, Tom triplet with a reaction. Yes, and in fact, the statistics cited are of the same magnitude for the entire State not just in Hennepin County the problems are magnified. However in the center city areas because of the relatively High welfare population, we pay a substantial amount of State resources back to local governments. As I said before to help pay for these sorts of costs and yet the counties are also expected to pay some of the costs out of tax levies and because of various factors the poverty problem that's growing in the center cities the fact that we have an elderly population that's second per capita in the country means that more and more expectations and demands are being placed on social and Human Services programs. And that is a major funding responsibility of the County's. That's why the county budgets are going up so much faster than City budgets that pay for things like police and fire were Minnesota has historically been low and that all comes around to the last point the caller made and that is property taxes and rental property is well as business property that Mike was talking about before get hit extremely hard in Minnesota compared to other states and that's why the property tax proposals of the governor and those that are now pending before the legislature all will Target relief to both business and rental properties away to equalize this burden Michael, right? (00:26:41) Well, then let me just say that the state spending was the caller inquired about is under the current proposals over the legislature about to increase by over 18 percent in the next biennium about twice the rate of projected inflation. It has been increasing more rapidly than inflation. Tune in each of the last two bienniums as well. We've been on that track as a matter of fact since the 70s are point in minnesotans from Minnesota has been that that spending at the state level is rising much faster than inflation. Then the state gross product which is the total value of goods and services growth and much faster than personal and corporate income growth in the state. Our conclusion is that at these levels we're due for a terrific problem in the early 90s, which will either be met by large-scale cuts and tax increases or by very significant tax increases in the early 90s. There's just no way out of it. We're headed in this direction and we're on a collision course and we're trying to raise the flag and say to the citizens beware. This is going to happen. Because of what the spending that's going on (00:27:51) now, I suppose some mr. Wright would make the linkage between that increase in spending that the state is projected to have here in the next biennium and the lack of health insurance for a lot of minnesotans. Some companies quite frankly are unable some are unwilling but many are unable to provide health insurance coverage for their employees and in our social contract with our citizens. Apparently we have voted to step in as taxpayers and say well, we'll try to pick up some of the cost (00:28:19) and let me let me make a comment on that. I'm not an expert in this area. But one of the things we've done again at this state is we've mandated that if employers are going to have insurance. They must cover are pieces. They go on down the list of mandated benefits and it's quite extensive including this year. There was a proposal for covering in Virtual in vitro fertilization, which is very expensive and not very well proven. The bill that was proposed took all those mandated benefits out if they would let private insurance in private employers go without all of these anions. It would be deuce the cost significantly and it's estimated that sixty percent of those people are now uncovered would become covered. We aren't always addressing the right problem. If you add these mandated benefits you drive the insurance costs so high that many of these smaller businesses can't afford it Tom triplet any (00:29:14) reaction. Oh, it's always easy to cite something like hairpieces and and but then when you probe a little further you find out the reason for coverage of things like that is for certain diseases that cause a baldness and particularly for certain people lie having hiding the evidence of certain disease is important psychologically as well as medically so you can always find these little things. I don't believe that we at the state level go overboard to require undo coverage. In fact, we're constantly bombarded by well-meaning. Who say we need to have more coverage for ventalili Depends ventilator dependent persons, for example, there's always many more needs out there than than we are covering we couldn't afford to meet the cost of the health span program this year the governor and the legislature is taking it one step at a time. Let's start with the kids right now. We provide Children's Health Plan coverage for children up to age 8, we extend that to age 18 this year. It's that sort of thing incrementally meeting the demands the demands are so great out there. The cost resources are so limited that we have to be rational and that's what I think we're (00:30:24) being gloomy. If I just can tack on to that the bill proposed the Tom just mentioned eliminated in my understanding all of those mandated extras at the state tagged on yet. If Private Business wants to provide that insurance. They have to take them on. I mean, I think we ought to at least look at it having a lower cost medical insurance available for business and see how many of these Sure can get picked up them. (00:30:48) And as far as the cost of health insurance, Mike is absolutely correct. In fact, that's the highest single growth item in our entire budget is providing for increased medical assistance. We believe there's better ways to get at the cost of rising Health Care than to start cutting back substantially on benefits. We're about halfway through our conversation with Tom triplet the state finance commissioner and Michael right the president chairman and chief executive officer of super value stores and chairman of the Minnesota Business Partnership. It's back to the telephone for another listener question, and it's your turn. Thank you for waiting. (00:31:24) Yes, I'm calling from Fergus Falls. And my question is that I think that you have neglected to answer earlier question. And that is that a lot of the jobs that are being created by the Port Authorities and other things in the area are doing a minimum wage to $5 part-time. No Benny's and that there's a big disparity between those and the and the corporations that you're talking about like super value and I think the needs of the people are being ignored and when you're talking about insurance, I think that that's great but there's still some other basic needs (00:32:10) reaction from either of you know, she's she's right that many of the jobs. If not most of the jobs are in fact what we call service sector jobs, which traditionally pay less than the manufacturing sector. That sort of begs the question though. If we had our druthers sure we'd create a hundred percent manufacturing jobs our goal at the state is trying to Foster an environment that helps to create as many of the best-paying jobs as we possibly can and to create an environment that keeps people employed in the state sure. We don't produce $20 an hour jobs in the ordinary course, but I think we are doing a job of providing the best possible way to get as many folks working in and continue working as we possibly can. (00:32:59) Well then let me just say that that I agree with Tom we want the best jobs for the people we want to create with the Business Partnership is trying to do is to create the the discussion of how we go about creating jobs for future. We want a successful State we have to try to educate the politicians that there is a cause-effect relationship that if they continue to raise the cost of doing business in Minnesota. As we see the companies like Honeywell Bull and Apache and am hoist and others leave the state with high paying jobs as we see the number of Union manufacturing jobs decline 27 percent in five years. Those are those good paying jobs. We need it doesn't help to get them replaced by lower cost jobs. And that's what's happening. And we're saying that the legislature and the governor have got to come to grips with policies that encourage the proper kind of job creation. That's not happening right (00:33:53) now back to the telephone and another listener question. Go ahead. It's your turn. (00:33:56) Good afternoon from Duluth. We have a problem here at the moment of school buildings that need to be May deficient as soon as possible yesterday Amory Lovins of Rocky Mountain Institute gave us some good ideas on the subject of efficiency in the long run. I was wondering if someone would please do a study on updating these materials and putting into it the possibility that materials might be donated and volunteer workers used. I'm one of many who would show up with a hammer to swing on the weekends. Thank you. (00:34:29) Tom triplet fantastic idea Duluth says the caller certainly knows had a major School referendum week or so ago large. I believe it was over 50 million dollars worth of projected expenditures for improving school buildings for a variety of purposes and That Was handily Defeated and so we have that dilemma again of folks like the caller wanting improvements the voters saying wait it costs too much. We can't afford that so let's look for Middle grounds alternative ways of doing it and what she suggests sounds like a great idea. Dear to me will will follow up. We'll go back to the telephone for another caller question. And it's your turn. Go ahead please (00:35:10) my residential taxes are on 2015 half percent this year. Since the dfl controls all levels of government what they are going to go up next year. Where do you live sir, South Minneapolis? (00:35:23) I can try to deal with that. First of all, the caller should be aware of a special real estate tax targeting program, which says that the state will pay 75% of any property tax increases above 10% In other words, if your taxes went up more than ten percent last year the state will pay 75% of it up to a maximum of 250 dollars. The legislature is considering its in both tax bills moving their way through the session this year to take off that 250 dollar cap and make it retroactive. So the caller should be sure and file for the benefit that's in current law and be aware of what the legislature finally passes but the bottom line here is what's happening to property taxes in Minnesota, even though we can put some Band-Aids on and deal with these large increases such as the caller head. We cannot afford to have 14% property tax increases in Minnesota as current law would call And that's why the legislature and the governor are spending so much time in these last two weeks trying to figure out a way to put a 300 million dollar property tax relief package together just one final comment and and that's an irony in all of this when Mike and his colleagues at the Business Partnership talk about two point 1 billion dollars in increased spending. They don't spend a lot of time saying that well at least 1/4 of that is going back from the state to local government in the way of property tax relief, we will be using more than 500 million of this 2.1 billion when all said and done to reduce the property taxes of people like the caller who just called and yet technically that's an expenditure for the state and it is included in the 2.1 billion. So it's important for all citizens in Minnesota to understand the degree to which we use state tax dollars to reduce local. Property tax levies by local government, I guess Comet strike. Some people that the local officials aren't rising to the bait and aren't passing the savings along. Unfortunately. We have had a few instances over the past year of of exactly that happening and that's why the tax bills down that are moving their way through this year will have very tough Levy limits on now this bothers local government officials. They don't like the state telling them to control property tax increases on the other hand state legislators and the governor feel that we get all this heat from the Business Partnership and others for spending so much when so much of our spending goes to hold on property taxes that we can't pass this back and then at the same time have local governments raise taxes even more and I gather that the local officials are concerned with the state mandates rules and regulations that come attached with some of the property tax relief directed at them such as when the state mandates that County she'll get out of the land filling business by a certain date they have to To incinerators right there very high Buck items right Dan and that in my judgment is a legitimate complaint too many local governments, and that's why the governor's program calls for the state to pay for those programs. We mandate and have local governments now assume more of the cost of the programs they decide themselves to to have for their citizens without the state stepping in and mandating them (00:38:48) and let me just add that the caller's increases last year will probably be matched this coming year. There will be some by down by the legislature and the governor's proposals, but the increase itself would be in the 15 to 20 percent rank. Then how much it comes down to pens upon how much gets rebated to the local unit of government by the state is the way I understand it. I think the key thing though is is that they're still going to be two point 1 billion of new spending either at the local or the state level is just transferring some income tax money and other resources. It was raised by the state to buy down the local Texas. I think maybe it would be good if Tom could explain because this is something that isn't well understood and I don't even understand it in trying to understand this whole issue is we have the local units of government spending so much of the money that comes from the state and the state complains that they have no control over that and therefore they just keep funneling the money out and the spending keeps going up and up and up. Somebody's got to take responsibility some time and pull it all together and say, hey the citizens of this state really can't afford to pay for this. Therefore. Let's make the tough political decision bring it together and have some accountability with the taxing and spending (00:40:03) Mike has hit one of the major fiscal problems in this state right on the head the state raises. Now, if you take a look at all the taxes raised in the state from state and local sources the state raises two thirds of all taxes that are generated in the state local governments raise 1/3. However, local governments spend two-thirds of all the spending that goes on in the state and in the state spends only one-third. And in fact for the bureaucracy that I'm a part of only eight percent of State spending is actually spent by us. So we've got ourselves in this horrible trap of the state underwriting so much of the cost of local government operations and yet local governments are the major Spenders and that's why we're spending so much time this session in trying to sort out these responsibilities if local governments spend the money for locally determined purposes. They should be expected to raise the money to pay for it. The state should be expected to raise the money and pay for those costs those programs that we mandate whether it be education Environmental Protection that came up before the cost of administering the court systems and so forth. It's this fundamental restructuring. That's so critical that has to occur before we can ever get Handle on overall state and local spending in Minnesota. Let's go back to the telephone and another listener question. Thank you for waiting at your turn. (00:41:29) Thank you calling from Minneapolis. I'm a independent insurance agent and this gets back to what was talked about earlier and I've had a number of clients probably eight to ten who have left the state small manufacturing companies small firms from 20 to 30 Employees leaving because of the tax environment in the costs of unemployment compensation and all the other issues and talking about leadership minute ago. You know what however it breaks down. I think the leadership comes from the governor and the legislature to get a handle on the real hemorrhaging that's going on in terms of lost jobs, you know, they talk about jobs, but they're losing them not just big ones like 3M, but many many many small companies are leaving in it affects me. And I'm sure it affects a lot of other constituents and there is to talk about an environment that's positive for jobs. You know that tompa triplet said before I was wondering if this was a Colin or Comedy Hour Minnesota is not a very friendly state for business. I'm tripling. (00:42:42) Well this you know, I don't want to make this a partisan response. I don't think that's the purpose of the show and it's not the purpose why Mike and I are here. Let me just say that the facts speak for themselves over the past five years. This state has created three hundred and forty thousand more jobs than we've lost last year alone this state created seventy thousand more jobs than we lost. It's not government that's creating these jobs. It's the private sector and it's our job at government to try and create the best possible tax environment so that this positive trend will continue but to say that the state is losing jobs is just Not true and we can cite study after study statistic after statistic. We do lose son jobs, but we gained more than we lose. Maybe we're not gaining in the sense of having all the best highest paying jobs. We could possibly want I concede that but you cannot argue with any truth that the state is losing net jobs certainly over any one of the past five years Michael, right? We hear these anecdotes all the time of especially smaller companies leaving the state does your evidence point that out? (00:43:54) Well, we see it happening a number of different levels. And yes, we see smaller manufacturing jobs that are leaving the state. We see big companies leaving like Whirlpool here in St. Paul FMC the day they announced the laying off of 40 years jobs here Minneapolis was I was in Aberdeen and they were just announcing the opening of a new operation over there with 20 new jobs and they expected to grow to 300. These are the kind of things that we see happening now. Let me just say This is not a partisan issue. We just happened to see things in different ways in the business Community is trying very hard to educate the governor and the legislature and saying you've got to focus on these things. So we do have good job creation. If you go back and look at the country over the last five years has been enormous job growth and job creation in every state not just Minnesota a lot of it as a result of the national economy. It's hard for us to get our message across on on this in Era of almost full employment here in the Twin Cities, but we in the business Community see the same chinks in the armor that the caller just mentioned and that is small companies where they have an opportunity to open a new facility. Don't do it in Minnesota. They do it in Illinois. They do it in Iowa the doing South Dakota jobs. We should be having here but because of our cost structure in the way that not only taxes but workers comp and other things that need to be adjusted to make us competitive. In a global economy that we're doing in now aren't being taken care of. (00:45:26) Let's go back to the telephone for a listener question. And it's your turn. Go ahead. Please (00:45:31) from the things you've been talking about. How about going back to the basics? And how do you govern a society? And when you see how few people participate in the process of selecting candidates for political office and stuff like this so very few people ever show up at a caucus and then people get elected and maybe they lose touch with all those non voters out there. (00:46:06) Alright and Michael, right the color is raising the point that the electorate the taxpayers aren't engaged. (00:46:11) I think that that in this state we're probably more engaged than we are in other states that we have a pretty knowledgeable and active one, but I agree. The caller I don't think that when we get down to the very basic level of our Precinct caucuses, the people are as active as they should be and and part of what the Minnesota Business Partnership and minnesotans from Minnesota is trying to do is just raise the level of knowledge of the citizens about what is happening out there so that they can have the connection between the spending levels and the taxing levels because our Studies have shown that ninety percent of our citizens are very concerned with high taxes only 20% with the level of spending that we've been able at least it appears that the politicians have been able to disconnect spending from taxes and therefore citizens. Don't get upset in other states. There's been tax revolts were the people who said enough. Let's bring this under control. We need some real hard evaluation in this state of what is happening. Tom just mentioned the one with the the lack of accountability in spending by local units of government, which collect a lot of the money from the state for instance. These things all have to be read And that's only going to happen if the people out there (00:47:25) demanded I agree just for a second here. I I've been to too many standing room only Precinct caucuses to believe that we don't pay attention to political activity in this state. But I also strongly agree with Mike that most minnesotans don't understand where the money they spend in taxes is actually going in the way of services property tax statements alone. I mean, I don't know whether you've ever tried to understand your property tax statement. I can't I mean and that's my (00:47:54) job (00:47:56) very very frustrating and so we're working on a number of levels to try to educate minnesotans and I think that's one real benefit of Mike and his colleagues and their program is to try to make that link make people understand how much they're spending what they're spending for so that all of us at the public level will know where we need to concentrate our efforts back to the telephone lots of folks waiting and we'll get as many of you in in the ten minutes or so remaining. As possible will try to keep our commentary brief here. Go ahead. You're next in line. (00:48:27) I have a question for Tom. My name is also Tom and I live in st. Paul this sounds aggressive but it's really an honest question. I moved here from Iowa about 12 years ago, and I've looked at my counterpart in Milwaukee the demographics between here and Wisconsin seem to be similar and yet every tax that a virtually every text and I pay is at least as high or higher than the taxes that my counterpart Milwaukee pays the question kind of is where does that money go? Is it is it basically redistributing money from the folks who have money to those who don't I'll hang up and listen. We're where's that money go? (00:49:10) Well having come here from Iowa 15 years ago rather than 12. I can remember some of the the same questions and concerns are spending and taxing patterns interestingly between Minnesota and Wisconsin are quite similar and Iowa is not that much different from us either. We spend a lot of money in a lot of the growth in spending in Minnesota is on education and medical care. I think if you were to pick out two general areas, that's where Minnesota ranks quite a bit higher than most other states education in Minnesota in recent years has been driven by fantastic enrollment increases. We have more people enrolled in our public higher education institutions than most other states. We graduate more students from our high schools and any other state in the country. So the cost of keeping these people in public higher education institutions is quite High higher than virtually any other state in the country in addition our medical assistants costs as I mentioned. Earlier are growing. We have a large elderly population that's growing. We provide significant. Although some would say not enough medical care for the poor and the elderly but if I were to pick out two areas that drive costs in this state those would be the (00:50:25) two to and let me earlier one of the caller's cited some statistics on levels of spending quickly. Let me tell you that that in 1987 our K through 12 education spending was a 17 percent above the national average our welfare spending 41 plus percent above the national average highways almost 50% higher education 35 percent above the national average hospitals 22 and a half percent in interest costs fifty one percent above the national average. It's those kind of spending in every category except I might add police and fire were well below national average is what drives taxes to be much higher than they are in Wisconsin or these other states (00:51:08) back to the telephone another another Question go ahead. We're listening for you. (00:51:12) Yes, I'd like to address myself to the fact that it appears that we're using a number of Band-Aid approach has insofar as the reduction of certain aspects of government cost is concerned. However, the overall picture indicates that the entire cost is going to have to be reduced Biz gentleman pointed out previously in one of the telephone calls not only are the businesses leaving in Minnesota sword the retired people because they can no longer afford to live here. Now if I were an executive of a company making a decision as to whether or not to operate in Minnesota or for example, Texas, I would go to Texas and here's why because I and my Executives I paid executives are paying are going to pay no personal income tax at all in Texas or Florida compared to Minnesota. And since the people who are making the decisions with the companies are the ones who are the paying the highest income tax in the state of Minnesota. It's understandable why if everything else were equal they would make the decision to leave the (00:52:15) state Michael Ryan is that's what's driving business decisions in the conference rooms and corporate Suites. (00:52:21) Well, let me say that that tax levels in property taxes are one thing in the Business Partnership is relatively comfortable with the current level of state income taxes on corporations. We think we're paying our fair share. We think that the so-called Alternative Minimum Tax on newer businesses or businesses that are not making profit is excessive in is really again hurting job growth. And we do think that there are many retired people leaving the state simply again because of the tax burden on them. I don't I'm not talking know about competing head-to-head with Texas and Florida those days without income taxes. We're talking about being the number one spending state in the nation. And that we can't get ourselves in that position because we are going to really hurt long-term the job opportunities for our children. We must get a hold on spending levels and we're not doing that when we look at the current biennium with an 18 plus projected increase twice the rate of inflation. We're headed for big troubles. And we now hear the colors coming in say we already are being taxed too much. We'll wait until the 90s (00:53:37) back to the telephone and another listener and it's your turn. Go ahead, (00:53:40) please. Yes. I'm referring to mr. Triplett. Hey, I'm a senior citizen and he indicates that he took care of the elderly. Leave me. We used to get our first 11,000 tax-free and state of Minnesota. Now, we're taxed I am now paying trick triple the income tax that I used to pay 3 to 4 years ago also. The big Reserve we have sales taxes on the outer T. He says the medical I don't see any medical and I'm getting taken care of it all by the state and I'm not a high-paid venture. So really I think is What are you saying is way off base because I'm an elderly person and I am many friends that are and we are all of us are thinking about moving out because we can't afford it here. (00:54:34) Let's get Tom triplets reaction to that two years ago, the Minnesota Legislature overhauled the income tax structure. We conformed to federal tax law, which said that income is income. It should be taxed the same way whether you receive it wages, whether you receive it as interest, whether you receive it as a pensions. So the goal is equity to tax people on the same basis regardless of their age in addition. However, the Minnesota Legislature kept certain special benefits one of which is a partial exclusion of pension income. We conformed with federal law, which now has partial taxation of social security for some of them are wealthy. Elderly. We do have despite what the caller Is one of the best medical assistance programs provided for the elderly of any state in the country and we should be proud of that but to the extent that elderly or young people or whoever have income we believe it should be taxed at the same rate applied to all individuals and in the same manner as as fairness demands. Okay. Let's go for one more question. I think we have time for a fairly quick question and response. Go ahead. It's your turn. (00:55:53) Yes, I have. About three questions. I'd like to have time triplets answer will take one of them to take one. Okay. A the comment about it on the last call with regard to income tax reform. What about a flat percent tax and on income in Minnesota with that give permanent property tax relief and with that type of tax meet the projected Revenue needs of the state spending if they continued on its present (00:56:25) course. Well, if the flat tax had an adequate percentage, it certainly could meet any need but we oppose a flat tax. We believe we need a progressive tax system in the country. So that the more you earn you would be taxed at a slightly higher percentage. This is called progressiveness in taxation. It's a long established principle on the country. We believe in it and strongly support it. Now. We have reduced the degree of progressivity in our income tax. We used to have some 16 different rates in a sharply Rising degree of progressivity that's been cut back now to basically two rates so we have Flatten the plane a little bit but we still believe strongly in the idea that the wealthy should pay a proportionately higher share of their income in income taxes Michael write any evidence that the minnesotans for Minnesota campaign or the effort to educate and cap State spending is having an impact any tangible evidence. (00:57:26) Obviously, if you look at the budgets being proposed over the state, you wouldn't think there was much evidence of success. But you know, I think there is some evidence of success. We think that there is more discussion in this session the legislature about the issues of how do we tie local spending and state tax policy together? Maybe it should be re-evaluated. We're hearing the same thing with respect to school spending and in in the state financing of that so the discussions are starting but it's up to the citizens out there if they're really concerned to let their legislator and the governor know how they feel and to get involved because of they sit back nothing will happen. Dan let me just make one more comment before we sign off. We've worked with the business partnership with Tom triplet for a number of years now and various roles. He's had in the state. We don't always agree but he is an incredible public servant and a great Finance commissioner in and while we disagree we do it in the spirit of bipartisanship and always trying to help make the state better. (00:58:29) No doubt much appreciated praise from the private sector for a long-suffering public servant and unfortunately time does not permit a glowing response and we must pass along here. Thanks to our guests Tom triplet the finance commissioner for the state of Minnesota and to Michael Wright president chairman and chief executive officer of super value stores. The nation's number two Food wholesaling business.