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Senate budget seeks to bridge gulf between Dayton and GOP

Sen. Majority Leader Tom Bakk’s theme throughout the press conference was that surpluses have their risks, and even Democrats can have too healthy an appetite to spend them. 

“You have to be careful that you don’t over commit,” Bakk said. “We have a pretty strong economy right now in Minnesota, but it won’t hold indefinitely.”
MinnPost photo by Briana Bierschbach

In the negotiations to craft Minnesota’s next two-year budget, Democrats in control of the state Senate are casting themselves as the wise old sages of state government.

That was the dominant theme of a Friday morning press conference revealing the DFLers blueprint for a $42.7 billion budget, which will cut taxes less than Republicans in control of the House want and spend less than Gov. Mark Dayton wants. With a nearly $1.9 billion budget surplus to spend, Senate Majority Leader Tom Bakk said the key ingredient in their budget is pumping $250 million into the state’s budget reserve to help provide a buffer from future budget deficits.

As he has many times since the 2015 session convened, Bakk offered a warning: The last time lawmakers had healthy budget surpluses, they gave them back in tax cuts and rebate checks. The decade that followed featured near-constant budget deficits.

Overall spending, 2016–17: House, Senate and Governor’s proposals
The DFL Senate’s overall department spending target (excluding reserves and tax cuts) of $42.3 billion sits between the governor’s and House GOP proposals, though closer to the administration.
Source: Minnesota Management and Budget, Minnesota GOP and Senate DFL

“There are only 39 of us in the Legislature that were here in the 1990s — when we cut taxes year, after year, after year — that were then here in the 2000s, when we managed deficits for more than a decade,” Bakk, a Democrat from Cook, said. “We want to make sure we don’t repeat some of the mistakes that were made. Everyone would like to spend more money, everybody would like to have a tax cut, but the budget is critically important to the delivery of all the services that our state and local governments provide.”

The $250 million Bakk proposes adding to the reserves is more than the $100 million Republicans are proposing to put away in the state’s rainy day fund, and far more than Dayton, who hasn’t proposed putting any money into the reserves this session. Bakk said their plan offers fiscal restraint and suggested Senate Democrats aren’t interested in “trading nickels” with Republicans in budget negotiations.

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“We are laying out a proposal here that says, this is a budget that they should consider enacting into law. This is a good final product,” he said. “To get them there, there’s just a pretty significant educational process that has to happen, because they just weren’t here.”

The Senate DFL budget blueprint is the third and final piece needed to start negotiations, after House Republicans unveiled their budget targets earlier this week. Their plan included $1 billion in spending cutbacks and more than $2 billion in tax cuts. Dayton is proposing to spend nearly every penny of the surplus on childcare tax credits, universal pre-kindergarten education and college tuition freezes on campuses across the state.

Bakk said Senate Democrats are positioned somewhere in the middle of the other plans, even though their numbers align more closely with Dayton’s budget.

They want to spend an additional $555 million on early through postsecondary education, a number higher than what Republicans want but significantly lower than Dayton’s proposal. It wouldn’t fully fund the tuition freezes and universal pre-kindergarten education in the governor’s plan, but Bakk said they could accomplish smaller versions of those proposals in their target. “I don't think it’s sustainable going down the road to think that [Minnesota State Colleges and Universities system] and the University of Minnesota can come here every two years and say, ‘Give us X and we’ll freeze tuition,’” Bakk said.

2016–17 spending by category: Projected, GOP and Governor’s proposals
The Senate’s budget proposal not only rejects the House GOP’s steep cuts to Human Services, it actually exceeds what the governor proposed for the department.

*The number reported for the House and Senate budgets is for "E-12 Education", the current name of the House committee, while the numbers for the the governor’s budget are taken from the "K-12 Education" line in the February forecast, so the numbers might not be exactly comparable.

Source: Minnesota Management and Budget, Minnesota GOP and Senate DFL

He said the Senate education plan will also likely include loan forgiveness for doctors who chose to set up shop in rural Minnesota, as well as their plan to reduce tuition at vocational schools to get more students into job-training programs.

Sen. Katie Sieben, DFL-Newport, acknowledged their education target isn’t as high as some advocates — or even DFL senators — might have wanted. “I’m hopeful that throughout the end of the legislative process that that target in particular will continue to improve,” she said.

The Senate DFL tax committee has a $459 million target to hit, but Bakk made it clear they won’t be sending rebate checks out to Minnesotans. They will, however, consider lowering property taxes, and senators say they want to balance out some accounting shifts that were put in place in the past.

How to spend $43 billion
Overall, Minnesota will take in about $43 billion in revenue, after reserves. Here's how the House, Senate and governor have proposed to allocate that money.

*The deficiency bill is $15 million in emergency spending for 2015 on the Minnesota Zoo, the St. Peter Security Hospital, Ebola preparedness and other areas. It was agreed to as part of the compromise on commissioner pay raises.

Source: Minnesota Management and Budget, Minnesota GOP and Senate DFL

“If there truly are one-time monies, we should use them for one-time expenses,” Senate Taxes Chairman Rod Skoe said. “They are probably more appropriate than some of the ongoing tax changes that could be problematic in the future.”

Senators aren’t financing a bonding bill in their budget, because Republicans have said they aren’t interested in passing a construction package this year. But Dayton plans to pitch an $850 million bonding bill this session, and there are already $30 million in additional costs related the ongoing Capitol restoration project that need to be covered, Bakk said. Bakk has directed Senate Capital Investment Chairman LeRoy Stumpf to craft a smaller bonding bill that could cover those costs as well as some “non-member specific” projects, like repairs at college campuses.

The Senate also has little appetite for a proposal from House Republicans to change MinnesotaCare, a state-based health care program for the working poor. Bakk pointed out that disagreements over the program led to a brief government shutdown in 2005. Republicans are trying to reduce government spending by about $1.1 billion, and much of that will be targeted in health and human services.

“If that’s where they find a majority of their savings, we are going to have a bumpy road,” Bakk said. “A lot of those people on the program are in rural Minnesota.”

Senate Republicans were quick to criticize the majority party for not trying to cut back on state expenses, like House Republicans did in their budget. “Keep in mind, these are the same politicians who are building themselves a new $90 million office building in St. Paul, and now they want you to start paying for it,” Senate Minority Leader David Hann said in a statement.

But Bakk’s continuing theme throughout the press conference was that surpluses have their risks, and even Democrats can have too healthy an appetite to spend them.

“You have to be careful that you don’t over commit,” he said. “We have a pretty strong economy right now in Minnesota, but it won’t hold indefinitely. We are probably closer to the next recession than we are away from the last one, and building up our budget reserves and having some discipline on spending will be important.”