Why and How Minnesota is Losing Money from Its State Government Shutdown

Due to Minnesota's State Government Shutdown, which went into effect the morning of Friday, July 1, 2011, at 12:01, the state already has lost hundreds of thousands of dollars in revenue, particularly over the Fourth of July weekend. While state attractions that generate huge revenues for Minnesota are closed, the impact and reasons why the state is losing money go far beyond that.

Many erroneously believe that Minnesota's state government shutdown is saving the state money because its state employees aren't getting paid, but the private sector is suffering as a result. And in reality, state employee salaries are a small portion of Minnesota's overall budget.

In addition, it doesn't matter if the state employee is an engineer, has an office job, or for example, just sells jewelry or coffee in a kiosk at the Science Museum of MN. Since the museum is a state facility, their gift shop workers and beverage cashiers have also gotten the axe. Also, since the Science Museum attracts tourists from around the world, as do all our main attractions, the state will be losing all the revenues that the museum generates, including sales taxes, besides those derived from tourism.

Why is there a State Government Shutdown?

As with most states, Minnesota is in dire financial straits. The state operates on a fiscal, two-year budget cycle. According to a front page article published in the July 1, 2011 issue of Minnesota's St. Paul Pioneer Press, MN State Governor Mark Dayton (DFL), his DFL lawmakers, and the Republican-controlled legislature were arguing and negotiating for months over a new budget plan. The Republicans didn't want any more tax increases, other than the $34 billion the state will hopefully collect over the next two years.

There were some gives and takes. At one point there was a proposed budget deal that wouldn't increase taxes, yet would still provide additional revenues, but Gov. Dayton refused to accept less than his goal of $35.7 billion. The 2011 legislative session ended without a budget agreement. Gov. Dayton refused to call a special session, and the MN State Supreme Court ruled that each side's appeals had to be consolidated, which they weren't.

One reason why and how Minnesota is losing money

We definitely lost a big chunk over the Fourth of July weekend, but hey, it's summer, and school is out! Time for family vacations, and summer is when we Minnesotans want to vacation in our own state. So do out-of-state and country vacationers. (And yes, so do state employees.) But wait--if the main attractions we want to visit are closed, there's no reason to drive there. Minnesota is a huge state, so sure we'll consume less gas, but that means less gas taxes collected for the state.

If the attractions we want to visit are closed, that also means we won't stop at restaurants, little shops and big stores, bars and other private businesses along the way. Many of them relied on the 4^th of July influx of vacationers, so their loss was devastating; not just for their owners but their employees, who lost tips or weren't even hired as extras due to the loss of business. Meanwhile, no ending to their loss is in sight, and again, the state's government is losing revenue from sales taxes.

Well, we may have to make pit stops at some private enterprise, since our highway rest areas are closed (although the wayside rests are open), so hopefully we'll buy something. But don't expect to purchase a Minnesota lottery or scratch game ticket. The Minnesota State Lottery is closed, which not only is losing state revenue, but in turn is financially hurting those in the private sector. Many small convenience shop owners rely on these gaming sales for their survival. The owners are paid a small percentage per sale, but even more important, those who come in to buy tickets usually purchase other higher-priced items.

Some Main Attractions that are shut down, leading to loss of state money

Visitors will also likely be buying gift items at these attractions, and if there's a restaurant onsight, the state will be losing even more revenues. In addition, all sales, maintenance, etc. personnel are now laid off.

Minnesota's Canterbury Park racetrack.

Although Canterbury is privately-owned, the Minnesota Racing Commission, a state agency, regulates their pari-mutuel and gaming operations (they also have poker and casino games). Therefore, Canterbury is shut down. In an article published June 18 (before the shutdown took place) in Bloodhorse.com

Canterbury President Randy Sampson said, "The track pays all of the costs incurred to regulate its operations," adding that, "In 2010, regulation cost the track about $1 million." The shutdown, as he further explained, would cost publicly traded Canterbury Park Holding Co., which owns the Shakopee racetrack, more than $1 million a week in gaming and concessions revenue. Layoff of about 1,000 full- and part-time workers would be possible."

The Fourth of July weekend is normally their busiest time during their racing season, with their biggest money-making races held then. Visitors come from far and wide. But this year, some races had to be held earlier, while others were canceled. But that's not all. "Canterbury relies heavily on horses stabled on the grounds because its location restricts regular shipping from other tracks, the closest of which are located in Iowa and Illinois," Sampson said. "If the budget impasse doesn't end quickly, owners and trainers will likely start moving their horses from Canterbury to other racetracks within a week or two of July 1, and once they leave it's unlikely they will return.

"If the budget impasse continues beyond early- to mid-July, the impact could be devastating for Canterbury and the horse industry. We could lose the entire remainder of the racing season." Meanwhile, their non-state workers are laid off, without any income.

Minnesota State Zoo

In a July 1 article at TwinCities.com (Pioneer Press) Mike Hatch, attorney for the zoo, stated that, "The zoo will lose about $50,000 each day during a government shutdown." This is money that would be generated to the state, and since the Fourth of July weekend is their busiest time all year, you can imagine their increased losses already. Also, if you planned to hold a wedding or luncheon there, forget it. Result: State loses money from parking, admission, sales taxes, etc. And, their employees are laid off.

Minnesota State Parks and Campgrounds

There are 74 state parks in Minnesota. Each park has fees that contribute to the state's revenue, but as long as the shutdown lasts, the state will receive no money from them. I have no current figures, but way back in 2000, MN State Parks had approximately 8,375,506 visitors. Every summer tourists stream up Lake Superior's north shore to Split Rock Lighthouse State Park, for example, particularly over the Fourth of July, but throughout the summer too, because it is one of Minnesota's best-known landmarks.

While tourists visit, they stay at privately-owned resorts along the way, both the large and the few remaining "mom & pop" ones. With the state parks closed, this means more loss to private business owners and employees...including those who change the beddings.

How many state employees are laid off?

According to Minnesota's St. Paul Pioneer Press, July 1, 2011 issue, "About 23,000 of Minnesota's nearly 36,000 state government employees will be furloughed, the largest lay-off in state history." But as I've noted, the repercussions from the state shutdown are endless. Also, both non-profit and private workers work with the state or have state contracts that they rely on. The list of those affected by the state government shutdown goes on and on. And logistically, when the everyday Jane and Joe has no job, they'll eventually have to collect unemployment; thus more state money lost.

So for those who think Minnesota is saving money by not having to pay its state employees, think again. Hopefully the state's government shutdown will end soon, because not only can't the state afford the money it is losing for its coffers, but neither can those working in the private sector.