Scott Russell, Minnesota Budget Project, February 21, 2012 –
Minnesota’s legislative leaders are considering a constitutional amendment that would require a supermajority vote in both the House and Senate to raise taxes. It could be a bad move for the state, increasing jitters among national credit rating agencies that are already nervous about Minnesota’s financial flexibility and creditworthiness. Lower credit ratings could make it more expensive for Minnesota to build roads, repair bridges and fix schools.
Rating agencies do not look favorably on states that have constitutional constraints on their ability to raise revenues quickly in response to changing budget conditions. Other states have recently seen their credit rating downgraded, with their supermajority requirements mentioned as one of the concerns. Our recently released issue brief, Supermajority Requirement Would Limit Financial Flexibility, Risking Minnesota’s Credit Rating, provides more details.
Minnesota’s strong credit rating has already been slipping. Last year, two of the three major credit rating agencies, Standard & Poor’s and Fitch, lowered the state’s credit rating a notch; the third agency, Moody’s, issued a warning. They are all concerned about the state’s lack of long-term budget solutions.
In recent weeks, we have highlighted reasons that a supermajority requirement is wrong for Minnesota. The amendment could shift the cost of providing valued services onto other sources of revenue, resulting in higher tuition, fees and property taxes. And the experience of other states shows that a supermajority amendment would not deliver on the promise of lower taxes or better tax policy.
Now there is one more argument against a supermajority amendment: It could put Minnesota’s credit rating on even shakier ground.