Daily Austerity Watch: Government Shutdowns Loom In Minnesota, Iowa

Americans may not be rioting the streets over austerity policies to the extent they are in Europe.  Smaller-scale skirmishes, however, are erupting in state capitols, and in the cases of Minnesota and Iowa, may lead to shutdowns of government that the U.S. Congress was only able to barely avoid.

Minnesota Gov. Mark Dayton (D) yesterday issued layoff notices to 36,000 layoff notices to state workers in preparation for a shutdown.   The governor and the Republican-controlled legislature are at odds over how best to address the state’s two-year $5 billion deficit.   Dayton wants to raise taxes on top earners while his opponents favor cutting spending, echoing similar debates in other states and the national level.  The two sides have until July 1 to work out their differences.  They last met on May 22, according to Minnesota Public Radio.  Senate Majority Leader Amy Koch (R) plans to schedule a meeting with Dayton later this week.  Earlier this year, she vowed to fight Dayton’s proposal for what she called “job-killing taxes.”   The Minnesota Chamber of Commerce backs the Republicans.

“Our members are clear in their directive that we protect the state’s job-creators from the negative impact of the Governor’s proposed tax policy,” the group says on its website. “It’s not clear when the Governor will convene a special session to resolve the budget.  Our differences with the Governor on raising taxes should not overshadow our common ground on ensuring that Minnesota companies can compete in the global economy.”

Meanwhile,  Iowa Gov. Terry Branstad (R) is trying to reassure residents of the Hawkeye State that they should blame Democratic Senate Majority Leader Michael Gronstal if the government shuts down because of a lack of a budget agreement.  The two sides have until June 30 to patch up their differences.

“I think you’ve got a situation where the leader has tried but hasn’t been able to get the support of his caucus to negotiate something and get this worked out,” Branstad told the Des Moines Register. “They have been used to calling the shots in the last several years, but now you’ve got a Republican governor and you have a Republican majority in the House … they need to respect and recognize that.”

Gronstal, not surprisingly, blames Branstad and the Republicans for refusing to compromise and vowed to fight against what he considers to be the governor’s “starvation budget” for local schools that calls for a zero percent increase in per-pupil spending.   That’s never happened before in Iowa and would affect many districts in the state which are facing rising costs and declining enrollment, according to Mike Owen of the Iowa Policy Project.

“Everybody is hopeful that there can be some sort of agreement reached” that would avert a shutdown, he says in an interview.  “It’s just anybody’s guess whether the two sides will get together.”

Budget battles in state legislatures are further complicated by the fact that tax revenue is on the rise because of the continued — though slowing improvement — in the economy.  With that comes added pressure from interest groups to restore recent budget cuts.  That makes maintaining fiscal discipline even harder.

–Jonathan Berr