Doubled Minnesota budget surplus raises the stakes for coming legislative battles

MinnPost photo by Briana Bierschbach
Minnesota Management and Budget Commissioner Myron Frans smiling during Friday's press conference.

On Friday morning, just as he was stepping up to the podium to announce the final numbers on the state’s budget surplus, Minnesota Management and Budget Commissioner Myron Frans made a note to himself: “Pause to smile.” 

The cause for Frans’ good cheer soon became apparent. Since November, the forecast for the state’s budget surplus had nearly doubled, to $1.86 billion. For economists, and just about everyone else, more money for the 2016-2017 budget is a good thing, especially since Minnesotans faced a $6 billion budget deficit just four years ago.

But it was a brief respite before another reality became clear: The surplus might have just made lawmakers’ job a lot harder. 

DFL Gov. Mark Dayton and Democrats in the state Senate said the surplus would allow them to put more money into education — though it would not eliminate the need for some new revenue to spend on the state’s transportation system. “A dedicated revenue stream for transportation is essential,” said Dayton, who is pitching a nearly $11 billion plan for roads, bridges and transit, including $6 billion alone for state roads.

But immediately after their remarks, Republicans in control of the House offered their harshest criticism yet of the DFL’s strategy to fund the transportation plan: raising the sales tax on gasoline at the wholesale level.   

“I think that this surplus means that Democrats can stop talking about a gas tax in St. Paul,” House Speaker Kurt Daudt said. “This surplus is partly due to the fact that gas prices are low… low gas prices leaves more money in the pockets of Minnesota families, and that’s what improves Minnesota’s economy.”

GOP to push tax cuts

What’s more, the surplus has now set up the GOP to pitch at least $900 million in tax cuts (“and probably a lot more than that,” Daudt said), though its unclear in what form those cuts could come. “We’re going to give some of this surplus back to Minnesotans,” he said.

Democrats in the Senate seemed uninterested in that idea, noting the budget deficits that followed a 1999 budget deal that reduced income tax rates and offered huge sales tax rebates to Minnesotans.

“That year, I believe I got about $250 and whatever I got I was very happy to use that on half a ticket to New York City,” DFL Senate Finance Chairman Dick Cohen said. “I had a great weekend and a lot of fun, but I made up for it over the next decade with higher property taxes, higher fees and any number of other things.”

Spending ahead

Republicans don’t want to give the entire surplus directly back to Minnesotans. Daudt said they would increase the amount they are proposing to spend out of the surplus on road and bridge projects this year, though he didn’t say how much. They’d also like to increase reimbursements for nursing homes and other long-term care facilities. Republicans also want to spend more on education, though Daudt gave few specifics on what that meant. 

Education is one of the only areas the governor, House and Senate leaders seem to agree could use more money from the surplus. Dayton is expanding a plan to offer pre-kindergarten education to all four-year-olds across the state, for an additional cost of $238 million in the next biennium. He also plans to give the University of Minnesota system the full $65 million it needs to freeze tuition for all students, and he lifted a self-imposed hold on funding for the Minnesota State Colleges and Universities (MNSCU) system, proposing $95 million to help freeze tuition on those campuses.

House Speaker Kurt Daudt
MinnPost photo by Briana Bierschbach
House Speaker Kurt Daudt: “We’re going to give some of this surplus back to Minnesotans.”

Dayton withheld money from the system in his first budget — released in January — as the faculty and staff were in the middle of a dispute over the future of the system, but he said they are on track to a resolution. Dayton also plans to restore money in his budget for the Minneapolis Park Board after they agreed to drop their opposition to the contentious Southwest Light Rail Line.

Senate Democrats said they are on board with Dayton’s plan to push more funds into education, though they were mum on whether or not they’d drop a costly proposal to give some students free tuition at technical colleges across the state. 

Just the beginning

The February budget forecast is the kickoff to the finale of the session. Legislators will now start to craft their own budgets in committee, and Dayton plans to release his supplemental budget the week of March 9. The surplus also would allow Dayton to pay off the debt service on an $850 million bonding bill he says he wants to pitch this year. That proposal could come in the later half of March.

But it’s already clear it will be a contentious process, and the 2016 campaign trail isn’t far from anyone’s mind.

House Democrats focused their comments on whether or not Republicans would live up to their campaign promises to give all of the surplus back to Minnesotans, while Daudt said — several times — that Democrats are more focused on things like pay raises for commissioners and building an office building for senators.

But Dayton, who isn’t running again in 2016, offered a simple warning.

“We have no assurance that this national economic recovery will last indefinitely. History assures us that it won’t,” he said. “Inevitably, there will be another national economic slowdown or downturn, and Minnesota’s economy will be affected like everyone else’s. Our budget surpluses will disappear.”

Comments (18)

  1. Submitted by Pavel Yankovic on 02/27/2015 - 04:56 pm.

    Mr. Daudt,

    Why don’t you give it back to those who paid it, namely the taxpayers in the higher brackets that were created by Governor Dayton and his merry men 2 years ago.

    • Submitted by Frank Phelan on 02/28/2015 - 10:11 am.

      I Can’t be Consistant All The Time

      Now that there is a surplus, Daudt and his allies are saying tax payers over paid and they should be refunded. But when Tim Pawlenty was running annual deficits (so much for Repubs being fiscally responsible), Daudt and his allies didn’t say tax payers under paid. They said we were spending too much.

      It’s cute game they play, manufacturing a “crisis” by cutting taxes in good times and using the resulting deficits to justify budget cuts.

      It’s worked so far for Scot Walker, but like MN taxpayers, WI taxpayers will have to pay the piper eventually.

      Conservatives used to believe that you don’t get something for nothing.

  2. Submitted by Jeffrey Swainhart on 02/27/2015 - 09:40 pm.

    Infrastructure and Rainy Day

    I’m a carpenter, when times are fat I buy tools and set some aside because I know that things change. We as a state should do the same.

  3. Submitted by Mike Downing on 02/28/2015 - 09:28 am.

    Dayton thinks we are stupid!

    Governor Dayton increases taxes by billions of dollars and he is surprised by a budget surplus?! Governor Dayton must think voters are really stupid!

    I am glad we have a GOP controlled MN House who will return some of our tax dollars to the taxpayers and put the rest into roads & bridges. MN voters are tired of the boring and far too usual DFL tax & spend approach to government.We would only have increased taxes and increased spending if we only had a DFL Governor, DFL Senate & DFL House.

    • Submitted by Steve Hoffman on 02/28/2015 - 06:24 pm.

      ALL for infrastructure!

      Let’s use it all for infrastructure. Our whole state’s roads and bridges need attention, and for once we’ve got some money to handle it. If we give it back to the “taxpayers” we’ll have no infrastructure improvement (with concomitant local jobs) and then when the surplus is gone they’ll scream “No new taxes!” It costs money to live with nice roads and such. Suck it up.

    • Submitted by Dennis Wagner on 03/01/2015 - 10:44 am.

      au contraire

      The Governor does not single hand-idly raise taxes: There is a Senate and a House of Representatives, that have many voices in the matter. Civics 101

      Clarity: TPAW and previous Republican Senates/Representatives left the state with “$Bs” deficits based on their kick the can/starve the government strategy, it failed miserably, “The surplus is the perfect example of that ideology failure” .

      Question which should we prefer to talk about around our kitchen table budget meetings, deficits in the budget calculations or surplus? Budget Surplus is a “Wonderful” problem to have! And proves a 2nd point, raising taxes, did not destroy the economy, nor did it cause everyone making over minimum wage to move out of the state, nor did every fortune 500 company relocate to North or South Dakota, much less Wisconsin.
      Last point: Nothing is free, some of us expect great things out of our governments: The right loves to talk the constitution like they own it and progressives are trying to turn it into a foot matte!

      The preamble “Tells us “why” the constitution was written, something it seems the right wing chooses to ignore? The first sentence (to form a more perfect union) more or less says it all, do folks know what domestic tranquility means? How about “General welfare” is good health general welfare?,

      “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

    • Submitted by Pavel Yankovic on 03/01/2015 - 03:08 pm.

      Mike,

      he does, especially the ones who voted for him. And come to think of it, he’s right.

  4. Submitted by joe smith on 02/28/2015 - 10:28 am.

    Jeffrey, you are a smart business man. You have every right to spend YOUR money any way you see fit. Budget surpluses never got stored away for a rainy day, they get fought over and spent by our elected officials, with lobbyists pushing wishy washy politicians any direction that is best for the politician. When you can spend billions of dollars, that is not your own money, the power that comes with it is immense. The politicians on both sides of the isle fall into the lobbying (political payback) game and forget they work for us, spend spend spend is their motto. When it is your own money, you plan for a rainy day, when you’re a politician you plan for a never ending supply of other peoples money.

    • Submitted by Jeffrey Swainhart on 03/01/2015 - 10:09 pm.

      Then all for infrastructure

      I don’t agree, but if the consensus is that we can not properly manage a rainy day fund then put all the money into infrastructure of all types: human and capital. Because when the economy is bad and government receipts go down, (while expenses go up) we as a state will be in a better situation if our infrastructure needs are already met.

      We don’t live in a vacuum, we live in a society. We do better when Minnesota is prosperous. Look at Kansas, look at Wisconsin, look at Mississippi, look at Arizona. You can have your low tax states, I’ll take Minnesota any day of the week.

  5. Submitted by Steven Bailey on 02/28/2015 - 03:18 pm.

    Fix the Bridges

    We don’t have a surplus because we can’t begin to afford to repair all of our bridges. It would be a great place to start with any extra money.

  6. Submitted by John Appelen on 03/01/2015 - 06:38 pm.

    Based on Recent History

    Dayton and the DFL will recommend that the money be spent on and/or given to their voting constituencies.

    Wasn’t it just last year they gave away most of those extra “revenues” that were collected from the “rich”.

    I have no problem investing the extra funds into infrastructure, however that is not what Dayton and the DFL are recommending. Dayton sounds like he wants to spend this and raise the gas tax.

  7. Submitted by Dennis Tester on 03/02/2015 - 08:28 am.

    Why is this even being debated?

    If you were over-charged by a merchant would you expect him to be able keep the money? Would you think it was fine if he gave your over-charge back to a different customer?

    We were overcharged. Give it back.

  8. Submitted by Tim Milner on 03/02/2015 - 09:43 am.

    All in for infrastructure

    As our Governor pointed out, this surplus is, by and large, a product of the nation’s overall economic growth. Growth which will not last forever. As such, let’s not repeat the past mistake in giving the money back as a “sale tax refund” or such other gimmick but instead let’s use it to repair the roads and bridges, school buildings, or any other state infrastructure that has been identified as needing repairs. Capital investing of the surplus is the right thing to do.

    And for the same reasoning, count me OUT on using the surplus for ANY program spending. The surplus is NOT guaranteed – and to use it for programs that have on going needs is simply not sound policy. No “we have extra money let’s do this” type of programs – because sooner or later – the surplus disappears yet the program funding needs remain. That leads to more taxes for programs that, in many case, only got funded because “we have extra money”.

    As a fiscally conservative, small business owner Republican, who saw his taxes go up substantially last year, I also am NOT in favor of any immediate tax reductions. Quite frankly, we need to see what the tax increases longer term effect is on revenue before making any changes. At least a full budget cycle in my mind.

    Unfortunately, my pragmatic approach has absolutely no chance of being the path chosen – but it made me feel better just typing it.

    • Submitted by John Appelen on 03/02/2015 - 11:51 am.

      Excellent Comment

      Though I share your concern that the DFL and possibly even some of the GOP politicians will use this as an excuse to increase the ongoing size of government.

    • Submitted by Logan Foreman on 03/03/2015 - 09:00 am.

      Excellent comment though

      My greatest concern is that republican leadership will try to eliminate the surplus immediately by using a give-away gimmick to “improve” their chance for re-election rather than lead by capital investing. This state will not be able to recover from another 8 years of “Pawlenty-time economics” of insufficient funding for education, transportation, and infrastructure including BRIDGES.

  9. Submitted by joe smith on 03/02/2015 - 03:35 pm.

    How does the state of Minnesota having 1.8 billion in extra cash sitting around to be fought over by politicians, make Minnesotans prosperous??? That makes our elected officials prosperous by doling it out to every lobbying group imaginable. It only helps if you work for the state or are associated with state spending businesses. It doesn’t help any regular folks. The political elites have many believing otherwise and too many fall for the ole “we are working for you” BS.

Leave a Reply