On Monday, Mark Dayton officially became Minnesota’s Governor.  He joins many new governors around the US who started this week with their swearing-in and are likely to end it with a swearing-at.  The job isn’t easy with the river of red ink confronting nearly every state, and we are no exception.  The size of the gap for the next two year cycle (2012-2013) is 6.2B$, which is to say about 16% of the total General Fund Budget for the same time period.

The festivities surrounding the new Governor’s official acceptance of this responsibility are probably the last time we’ll have a chance to reflect back on what might have been before every politician in the state rolls up their sleeves and gets to swinging their fists … er, gets to work.  It’s as good of a time as any to remember that 12 years ago we started handing out what would be known as “Jesse Checks”, the sales tax rebate that totaled $2.6B over a three year period.

What would the Legislature do with that money now?

For those of you who don’t remember back that far, and this seems to include the vast majority of our local media, there was a time when the State of Minnesota literally had more money than it knew what to do with.  This tremendous blessing met a tri-partisan government, where each of the major parties controlled one part of the mechanisms of the state.  Normally that might be a recipe for chaos, but with plenty of money to spend they were able to work it all out.

Articles from the time are a fascinating read because they generally concentrate not on the effect on our state’s treasury, but on how much any one person is likely to get.  The totals were $1.3B in 1999, $470M in 2000, and $790M in 2001, but you have to dig to find those numbers.

The debate in the Legislature focused on how the money would be rebated – based on sales tax or income tax.  No one is quoted as saying that the money should be put into the state’s “Rainy Day Fund” for use against later deficits.

It goes without saying that we could sure use that now, even if it doesn’t cover the entire gap in our next budget.  But a hole of 3.6B$ would sure seem a lot less daunting than what we have.  It’s interesting to compare this to the  $2.0B “borrowed” from the roughly $14B allocated to K-12 education over a two year budget cycle that is coming due in 2012.

This is, of course, entirely academic.  It doesn’t take too much reading of the news reports of the day to realize that there was absolutely no chance that the surpluses of 10-12 years ago would wind up sitting around in an account waiting for bad times.  It’s also worth noting that while it’s easy to demonize the state government of that time they did manage to work out a system where the state and local government were separated in their sources of revenue by fully funding K-12 education from the state coffers, which is to say that our property tax increases could be much higher right now.

It’s also worth noting that Minnesota’s General Fund is still about 7.4% of the entire state economy, about the same as it always has been over the same period.  There are some very serious spending problems that have been put on auto-pilot that deserve scrutiny from the Legislature, but most of the problem is related to our reliance on income tax, which rises and falls with greater volatility than the economy generally.  So most of the political arguments that are likely to be raised about who/what is to blame are going to be rather silly.

The current economic crisis is a lot more than a shadow from the bright sunny daze that are long past, but we certainly didn’t do our best to prepare for this time before it came.  The “Jesse Checks” would not completely close our current fund balance, but they would have gone a long way to making this situation far less painful than it is now.