Put away that high priced credit card.
That’s the message the DFL had for Minnesota’s Republican party legislators today. It was in response to a recent statement by Republican Tax Committee Chair Greg Davids that he would consider relying on the tobacco bonds again to resolve a future deficit.
Representative Ryan Winkler says The tobacco bonds used to close the state’s budget deficit this year will cost the state $576 million in interest and other charges to borrow $640 million dollars — essentially costing the state almost twice as much as it would to have raised the money through taxes.
Press release from the Minnesota DFL Party:
Note: Press release quotes Representative Paul Thissen who was not at the press conference. Representative Ryan Winkler filled in for him.
Today, the House DFL Caucus called on legislative Republicans to return to fiscal responsibility.
“It is time to cut up the state’s credit card when it comes to balancing the budget,” said House Minority Leader Paul Thissen in response to the announcement of the sale of tobacco securitization bonds. “I hope the Republicans in the Minnesota legislature will join me and commit to never again balance our budget by selling 20 years of future income. People are fed up with deficit spending.”
Last week, Minnesota Management and Budget oversaw the sale of $757 million in tobacco securitization bonds, with $640 million of that applied to the state budget. Minnesota will have to pay back that $640 million plus an additional $576 million in borrowing costs, bringing the total debt service to $1.2 billion over 20 years. Legislative Republicans proposed and passed the borrowing scheme on a party-line vote as part of a final budget agreement to close a $5 billion deficit.
Incredibly, just a few weeks ago Republican Tax Committee Chair Greg Davids said he would consider relying on the tobacco bonds again to resolve a future deficit.
“Instead of asking millionaire Minnesota to pay the same in taxes as hard-working, middle-class Minnesotans, Republicans took the unprecedented step of borrowing money to close a state budget deficit — at an enormous cost to our state and to future generations,” said Thissen. “The money needed to pay off this debt could be going to much more worthwhile causes — education, economic development, and property tax relief. Democrats in the Minnesota House are standing united to urge the Republican majority to stop putting the state’s budget on the credit card.”
“Republicans said they were here to do things differently and they were right — for the first time, Minnesota is basically engaging in the same deficit spending that we’ve grown tired of seeing in Washington,” said Rep. Lyndon Carlson (DFL – Crystal), Lead DFL member on the House Ways and Means Committee. “Until now, we had never issued securitization bonds for the funding of ongoing programs. This isn’t solving our long-term problems and will leave us saddled with debt and deficits for years to come.”
The constitutionality of appropriation bonds is still in question as well after an opinion issued from Attorney General Lori Swanson in 2009, forcing the move to the more risky securitization bonds. In addition, a “reliance on one-time measures,” like tobacco bonds, was cited by Moody’s in the downgrade of Minnesota credit outlook from stable to negative this past August. Standard and Poor’s followed suit in September, downgrading Minnesota’s AAA credit rating to AA+. Fitch downgraded Minnesota’s credit rating during the government shutdown (in July 2011) from AAA to AA+.
“No Minnesotans would operate their own budget in this irresponsible manner,” added Rep. Thissen. “Let’s cut this credit card up and get serious about solving our state’s budget woes permanently so we can focus on what really matters to Minnesotans — a vibrant economy with good jobs and a strong middle class, a quality education for all our kids, and safe neighborhoods and streets for our families.”