Truth in Budgeting
What better time than tax season to wonder: Just how are our tax dollars being spent?
One year ago this month, I opined about the near impossibility of understanding government budgets after looking at the state’s eight-inch-thick budget summary, and what one can find regarding the cities of Minneapolis and St. Paul. Their budgets were set up differently and often lacked important details. Large expenditures were sometimes labeled “other operating expenses” with no further explanation, and employee-related expenses were often lumped together under one line item titled “total compensation” or “employee expense.”
Government budgets should be as well detailed as those of publicly traded corporations, but many are not. And it seems like the bigger they are, the less transparent they become—almost as if it’s inherent for some of these institutions to produce budgets that would fail miserably in the private sector.
All of this is more pertinent than ever given the polarization between those who want to raise spending for key programs, and those who are hell-bent on cutting, or at least holding down, government spending. And this battle rages at all levels of government.
On each side, too much time has been spent stressing one’s convictions and not enough has been spent addressing the real problem—how to better manage spending. And the only way to do this is by first understanding how the dollars are currently being spent.
About a year ago, the commercial real estate development association NAIOP Minnesota teamed up with the Minnesota Taxpayers Association to try to standardize—at least in a rudimentary way—how cities and counties in Minnesota report their financials. (Hopefully, this initiative will eventually include the state’s budgeting process as well.) Their efforts have culminated in proposed legislation authored by Representative Keith Downey (R-Edina), up for discussion this legislative session.
Downey is proposing to amend current laws on how taxing authorities other than school districts manage and report their budgets. If these changes pass, counties and cities with a population of 2,500 or more will have to provide the public with electronically accessible, easy-to-understand spending and budget information.
Local governments typically present budgets by program areas, such as general government, police, fire, parks and recreation. The legislation would require information on spending by “aggregated expenditure types”—specific line items in selected key categories. Among them would be employee costs, broken down by wages and salaries, pensions, health care, and other benefits. Such information would need to be disclosed for the two prior years’ budgets, estimates of current-year spending, and projected spending in the coming year.
Downey is perhaps the most vocal proponent of government reform in Minnesota, and he believes much of our spending challenges are in the area of labor costs. Others agree: A study last year found Minnesota’s public employees are among the highest paid in the nation, and are better compensated than their counterparts in the private sector. A more recent survey claims that Minnesota would be far better off (higher incomes and standards of living on average for all workers) if it were a so-called “right to work” state, which in essence forces a union to represent every eligible employee whether he or she pays dues or not. Currently, only those who pay dues receive full benefits provided under a collective bargaining agreement.
Given Downey’s beliefs and the increasing statistical support to back them up, some may perceive transparency in budgeting as simply a tactic in an overall campaign to attack public-employee unions (which provide the greatest source of campaign backing for Democrats) by those who believe such unions are unwilling to do what’s necessary to help reduce government spending. Others will point out that transparency in budgeting has now become part of a politically charged, Republican “Reform 2.0” agenda that calls for government spending changes opposed by most Democrats. And of course, there’s the obvious benefit to NAIOP: Steering taxpayer attention toward spending and cost management may eventually help reduce the percentage of budgets paid by commercial property owners in Minnesota.
Regardless of the political bickering and the hidden agendas—be they fictional or real—all sides should support greater transparency in government spending. The only reason for not doing so would be if one’s agenda is better served by keeping the public in the dark about what’s really happening with its money.
About this month’s cover story
For more than 20 years, I’ve read and occasionally written about Bill Cooper. Yet during our Minnesota Business Hall of Fame awards dinner last summer, I learned things about him I never knew before. And it prompted this month’s cover story. I hope you enjoy it, and that you also will go on line and watch the video recording from last summer’s event. The introduction by Ralph Strangis, and Cooper’s acceptance speech, will provide you with even more insight on the man behind TCF Financial.
Speaking of awards, please drop us a line or call with suggestions as to whom you would like to see inducted into the Minnesota Business Hall of Fame this year, and why. We’re also now seeking nominations for 2012’s Outstanding Directors Awards, Family Business Awards, Smart Solutions, and Small-Business Success Stories. Details about each event and its nomination criteria can be found at http://bit.ly/ysMUm1.
For more on the efforts to make city and county budgets easier to understand, visit bit.ly/AytnAc.