Divided we fall

Minnesota's budget

Jul 7th 2005 ST PAUL
From The Economist print edition

The politics of polarisation arrive in a friendly state

ONCE it was known as “the state that works”. But Minnesota has now joined Tennessee as only the second state for a decade to face a shutdown. Because its politicians failed to agree on a two-year budget by the statutory deadline, July 1st, 9,000 state employees are now out of work.
State health-care programmes are still running, and parks were kept open for the July 4th holiday, but “non-essential” services—such as renewing driving licences—have been suspended.

Voters are furious, but the shutdown is a cathartic moment after several years of malevolent political torpor. The ostensible reason for the breakdown is split government. Democrats, who used to regard this traditionally liberal state as their bailiwick, remain narrowly in charge in the Senate, but Minnesota now has a Republican governor, Tim Pawlenty, and a small Republican majority in the House.

In fact, both parties have shunned compromise for quite some time. This is partly a matter of ideology. The right, on the ascendant, won't give way on the need to roll back entitlements; the left, on the defensive, won't give up the last bits of the state's trademark high-tax, high-service approach. And this split has a personal edge. In keeping with its Scandinavian heritage, Minnesota used to be a friendly place to be a politician. Now legislators from different parties barely talk to each other.

The current crisis (and the grudges) date back to 1999 when, at the eleventh hour, the tripartite government (which then included an independent governor, Jesse Ventura) agreed on an unwieldy compromise budget. Four years later, a two-year deficit of more than $4.2 billion was “solved”, again partly by more accounting gimmicks, but also by a shift to the right: there were cuts to state health-care programmes, a tiny increase in education spending and no new taxes. In 2004, the Democrats struck back, preventing passage of a crucial state-bonds bill. Weirdly, voters punished the Republicans: 13 House members were ousted in that year's elections, slashing their majority and emboldening the Democrats.

This year was meant to be different. Legislators attended pre-session seminars on political compromise, and the leaders promised collaboration. But it all went sour when the time arrived to deal with education and health care (which together account for more than two-thirds of all state spending). Faced with a biennial deficit of close to $800m in a total budget of $30 billion, Republicans demanded cutbacks and reform. But Democrats wanted more money for both education and health care; the cash, they said, could come from a cigarette tax, which is popular, and a new income-tax bracket for the state's wealthiest, which is not.

Since then, Governor Pawlenty has been in obvious discomfort. Together with the House speaker, Steve Sviggum, he agreed to small increases in spending on health and education, claiming that the gap could be closed by accounting shifts and gambling revenues, but this tolerance of vice only irritated social conservatives.

At first, Mr Pawlenty stuck to his pledge not to raise taxes. Then he agreed to a 75-cent levy on each packet of cigarettes, calling it a “fee”. Such semantics did not prevent anti-tax groups from running ads against him. Nor did it appease the ungrateful Democrats. As the deadline approached, it still seemed likely that a last-minute compromise could be hacked out. Instead, the Democratic Senate majority leader, Dean Johnson, adjourned the special session, claiming the Republicans had backtracked.

After the shutdown, the furious governor began the process again. As The Economist went to press, the two sides were trading offers, the bitterness complicated by the fact that nobody is really sure who is gaining from the stand-off.

It may be that neither side is. Many Minnesotans may simply vote against any incumbent in the next election, argues Craig Grau, a political-science professor at the University of Minnesota-Duluth. If so, the shutdown might once again advance the cause of third parties (of which Minnesota has a rich history), though none looks exactly well organised at the moment.

As for the Democrats and Republicans, some optimists claim the cathartic shock will persuade both sides to stop pandering to their bases and find ways to solve the state's problems. Getting to know each other would be a start.

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