Budget surplus may fast-track tax cuts and produce big bonding bill

MinnPost photo by James Nord
House Minority Leader Kurt Daudt, right, talked about all that is bad with the state of the Minnesota economy during Friday's press conference.

With Friday’s news of a projected $1.2 billion budget surplus, it wasn’t surprising that both DFLers and Republicans were quick to take credit.

But it was a little surprising to see what seem to be chilly differences between DFL House leaders and their Senate counterparts on what should happen next. 

Republicans, of course, said it was their policies from the Pawlenty years that have resulted in the Minnesota economy’s continuing improvement — a surplus increase since the November forecast of $403 million.

‘Give it back’ plan

And they have a bumper-sticker plan for what to do with the money: “Give it back.”

At their news event, they even had a “Give it back” poster, designed for $20, as a catchy television visual for GOP legislative leaders to stand next to while making their case.

DFLers, meanwhile, were crediting their policies from last session for helping the economy chug along nicely.

Actually, DFLers are pretty much in agreement on the give-back idea, although they’ll quibble over the amount.

Gov. Mark Dayton, in fact, predicted there will be “a tax bidding — everybody will be trying to top everybody else.”

Already, the House tax committee has passed a bill that would repeal most of the business-to-business taxes that were created last session. Additionally, the committee has come up with other tax breaks for the middle class.

Total givebacks in the House proposal would amount to $514 million.

House Speaker Paul Thissen made it clear that the bill will move through the process quickly with hopes of having it to Gov. Mark Dayton by March 14. Such fast action would allow Minnesota income-tax filers to reap the benefits of the changes this tax season.

Most of the savings for individuals would come from the state conforming to federal tax rule changes.

Dayton, too, is pushing for the dollars to be returned to taxpayers.

House Speaker Paul Thissen
MinnPost photo by James Nord
House Speaker Paul Thissen made it clear that the bill will move through the process quickly with hopes of having it to Gov. Mark Dayton by March 14.

“We have proven there is a positive role for government to play in our state’s economic progress,” Dayton said in a statement. “Now we have the responsibility and the opportunity to extend our contribution. … The individual and business tax cuts would be a good place to start.”

But here’s where the chill comes in.

Bakk approach: Not so fast

Senate Majority Leader Tom Bakk doesn’t appear to be in such a rush.

He did say that the new forecast makes repeal of the business-to-business taxes more likely, but he also said it seemed unlikely that the Senate would move as rapidly as the House.

Dayton, however, wants the Senate to move quickly on the tax cuts. 

That wasn’t the only difference between Thissen and Bakk.

Thissen didn’t see a reason to “stuff [surplus funds] into a cushion,” meaning he didn’t think it was necessary to add large amounts to the state’s rainy-day fund.

Bakk, on the other hand, is much more interested in bolstering the state’s reserve fund.

There appeared to be almost a chill between the two leaders, who typically show more agreement when in public.

There was even a hint of a chill over the Senate office building that Bakk wants built. That $63 million building, which was passed in last session’s omnibus tax bill, is becoming the Republicans’ daily issue with which to hammer DFLers.

DFL, GOP leaders’ differing views

Understand, the Bakk-Thissen chill wasn’t as great as the frosty give-and-take between DFLers and Republicans.

Thissen accused the Republicans of “gloom and doom” politics on this day. He said it was almost as if Republicans are hoping the state’s economy doesn’t continue to improve.

Republicans, of course, denied that they were gloom-and-doomers.

But, in the next breath, House Minority Leader Kurt Daudt talked about all that is bad with the state of the Minnesota economy.

Senate Majority Leader Tom Bakk
MinnPost photo by James Nord
Senate Majority Leader Tom Bakk is interested in bolstering the state’s reserve fund.

His arguments: 49 percent of the people in the state are “under-employed.” Minnesota families are hurting. Minnesota businesses are overtaxed. Etc.

Dayton brushed off the GOP criticism of DFL “job-killing”policies.

“Same old rat-a-tat,” said the governor, who is still recovering from back surgery and held a telephone news conference with reporters. 

Daudt’s gloom doesn’t line up with what officials of the state’s office of Management and Budget were saying.

‘Best numbers’ since 1990s

Commissioner James Schowalter, for example, said that “these are the best set of numbers since the late 1990s.”

And state economist Laura Kalambokidis painted an optimistic picture of job growth and rising wages.

Kalambokidis said that improvements in the overall U.S. economy play substantial roles in Minnesota’s economic growth.

There was positive momentum in the final weeks of 2013, she said. (Most economists seem to believe that awful weather throughout much of the economy has stalled some of that momentum — but they also believe that situation is temporary.)

Additionally, she said, business and consumer confidence has increased since Congress stopped taking the country near a fiscal cliff in debates over the debt ceiling.

So what lies ahead?

State economist Laura Kalambokidis
MinnPost photo by James Nord
State economist Laura Kalambokidis painted an optimistic picture of job growth and rising wages.

The governor and legislative leaders of all stripes seem to agree that Friday’s good news won’t lead to re-opening last year’s budget and going on a spending spree.

The surplus, though, will add impetus to a large bonding bill, perhaps supplemented with some direct cash payments for some projects.

And, because it’s an election year, there will be even more finger-pointing and self-congratulatory back-patting than normal.

Comments (8)

  1. Submitted by ALAN BELISLE on 02/28/2014 - 03:00 pm.

    bonding

    So we have this big surplus of funds but we still have to borrow money (bonding) for projects? How about if we pay with the cash we have and not borrow and pay interest?

  2. Submitted by chuck holtman on 02/28/2014 - 04:23 pm.

    I’m with Senator Bakk on this one.

    Let’s get a sound, non-partisan determination of reserve needs, and go from there. Not immediately repeat the mistake of 12 years ago from which we’re just now recovering.

  3. Submitted by Logan Foreman on 02/28/2014 - 07:27 pm.

    Daudt and the rest of the republicans

    Would prefer to duplicate the mess from the early 2000s and then steal money from the schools to pay the deficits for the following 8 years. They would not have paid that money back but for Dayton and the Democrats. The rich would have had a deduction.

  4. Submitted by Greg Kapphahn on 02/28/2014 - 07:54 pm.

    Rep Daudt We Have NOT Forgotten

    Where the Republican approach of borrowing from the future, starving the school systems and all our other infrastructures, while privatizing as much of state government as you can finagle while handing never audited agreements to your cronies in order to pad their already overstuffed pockets at taxpayer expense approach got us.

    The “Jessie checks” were the beginning of that whole sorry mess by which “the state that works” moved in the direction of becoming “North Mississippi” and largely STOPPED working (except for the top 1%, who, somehow, got fabulously wealthy while the rest of stayed in one place or went backward).

    We KNOW where “give it all back” gets us. It’s akin to blowing every paycheck on partying and buying expensive junk while ignoring your future needs and failing to pay your mortgage, utilities, and insurance premiums. Considering the current financial state of the Republican Party we’re not surprised to learn that this is the way you handle your finances, but we DO NOT want to run the state that way (again).

  5. Submitted by Mike Downing on 03/01/2014 - 06:34 am.

    DFL Legislators should be embarrassed

    Our DFL Legislators should be embarrassed with a $1.3 billion surplus after increasing taxes by over $2.0 billion! But our low information voters won’t connect these dots…

    • Submitted by Logan Foreman on 03/01/2014 - 09:18 am.

      The right people

      Are now paying a more fair share of taxes

      • Submitted by John Appelen on 03/02/2014 - 08:16 pm.

        Right People?

        They did such a good job that a “House tax committee has passed a bill that would repeal most of the business-to-business taxes that were created last session”.

        On the upside they have seen the errors of their ways…

  6. Submitted by Kate Crowley on 03/02/2014 - 01:48 pm.

    Reserves to benefit all

    I’d like my surplus portion to feed school children of all ages, sound, healthy, nutritious breakfast and lunch. We all benefit if kids are healthy – good satisfying meals may keep kids going to school and certainly helps kids from homes with negligent parents, working parents..whatever reason (kids should not be judged by what their circumstances are). Keeping kids healthy saves on healthcare monies we all pay, food for brain power and an incentive to show up and earn a high school diploma and gain a decent job keeps them off the ‘coffers’ – PRICELESS. No money, no future, having no adult/society encouragement leads to welfare, teen pregnancy, homelessness, crime, gangs and a never ending cycle of poverty. Don’t believe me? Prove me wrong by supporting this one time proposal and let the test scores and graduation rates prove it. (No, my kids are now adults so I’m not asking for a handout). Good schools =’s higher property values, safer neighborhoods and business attraction.

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