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How to spend a $1 billion budget surplus

MinnPost photo by Briana Bierschbach
Gov. Mark Dayton: "It seems to me to take this surplus, which was generated by the economic success of Minnesota over the last couple of years, and spend that money on immediate needs."

There are a lot ways to tackle a more than $40 billion two-year state budget, especially if there’s an extra $1 billion that happens to be lying around.

If you’re Minnesota Gov. Mark Dayton, you spend every penny.

On Tuesday, the second-term Democrat capped off a week of slow drips about his 2016-2017 budget plan by releasing all the gritty details. The majority of Dayton’s budget simply continues funding for state programs, with few cuts and no major new revenues. But the proposal also includes his spending priorities for the $1 billion surplus, which the governor would like to spend in its entirety. He devotes more than half of that money to three priorities: pre-kindergarten through 12th-grade education; health care for vulnerable children; and tax credits to help families pay for child care.

“The evidence says we have more and more children that have serious difficulty at earlier and earlier ages. [This is a chance] to step back and say, ‘Why has this society, in spite of its overall prosperity, put so many more families into economic hardship?’ ” Dayton said. “It seems to me to take this surplus, which was generated by the economic success of Minnesota over the last couple of years, and spend that money on immediate needs ... to try and save more of our kids and families from long-term dysfunction and disruption is money very, very well spent.”

Dayton’s budget is just the first step in a months-long process to negotiate the state’s finances. And what is notable about Dayton’s budget isn't just what it contains — but what it doesn't. There’s no funding for business tax breaks or long-term care, a priority for Republicans who now control the state House, and legislative Republicans were quick to criticize the governor for not including more reforms to state programs or tax cuts. Advocates for Greater Minnesota also knocked the governor for not putting more money into the state’s Local Government Aid (LGA) formula to make up for years of cuts and stagnant funding for the program.

Dayton also employed a hardball (and in Minnesota, novel) political tactic in his dealings with two groups: the Minnesota State Colleges and Universities (MnSCU) system and the Minneapolis Park and Recreation Board. In both cases, he denied some funding for the groups, seemingly as a reward for their ability to be near-constant sources of headaches.

“I’m not withholding any money unilaterally, but I don’t believe that they should be paid by the taxpayers of Minnesota to cause this kind of mayhem,” Dayton said of the Park Board, which saw its funding cut by $1.8 million per year in his budget, thanks to the board’s opposition to the current route of the Southwest Light Rail Transit line.

But Dayton is probably not done spending yet. He expects improved economic conditions to turn up even more money when the state’s budget forecast is revised in February, and within the next few weeks, the governor plans to propose a bonding bill to fund infrastructure projects he couldn’t fit into his budget.

For now, though, here’s a more detailed look at how Dayton proposes to spend $1 billion he has:

New spending in Dayton’s 2016–17 budget

The priority: education
The money: $418 million
Dayton says he promised to increase education funding every year he’s in office, and this time he’s looking to take up a big part of the budget surplus to help him achieve that. His budget would increase the state’s school funding formula for every K-12 school in the state (though some school officials have already complained it’s not enough). He also wants to spend $28 million over the next two years to expand free school breakfasts to all pre-K through third-graders, and another nearly $20 million to eliminate a nearly 2,500-student long wait list to participate in Head Start programs.

Among his education investments, Dayton highlighted a plan to spend $109 million to create a free, voluntary pre-kindergarten learning program for about 31,000 4-year-olds in Minnesota. Pre-kindergarten programs have support from Senate Democrats, who introduced an even broader early education funding proposal earlier this year. Supporters of the plan say the program will also help address Minnesota’s achievement gap, one of the worst in the nation.

“Minnesota’s future success — and health of our families, the vitality of our communities and the prosperity of our state — will depend upon our making excellent education available to all Minnesotans,” Dayton said. “That is exactly what my budget proposal aims to do.”

The priority: child care
The money: $100 million
Minnesota is in the top five most expensive states in the nation for child-care costs, according to a New York Times analysis, and Dayton reserved his only tax cuts in the budget to try to remedy that. The governor has proposed $100 million to give households earning up to $124,000 annually a tax break to help pay for child care, as well as the disabled and elderly. That’s up from the current income threshold of $39,000 per year, and would help an additional 92,000 families, Dayton said. He said the credits are continuing with his theme of helping middle class families and children in his budget proposal.

The priority: higher education
The money: $93 million (so far)
Last week, as Dayton rolled out a plan to spend $30 million over the next two years to bring the University of Minnesota’s medical school back to national research prominence, he made it clear he would pump even more money into higher education in his budget. He made good on that promise Tuesday, when he proposed an additional $32.6 million for the university system to help freeze tuition costs. That covers about half of the $65 million estimated cost to fully freeze tuition for both undergraduate and graduate students over the next two years. The governor also put more money into the state’s grant program to help students cover tuition costs.

Dayton also reserved about $35 million in his budget for MnSCU, but he said he won't allocate those funds until it’s clear a dispute between facility and management over the future of the system is on track to being resolved. That’s a different approach than Democrats in control of the Senate are taking this year — they’ve proposed free tuition for some students on MnSCU campuses.

For their part, MnSCU officials said they are taking his warning “seriously.” “We understand and share the governor’s concerns and are taking positive steps and having substantive dialogue to resolve our disagreements” over MnSCU’s strategic plan, a joint statement between faculty and management read. “We are all committed to continuing our progress and are confident of a positive outcome.”

The priority: child protection, mental health reform
The money: $140 million
When it comes to health and human services spending — the second largest portion of the state budget after education — Dayton wants to focus on child care and options across the state for people suffering from mental illnesses.

Dayton’s budget allocated $44 million to child health care programs. That includes providing incentives for providers to simplify and improve the Child Care Assistance Program; hiring more child care protection professionals across the state; funding new early mental illness intervention programs in schools; and bolstering the home visiting programs for at-risk mothers, which officials say have helped prevent child abuse and neglect. He also wants to put a focus on Greater Minnesota by expanding mental health care treatment and housing options in the far-flung regions of the state.

One area that could need more funding in the coming months is the Minnesota Sex Offender Treatment Program (MSOP). Dayton reserved a small $6.7 million pot of money in his budget for some changes to the program, but he sees little will among legislators to pass make major alterations to the controversial program before it heads into federal trial in February. A class-action lawsuit against MSOP alleges the program is unconstitutional because it promises treatment for offenders after most have served their prison sentences but rarely lets anyone out of the high-security facilities in Moose Lake and St. Peter. The governor said he will likely have to address any recommendations from the federal judge in his supplemental budget proposal.

The priority: courts and cops
The money: $137 million 
Dayton’s budget also proposes to pump $65 million into the state’s court system over the next two years, which often got short shrift during years of budget deficits. He also funds a handful of improvements to the state's correction system, including additional funding for Capitol security, health care for offenders, community supervision programs and state data management.

The priority: everything else
The money: $114 million
Many items in Dayton’s budget are small, but they round out the $1 billion spending figure. They include $11 million in lease payments for the new state office building for senators, $30 million on improving broadband Internet service, especially in Greater Minnesota, and putting more than $75 million total in assessing state railroads and improving rail safety across the state, with a focus on tracks that carry oil from North Dakota into Minnesota.

If the state gets more money in the next budget forecast, Dayton said he would consider a number of proposals, including additional long-term-care funding, spending in higher education and other kinds of tax cuts.

“There were a few [things I had to leave out], if I’m going to be honest,” Dayton said. “I’ll save that one for the next round.”

Dayton’s proposed budget changes by department

Comments (10)

  1. Submitted by Beth-Ann Bloom on 01/28/2015 - 01:35 pm.

    Star of the North

    Proud to live in a state where priorities favor care and education of the children who are our future!

  2. Submitted by Scott Walters on 01/28/2015 - 04:47 pm.

    Sounds about right to me.

    Education, education, kids, courts.

    Not sure families earning north of 100k/yr need a child care tax credit, but all in all, that’s a pretty minor quibble. I’d say these priorities are in fact priorities, and I feel pretty good about my state income tax payments going to provide these public goods.

    I’m feeling pretty good about my vote for Governor Dayton.

  3. Submitted by Ron Gotzman on 01/28/2015 - 05:09 pm.

    Spend, spend, spend?

    Why spend the surplus? Why not give it back to the people who provided the surplus?

    Was this surplus promised to the special interest groups who invested in the election of Dayton?

    • Submitted by Dennis Litfin on 01/28/2015 - 10:00 pm.

      Sure Thing….

      give it back to the people so they can enrich the casinos and/or pad their bank accounts and complain about taxes. Typical regressive thinking.

  4. Submitted by Jerilyn Jackson on 01/28/2015 - 05:53 pm.

    I am too!

    A stark contrast to Scott Walker’s short-sighted vision for Wisconsin.

    • Submitted by Bill Willy on 01/29/2015 - 12:17 pm.

      I agree, but…

      Comparing Scott Walker’s efforts and actions to Mark Dayton’s may not be fair because Scott Walker has so much more to do, now that he’s in the beginning stages of running for president.

      As many of us recall, our last governor was burdened with the same set of distractions. As Tim Pawlenty would no doubt confirm, it’s not easy to govern a state while trying to navigate the tricky road to the white house.

      You have to travel to places like Iowa, New Hampshire, and South Carolina so often, and to the studios of the “Sunday Morning Talk Shows” (and anyplace else your “non-government” staff can get you in front of the public to increase your “name recognition”).

      And then, when you get there, you have to convince people that America is in dire need of the same kind of thing you’ve engineered in the state you’re governing.

      And that can be extra tricky when your state’s deficit is twice as big as it was when you were elected (mainly on the argument that the deficit that existed then was caused by the previous governor’s, and general DFL, delusions and incompetence).

      And then there are all those other aspects of the “Conservative Agenda” that have been implemented in Wisconsin by Mr. Walker and the state’s conservative legislature that don’t seem to have worked out very well for a large number of Wisconsin’s citizens.

      But should it turn out that Scott’s walking in Tim’s footsteps, and things don’t go well for him in 2016, he shouldn’t have much trouble landing a job. Given his qualifications, and seeing as how Tim has moved on from his dedicated service to Minnesotan’s to become Head of the Financial Services Roundtable and “leading Washington lobbyist for the Wall Street banks” that are working hard to gut the Dodd Frank bill (among other noble endeavors) he shouldn’t have to make more than a phone call or two.

  5. Submitted by John Hendricks on 01/28/2015 - 05:59 pm.

    Spend it all

    Keeping giving education more money with very little results to show for it. Education Minnesota gets the biggest chunk and it’s never enough

    • Submitted by Wayne Coppock on 01/29/2015 - 09:09 am.

      As much as it pains me to do so, I’m going to praise Minnesota here. There is actually plenty to show for it, as the pretty decent level of education people here have is a big reason why the state’s economy is doing so well, which in turn is where this surplus is coming from. It’s all very cyclical and while it might be tempting to cheap out on education and not have too much short term pain, you’re dooming the future of your state and I’m sure all the current conservative ‘experiments’ will turn places like Kansas and Wisconsin into peers of Mississippi in a decade or two.

    • Submitted by Bill Willy on 01/29/2015 - 12:40 pm.

      Speaking of Wisconsin

      “Very little results to show for it”?

      Wayne did a great job explaining that one.

      For an example of the type of alternative plan you’d probably be able to get behind take a look at yesterday’s latest stroke of current deficit-erasing brilliance from Wisconsin’s current governor:

      “$300M UW System budget cut proposed”

      (That and giving “more autonomy to the governor-appointed Board of Regents, which oversees the system’s 26 campuses, on a wide range of issues, including raising tuition without Legislative approval starting in 2017.”)

  6. Submitted by Dana DeMaster on 01/29/2015 - 09:51 am.

    Jesse Checks

    Remember 1999 when Jesse Ventura gave back the budget surplus? I remember the $200 check, but I have no idea what I spent it on.

    I bet my return on investment for that $200 would have been a lot higher if it was invested in pre-school education, elementary ed, and child care.

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