A Tale Of Two Very Different States

It really is eye opening to get into a new state for a long period of time so that you can see the difference between the way the state you live in (or in my case lived in for 14 years) and the one you are in now. Case in point is how the current economic downturn is being handled by the State of Utah versus how it's hitting the State of Minnesota. First Minnesota....thanks to a slowing economy, state revenues are down $530 million, the reserves (rainy day fund) is down $33 million and spending is up $64 million, leaving the state in the hole $935 million - a far cry from the $2.2 BILLION surplus that the state had at the end of FY 2006. That led some legislators to come flat out and say "I Told You So".

One year ago the economy was doing well and the Legislature was overflowing with ideas on how to spend the $2.2 billion state budget surplus. It was the first time in several years that we weren't facing a large deficit. A new cast of leaders was eager to validate its sweeping victory in the 2006 election by turning their campaign promises into promises kept.

In the midst of the spending frenzy, I wrote to constituents my belief that "we need to be prudent with spending and not leave ourselves in a tough situation if the economy takes a sudden downturn." There was at the time plenty of historical evidence to suggest such a downturn could take place.

Utah, on the other hand, took many of the steps that Rep. Beard laid out in his legislative update. I know Rep. Beard will not be surprised at the results of such prudence.

On Friday, the Utah State Tax Commission released preliminary year-end revenue numbers.

When you look at the numbers, you will notice we're collecting less revenue than originally projected. That is not a surprise (we're actually pleased it's not worse). We're still within the range we predicted last month.

No one wants to be right about bad news but legislative dinosaurs like me have been through enough economic cycles that we felt the downturn coming and planned ahead for it. We have some carry-forward money, a healthy Rainy Day fund and we socked away an additional $100 M for the Uniform School Fund. In addition, we crafted a FY 2009 budget that is significantly lower than the FY 2008 budget.

From the article in the Salt Lake Tribune:

"We intentionally reserved a large carry-forward because we anticipated a slowdown," Valentine said. "Utah is very well poised to weather any kind of economic downturn."

Some states are having to cut services because of dwindling tax revenues, said State Tax Commission spokesman Charlie Roberts. "We're in a lot better fiscal shape than most," Roberts said, pointing to Utah's fiscally conservative bent and efforts to foster a favorable business climate as contributing factors.

So, we need to pay attention, spend carefully, and act wisely - but we don't need to be afraid. In keeping with being the best managed state in the nation we have already asked state agencies to plan ahead on where and how they can cut, should that become a necessity. I'm hoping it won't.

The Minnesota Legislature can and should take a lesson from their bretheren in Utah. Economic cycles are the norm. A little prudent planning, forethought and a lot of self-discipline can (in the long run) save your state from being blown around by the inevitable economic storms of life. Just as a wise worker sets aside money (and spends wisely) in case of a loss of income, the state should be setting aside money and wisely spending their money - in case of a loss of income. That is supposedly what we pay the Legislature to do.