The GOP’s Senate 18 and House 18A and 18B nominating convention was held on Saturday, March 14, 2010 at the Dassel-Cokato High School Performing Arts Center. Scott Newman of Hutchinson was nominated to run for the seat being vacated by Senator Steve Dille, who is retiring this year.
Representative Shimanski (18A) and Representative Urdahl (18B) were also nominated to run as incumbents.
On February 23, 2010, in private correspondence, Ford Peterson of Dassel, MN posed 10 questions to the 4 GOP candidates for the Senate 18 seat. TIM BENOIT–Dassel, DEAN MAHLSTEDT–Cokato, SCOTT NEWMAN–Hutchinson, and RANDY WILSON–Glencoe, were asked to respond in such a way so that their response could be compared. Each candidate provided a thoughtful response. What follows is a description of the issue, the questions posed, and each candidate’s response placed side-by-side for comparison.
What follows are individual posts for the 10 questions. The candidates each responded with their opinions. I invite you to ask questions and make comments in the comments section of each posting.
Pensions: Funding retirement beyond Social Security is everyone’s personal responsibility. Historically, pensions became common in response to the wage and price control experiments of Nixon era economics. This is also how we came to expect employer provided health care benefits. Non-wage benefits would circumvent the limitations imposed by the failed economics of wage controls. You will find two general types of qualified pension plans: defined benefit plans, and defined contribution plans. Under defined benefit plans, the employee and employer enter into an agreement where the employee is to receive a lifetime benefit defined at the time of retirement. It is usually a per-month payment, often with survivor benefits, and may include health care benefits as well. Defined contribution plans, often an IRA, 401(k), or 403(b) plan, contribute money to a fund, which belongs to the employee and earns interest, dividends, and gains until retirement. Once in retirement, the retiree can withdraw funds as needed over their remaining life. Because of high and unmanageable cost, most private employers converted their defined benefit pension plans to defined contribution plans. Minnesota employees continue to enjoy the favorable benefits under defined benefit pension plans. Through years of poor management, poor investment advice, lack of proper funding, and bad luck in the stock market, the state’s unfunded pension liabilities for its 294,000 active members has ballooned to $11.4 Billion.
1) MN has had a defined benefit pension plan for decades. Many of the various plans have large unfunded liabilities. The private sector converted pension plans from a defined benefit to a defined contribution, similar to 401(k) and 403(B) type plans, years ago. Do you support, and more importantly, would you provide leadership in the effort to convert the state’s pension system from defined benefit to a defined contribution plan?
| Benoit: I would definitely want to provide leadership to convert the state’s pension system from “defined benefit” to a “defined contribution” plan. This has to be done in order to prevent Minnesota going the way of California and New Jersey. It is time for all those in government, whether elected, appointed or hired to realize that we need to lead by example and to respect, not screw the tax payer. This has to be done to ensure Minnesota’s credit rating and sustainability going forward. Everyone who works for the government needs to be accountable to the people, whether elected, appointed or hired. | Newman: Yes, I would support this proposal and would agree to lead that effort by authoring the bill. I was faced with this question while in the legislature involving the MPLS Teachers Pension Fund bailout. At that time, this fund had been horribly managed and the Mpls teachers came to the the legislature seeking funds to make it solvent. I strenuously opposed this bill authored by State Rep Paul Thissen and would continue to oppose similar bailouts in the future. |
| Mahlstedt: I will support and provide leadership to convert to the defined contribution plan. | Wilson: I believe it is in our best interest to switch public employees from a defined benefit to a defined contribution plan. The unfunded liability is beyond what the state and residents can afford. |
Business Income Tax: Prior to Rudy Perpich being Governor, Minnesota was a tax haven for multi-state businesses. The relative high tax rate on corporate income at that time (6.8%) was higher than in most surrounding states. However, each corporation would pay tax to MN based on its level of net income earned within the state, allocated to MN based on property, payroll, and sales located within MN. Each corporation within a multi-state or multi-national company would allocate both income, and overhead. There was a great advantage to placing high overhead activities within Minnesota’s borders. Property and wages located in MN would offset income allocated here. 6.8% of zero income was zero tax. In the mid-1980’s Rudy Perpich introduced the Minnesota Unitary taxation method and forever changed the equation. Under the current “Unitary” methods, property, payroll, and sales located within Minnesota are used to allocate a multi-state corporation’s total US income. Minnesota has imposed a quadruple incentive to locate property and wages elsewhere. Property, payroll, sales, and a 9.8% tax rate all conspire and contribute to driving business into neighboring states and elsewhere in the world. Add a high sales tax rate (now 6.875%) and you have a perfect storm of burden on business. Decades of abusive taxation has driven business and jobs elsewhere.
2) Do you support the elimination of the corporate income tax? This includes the most onerous “Unitary Tax” on multi-state corporations. Short of elimination, would you support a return to the separate corporation taxation, which for decades made MN a tax haven to corporations choosing to place commercially productive payroll and property in MN? (e.g. pre-Perpich taxation methods)
| Benoit: Yes! I definitely would support elimination of the corporate income tax as well as the separate corporation taxation. I also believe in a real simplification of taxes in general. I don’t believe income should be taxed at all. Consumption taxes are the fairest way to raise needed revenues. By lowering taxes, not only do people have more money to spend and donate, the state will give up some of its power to local units of government, which is where the power should be.
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Newman: Yes, I favor tax reform which will return MN to being a State which welcomes business rather than creating its current anti business climate. Between our tax and administrative burdens on business, we are losing jobs to sister states at an alarming rate. I distinctly remember a DFL tax proposal on the House floor in 2005 in which they were attempting to create an income tax on corporate profits earned in another state or county. The DFL authors of that bill kept referring to it as “closing the corporate tax loop hole”. I kept referring to it as telling business they simply were not welcome in MN. |
| Mahlstedt: Yes I would support a return to the separate taxation. | Wilson: I would not support the elimination of income tax. I would support reducing the cost of services and more efficiency in government and look to provide the least intrusive revenue package to provide needed services. |
Prevailing Wages: Minnesota has imposed rules promising higher wages to workers in state funded projects. Those projects must pay workers the ‘prevailing wage’ established for the type of expertise required. A survey of workers is taken, and the mathematical ‘mode’ is used to determine the prevailing wage. The mathematical mode is the wage that appears most frequently on the survey results. How does this work? Not well. The legislative auditor’s February 2007 report was critical of the state’s administration of the rules. From page 23, Summary, the auditor states:
…some prevailing wage rates do not reflect the majority of wages and benefits reported to the Department of Labor and Industry. This concern arises in part because Minnesota does not require the mode to represent a minimum percentage of reported rates.
He then continues:
While the department generally calculates prevailing wage rates in accordance with state law and rules, we found instances in which the department set rates without following all of the required procedures in its rules.
From page 33 of the same report we find an example explaining some of the auditor’s concerns: (click image to enlarge)
As a consequence of these rules, in the example provided by the auditor, all Le Sueur County Pipefitters and Steamfitters will be paid $43.31 per hour, even though the average is only $22.87. A disproportionately large reporting of union scale (uniform hourly rate) can distort the earnings considerably. Likewise, the absence of uniformity in wage reporting, such as you find with the Todd County Carpenters, can result in the opposite effect.
In the current economic environment, prevailing wage artificially creates high labor rates on state projects, a burden carried by the taxpayers of Minnesota. If regular market forces were allowed to respond to real wages, the same taxpayer dollar could be used to hire considerably more workers. In addition, no effort is made to limit the dispensing of state funds to out-of-state workers, giving rise to the situation where Minnesota taxpayers are funding other state’s residents.
3) Do you support the elimination of the “Prevailing Wage” rules designed to inflate the cost of payroll on state projects?
| Benoit: I absolutely support the elimination of the “prevailing wage” rules. Prevailing wage is part of the reason local units of government are unable to effectively build, expand and overall improve the services they provide. It is time for the tax payers not unions to determine what projects are approved and funded. As a State Senator, I should be able to propose elimination of the “prevailing wage” because I am not looking for funds and endorsements by unions if they don’t share my conservative solutions to fixing what is wrong with our government. | Newman: Yes. Prevailing wage rules hold costs artificially high on state contracts. They are based on a theory that because someone in a different geographical location has a higher wage therefore that wage is due on all government projects. This is something you would not see in the private sector because it is not based on sound business principles. In the past I routinely voted against minimum wage bills for the same reason. |
| Mahlstedt: Prevailing wage rules, all of them, need to be rescinded. | Wilson: The prevailing wage does not reflect the wage in a certain area and far too often drives the cost of projects up. We need to reform this issue and potentially eliminate it. |
Business Subsidy and “Making” Jobs: The public is calling for the government to ‘make jobs’ at an unprecedented rate. Asking government to borrow more money and spend it on ‘works projects’ expands the already exploding deficit. Decades from now economists will debate whether the Trillions of Dollars spent on bank bail-outs, car company take-overs, and artificially low interest rates were necessary to save the nation’s economy from the natural implications of unwise lending practices initially designed to ‘stimulate’ construction jobs. Ethanol from corn has been scientifically demonstrated to be counter-productive yet we subsidize the plants producing it. Crop producing land receives significant reductions in property tax, which is a substantial portion of the commercial tax base from which rural citizens are expected to pay for urban style education—in essence subsidizing cheap food for urban residents. Rural taxes are collected and spent on urban mass transit to subsidize urban commuters. Construction projects are subsidized by artificially high wage rates. The government hiring additional public safety, education, and maintenance workers does not create a sustainable economy of scale. Quite the contrary, it does less with more.
4) Do you support the elimination of all business subsidy? Including the subsidy for corn, milk, ethanol, farm property tax, mass transit, construction projects, public service wages, etc. This includes stopping the up-coming ‘make jobs’ projects likely to be part of the next round of budget talks.
| Benoit: Yes I support the elimination of all business subsidies. We are at the point economically that if these programs and businesses are not sustainable on their own, then the government has no business in keeping them afloat or solvent. Subsidies are part of the reason our state and nation are at the brink of being insolvent. There should be no more sacred cows when looking at cutting spending including subsidies. | Newman: Yes. It is not the role of government to artificially assist one group of business and not others. I would rather let the market determine whether a business is viable. Remember Reagan’s sarcasm; “if it moves tax it. If it stops moving subsidize it”. |
| Mahlstedt: Yes. I cannot think of a good business subsidy. Business should bear its own weight. This includes stopping the up-coming ‘make jobs’ projects likely to be part of the next round of budget talks. The trick is how to, and how fast for each and every item?? NO make jobs! Quit “cold turkey” is preferable, but not realistic without much chaos. | Wilson: We need to look at the entire scope and value of a subsidy. Anyone who would rule out all subsidies is not looking at the greater good of some projects. |
Cost Cutting: There are currently about 36,000 state workers. The Minnesota public pension plans have over 294,000 active members. This past year, the state added another 450 workers. The average Full-Time-Equivalent (FTE) payroll for the state’s 33,514 workers in 1999 was $50,083. By 2009 the average FTE payroll was $72,668, an increase of over 45%. http://www.mmb.state.mn.us/doc/budget/report-fte/2009/fte-history.pdf
5) Are you prepared to support methods of reducing the overhead at the state level by eliminating services and the jobs related to these services? An effective cost-cutting approach entails the elimination of tens of thousands of state jobs. Are you prepared to lead that charge in an environment where the media and liberals in general are calling for the state to greatly expand its payroll?
| Benoit: Again, I say yes. The State of Minnesota is the largest employer in the state and now, getting bigger. There is nothing constitutional about the increase in the number of jobs and if anything I am for the state to begin the task of cutting jobs, the size of some of the departments and the state should be inviting many more private sector companies to become vendors in providing products and services to the state. The state should not be competing with the private sector in building roads, providing health care and a long list of other specific areas where a state vendor could do the work for much less than a state employee paying union dues. Again, we are at the point where we have to make these types of decisions and cut the spending across the board. We must somehow get the unionization of state workers to be illegal. There is no reason for government employees to unionize. This has rendered the government almost ineffective in providing service to the taxpayers and the people government claims they want to help. | Newman: Without equivocation, Yes and this question really gets to the heart of our spending problem. MN is the number one employer in this state involving thousands of government employees working for various agencies. As an attorney I have been involved in many cases of the government versus individuals and private businesses. I have been witness to the adverse effect of rules and regulation on our citizens and their ability to succeed in business. First we cut off the revenue because no bureaucracy can survive without taxpayer funding. I believe with the current budget problems, we have the best opportunity in a generation to do just that. Second, we systematically begin a program to repeal the thousands of pages of rules state agencies and departments thrive under. I have attached a budget handout to illustrate this problem. Note, in total dollars we spend more on welfare than we do on educating our kids. Built into that welfare budget are the salaries for the thousands social service employees throughout the state. Rhetorical question: Who’s on welfare? |
| Mahlstedt: YES, definitely YES. | Wilson: As the Mayor of Glencoe we have reduced staff to meet our declining revenues. We have also looked at ways to share services and equipment with other communities and the county. It is in our best interest to find reductions and economy in the services the state provides. I would be diligent in this pursuit. |
Addendum: Some confusion was presented to me that begs to be addressed. I stated that there were currently about 36,000 workers. The confusion comes from understanding how we are organized. The executive branch is 36,000. The notion of “Public Employees” engulfs local as well. From page 5 of the 2008 Workforce Report we can find this graph that explains this a bit better:
Total employment is really 389,700 in 2007. Sorry about the confusion… Admin
Commercial Property Tax Relief: The current economic climate has wreaked devastation on main street businesses of all descriptions. Some are struggling to keep the lights on until this down-turn in the economy recovers. In many cases, the property tax on commercial facilities is sapping the remaining limited capital in these businesses. Unless a business can be profitable, no jobs or property tax can be paid. Workers can be sent home. Yet property tax is due without regard to income. Property tax is a mill stone around the necks of Main Street with no relief in sight. If the property tax causes a business to be dismantled, the likelihood of that business returning to pre-recession employment levels is greatly reduced.
6) Would you support property tax relief for struggling businesses unable to support their own payroll much less the onerous tax on facilities, whether they are productive or not? The state provides a ‘circuit breaker’ to poor individuals, but not to poor businesses. Would you provide leadership in this area?
| Benoit: Yes, I agree that small businesses need to be treated fairly as other property owners. I believe that small businesses and family farms should be taxed accordingly by the “circuit breaker” system. I see no separation between a home owner and small business owner. Commercial real estate taxes are excessive and are part of the reason more home-based businesses never get the chance to grow and employ people because of the tax structure within our state. I would definitely provide leadership on this issue. | Newman: This question is a bit vague so I must try to answer it in a more generic fashion. If you are describing a form of corporate welfare or business subsidy, no I would not support such measures. If however you are describing tax reform which will put all business owners in a position to succeed by allowing them to invest in their business rather than struggling under an unfair tax burden, then yes, I support such reform and have done do in the past. |
| Mahlstedt: NO. The circuit breaker that will work is smaller government. If we start providing a weaning tool to save businesses as we reduce government, we simply create more dependency on the state. Then every two years a new election, new politicians, and some will likely get traction at home, from the voters, on the new dependencies and here we go again. Game lost. Serious injury is imminent. | Wilson: I will always work to lessen the burden of property tax and all revenues collected by the state. Having said that, we must not neglect the management and care of infrastructure and become poor stewards of this state. The people should expect us to provide affordable yet adequate services. |
Managing Government: At the federal level we see bills of multiple-thousand pages appearing before our elected representatives, who are expected to enact or repeal on an up-or-down vote. These bills can address tens of thousands of topics all at once. The current Senate version of the Health Care Bill before congress is 2,400 pages. The world is complex but our representatives are mere mortals. Many are forced to vote without the luxury of even reading the bill much less understanding its implications.
7) Do you support the “One Subject at a Time” program similar to OSTA at the federal level? http://www.downsizedc.org/etp/campaigns/83
| Benoit: This is really important and I would definitely sponsor and support this. In It is unbelievable that all states have not adopted this yet. Looking at the travesty of a national I-D card passing reaffirms the need for this type of procedure to be implemented. | Newman: Yes. At the state level this question is answered by Art IV sec. 17 of the MN State Constitution which clearly states “no law shall embrace more than one subject…..” and as a State Representative was the basis of my numerous objections to various multi topic omnibus bills. |
| Mahlstedt: I strongly support “One Subject at a Time”. NO more omnibus bills. One at a time will also get us back to legislating only what needs legislation. | Wilson: A bill or legislation should stand on it’s own merit. We have had far to many issues pass through the legislature both at the state and federal level that don’t reflect the values we have. |