Saturday, July 02, 2011

Negotiation Documents Posted. The Republican legislative leadership has released the last few offers from the failed budget negotiations and they are interesting. I say this with tongue firmly in cheek, but it looks like Minnesota school districts suddenly became the equivalent of the state's high income earners, because that's where both sides were looking for the revenue necessary to close the $5 billion budget gap.

From a cursory glance, the Republicans started the ball rolling with an offer to increase the shift from 70% current year/30% subsequent year to 60%/40%, with a later offer from the Governor to the Legislature increasing it yet again to 50%/50%. All offers included a $50 per pupil increase for both years of the biennium to cover borrowing costs that would result from cash flow problems associated with the shift. I could be reading the documents wrong, but I think I am following them correctly.

How central the increase in the shift was to the bargaining framework remains to be seen. The Republicans' refusal to accept any tax increase and the DFLs' refusal to issue bonds from the tobacco revenue (I'll have to go back to one of my old finance texts to decipher how that would be done) appear to be the major sticking points. Both sides now appear to realize the need for increased revenue, but their methods of raising said revenue diverge dramatically.

The suggestion that the shift be increased once again brings back the old "would you rather have your cash flow affected or your base reduced" question to the fore. When the move was made from 90%/10% to 70%/30%, the education community supported the move. We had been at or near the 70%/30% level a couple of times in the past and while scrambling to keep cash flow healthy is never a walk in the park, 70%/30% was tolerable. Increasing the shift beyond 70%/30% would be uncharted territory and the level of comfort would diminish drastically. The original question of whether or not this is preferable to a base cut remains, however, and the education community will have to parlay and determine how to react to the suggestion.

Mark this one down folks (along with all the rest of my inaccurate predictions). I thought that the 70%/30% funding schedule would be accepted by both sides and no further cash flow adjustments would be even suggested. Just imagine John McLaughlin, host of The McLaughlin Group, looking at my suggestion and bellowing his trademark "WRONG!" in reaction to my earlier prediction.

Here is the StarTribune links to the budget offers:

Special Master Hearing. Below is a link to the MinnPost story on the initial hearing held by Special Master Kathleen Blatz.

Morning Take. If you haven't already done it, I strongly suggest that you subscribe to Blois Olson's Morning Take. Olson is a public relations specialist with the Tunheim Partners and does a tremendous job of providing an encapsulation of what's happened and what's happening in relation to state government issues all delivered to your e-mail inbox Monday through Friday.

Here's a link to subscribe to Morning Take.

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