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Tale of Two States: Wisconsin and Minnesota, a socioeconomic experiment in real time!

By Penny Barnard-Schaber

Many states have similarities, but few states are as similar to each other as Wisconsin and Minnesota.

Both states have four seasons with an added emphasis on snow and winter. Both states have a lot of lakes; Minnesota is referred to as the Land of 10,000 Lakes and Wisconsin is noted as the Nation’s Dairy Land and has even more lakes.

Here are some interesting statistics from 2010 Census Bureau website (census.gov):

patty_table

As you can see from the chart, there are many similarities between Wisconsin and our neighbor, Minnesota. Notice one very large and significant difference: in Wisconsin we put more than twice as many people in jail. This is very costly for Wisconsin and demonstrates a different spending strategy for Minnesota.

Over the last four years there have been other significant differences between these two neighboring states: the differences will make a very interesting sociology study in the near future.

Each state elected a new governor in 2010; the governors have done very different things in their respective states. The different strategies were recently discussed in detail in a La Crosse Tribune Editorial from January 4, 2015. Both governors inherited economic problems because of the nationwide recession. Governor Walker inherited a $3.6 billion dollar deficit and Governor Dayton inherited a $5 billion dollar deficit.

Governor Walker cut education spending by a very large amount and cut taxes for businesses and individuals who made more than $150,000, while decreasing the earned income tax credits and the homestead tax credits. Both of these tax credits help low-income people; cutting the credits made their taxes go up. Governor Walker has also borrowed a lot to continue the high level of road building in Wisconsin with less money going to road maintenance. Governor Walker did not create a Wisconsin Exchange for Health Insurance, and he did not take the Medicaid Expansion money.

Governor Dayton had an education fund that he borrowed from to balance their budget, and he raised taxes on the highest earners in Minnesota while at the same time increasing the credit for renters as well as cutting taxes for middle income families and for businesses. Governor Dayton did help create a Minnesota Exchange for Health Insurance and took the Medicaid expansion money. He also increased the Minnesota minimum wage to $9.50 an hour.

So how have these different decisions played out over the last four years? Very differently as you can imagine!

Minnesota’s jobless rate in November was 3.7%; Wisconsin’s was 5.2%. Forbes ranks Minnesota as ninth best for business, seventh in economic climate and second in quality of life. Forbes ranks Wisconsin differently: it is 32nd best for business, 27th for economic climate and 17th for quality of life. Different actions were taken in both states with very different results.

From my perspective we are really feeling the impact of Governor Walker’s decisions at the local level. Our communities are stretched thin for road repair and maintenance and for making sure we have a great public education system. Based on requests from state agencies and departments Wisconsin is facing a budget deficit of about $2 billion which includes a $750 million dollar shortfall for transportation funding while Minnesota has a $1.2 billion surplus.

Governor Walker and the Republicans like to talk about how they fixed a deficit. They talk about inheriting a $3.6 billion deficit in 2011, but they don’t tell you what preceded that deficit. In 2009 our state had an estimated $6.6 billion dollar deficit because of poor decision-making and the national recession. At that time, in my first term of office, the Democrats had the majority and they had some hard decisions to make. Revenue collections had fallen to one of the lowest levels ever seen; both income tax and sales tax revenues were very low in 2008 and 2009. Instead of ignoring the problem we were facing, the Democrats did some things similar to what Minnesota did in 2011. We raised the income tax on high wage earners by 1% and we closed a corporate tax loophole that allowed corporations to move their Wisconsin earned profits out of the state to avoid their tax responsibility. By doing this the deficit of $6.6 billion was cut to $3.6 billion.

These tax changes were left in place until about 2013 by the Republicans and Governor Walker, allowing them to pay some bills and develop a “projected” surplus. In 2013, based on a surplus that was only projected and not definite, Governor Walker proposed and the Republicans passed large tax cuts. The Governor and the Republicans are not talking very much about the deficit that has been recreated through their policies and decisions, instead they are talking about re-aligning a couple of state agencies and they are avoiding the more important issue of the structural deficit that is the result their decisions over the last four years.

Possibly, if Wisconsin had left the changes from 2009, which were very similar to the changes Minnesota just made, in place then Wisconsin would also have a surplus and we would have similar higher rankings from Forbes. It will be interesting to see what the next biennial budget will look like in Wisconsin as we try to catch up with our neighbors in Minnesota. I’ll be watching the upcoming budget carefully because it is important and I would prefer to have Wisconsin leading the way instead of playing catch up.

Here is the link to the La Crosse Tribune article from January 4, 2015: http://lacrossetribune.com/news/opinion/our-view-minnesota-is-winning-this-border-battle/article_92f1e11e-1375-5f5a-b28e-eb80bded634d.html

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