Dayton’s surplus-spending plan centers on tax reform, equity, broadband and education

MinnPost photo by Briana Bierschbach
Gov. Mark Dayton's proposal leaves about $200 million on the bottom line for the upcoming budgeting year.

Editor’s note: this post has been updated with comments from Gov. Dayton and Lt. Gov. Smith.

Gov. Mark Dayton has big plans for the state’s budget surplus: tax cuts, racial equity, broadband and education.

The two-term Democratic governor released his supplemental budget plan Tuesday to spend much of a projected $900 million state budget surplus for 2016 and 2017. His budget includes $117 million in child-care tax credits and other tax cuts, $100 million to boost high-speed internet access across in Minnesota, and another $100 million in one-time spending on a number of racial equity programs, including $33 million of not-yet-committed funds to expand economic opportunities for racial minorities in Minnesota.

“Our supplemental budget prioritizes tax cuts for middle-income families and investments in Minnesota’s children, families and communities,” Dayton said while unveiling his budget.

Dayton is also proposing $77 million to boost various early education programs. That includes $25 million for a voluntary version of his signature preschool education proposal. Under Dayton’s budget, funding for the program would be split between urban, suburban and greater Minnesota school districts and charter schools and awarded based on poverty rates. That program’s cost would increase to $100 million in the 2018-2019 budget.

“Sometimes you can make progress in big, giant steps and sometimes you can make progress in slow, steady incremental steps, and what we are doing with this budget for preschool is to make some incremental steps toward preschool for all 4-year-olds and families who want it,” Lt. Gov. Tina Smith said. “We heard a lot last year about how school districts and parents don’t want this. I think what we are going to see here is that a lot of schools and a lot of parents want this.”

But with predictions of possible economic decline on the horizon, Dayton scaled back his wish list considerably. He also left about $200 million of the total surplus unspent for the upcoming budgeting year. About $411 million of his proposals are one-time spending, according to a breakdown from the governor’s office, while proposals totaling $287 million would continue to cost the state money in coming years.

“I think it’s really important that we start to protect our state government’s fiscal integrity from a future national economic downturn,” Dayton said. “That wasn’t done in the past and we saw the catastrophic consequences of that, with ongoing deficits and budget shifts, borrowing from the schools and the like.”

Dayton also proposes to pump a considerable amount of money into various programs within the massive Department of Human Services, including $28 million to increase the number of inpatient psychiatric beds, $22 million to improve client care and staff safety at the Minnesota Security Hospital in St. Peter and $4 million for biennial evaluations of offenders in the Minnesota Sex Offender Treatment program. Some of those proposals will be unpopular with the Legislature in a big election year, but Dayton said improvements at St. Peter facility is one of the most urgent in his supplemental budget proposal.

Other big items from the governor’s supplemental budget proposal:

  • $47 million for a one-time increase in Local Government Aid and County Program Aid
  • $46 million to improve cybersecurity in state agencies
  • $44 million in investments in various state agencies
  • $23 million for the state’s court system
  • $56 million for operating costs and programs at the Minnesota State Colleges and Universities system and the University of Minnesota
  • $34 million for compensation, security, staffing, health services in the state’s corrections system and to expand early release programs

Dayton’s budget sets the tone for the upcoming debate over how to spend the surplus with the Legislature. Democrats in control of the Senate and Republicans in control of the House will introduce their own plans in the coming weeks. Republicans have promised to prioritize spending on roads and bridges and tax cuts. Dayton said he’s open to negotiations on all parts of his budget, but he wont agree to a plan that commits too much of the state’s money in the years to come.

“I’m flexible on all of this,” Dayton said. “But I’m not flexible on the principle that we need to be very cautious in what we obligate with tax cuts and spending increases.”

Summary of Dayton’s supplemental budget proposal
All numbers are in millions.
Spending typeFY16-17FY18-19
Tax Reductions117154
Broadband1000
Courts236
Corrections3459
Cyber Security460
Debt Service/Bonding2184
Department of Human Services19(39)
Education and Early Learning77405
Equity1000
Higher Education5670
Local Government/County Program Aid470
Other Agency Investments4437
Transportation1436
Total$698$812
Source: Office of Gov. Mark Dayton

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Comments (11)

  1. Submitted by Ron Gotzman on 03/15/2016 - 12:44 pm.

    Tax and spend….

    Thank you Governor Dayton for reaffirming the DFL motto of “Tax and Spend.”

    When will you be announcing your additional taxes on the poor and middle class by “taxing” gasoline at the wholesale level?

    When will you be announcing your $15 per hour minimum wage that will raise prices on the poor and middle class – especially those seniors on a fixed income?

    This will be a interesting election cycle.

  2. Submitted by Ray Schoch on 03/15/2016 - 03:38 pm.

    My 2¢

    Mr. Gotzman left out a word. It would appear that the Governor’s motto for this budget cycle is “Tax and Spend and Save for a Rainy Day.” I’m fine with that, personally.

    As a senior living on a fixed income that’s significantly lower than the median in Minneapolis, I dislike crumbling roads and bridges as much as anyone. If raising the tax on gasoline – whether at the wholesale or the retail level – is what it takes to keep the region’s (and state’s) roads and bridges in safe operating condition, so be it. There ain’t no free lunch…

    While I’m not wedded to the specific figure of $15 an hour as a minimum wage, I do think that the current minimum wage is far too low. $10 an hour, which is, I believe, still somewhat above the current minimum, yields an annual income of less than $21,000. It appears, based on online sources, that average 1-bedroom apartment rental in Minneapolis is just over $1,000 a month – out of an income, at $10 an hour, of just over $1700 a month. It’s nearly 60% of that monthly income, and for an “average” 1-bedroom apartment. Add another $100+ for utilities every month, toss in $200 a month for food, and there’s not much left with which to take part in a “consumer economy,” no matter how broadly it’s defined.

    I do agree that it’s going to be an interesting election cycle.

    • Submitted by John Appelen on 03/15/2016 - 06:28 pm.

      Living Large

      I will never understand the 1 bedroom apartment concept on one income as the standard.

      Back when I was making minimum wage I had 5 room mates with who to split the rent, utilities, etc. Then of course I moved into the marriage stage of my life where we had 2 incomes to support the 1 bedroom apartment.

      I believe the idea is to make living on minimum wage relatively uncomfortable so that people are encouraged to improve their earning potential. Unless you would prefer for them to stay trapped at the bottom rungs of the work force.

      This article has some good data.
      http://www.theatlantic.com/business/archive/2013/12/should-we-raise-the-minimum-wage-11-questions-and-answers/282326/

      • Submitted by Todd Hintz on 03/16/2016 - 08:13 am.

        Living At All

        I think we’ve passed the point where people are merely “living uncomfortably” and are to the point where it’s unsustainable. Yes, people can cram a lot of bodies into an apartment and split the rent, but that only delays the issue as wages continue to stagnate and productivity gains are funneled to the wealthiest Americans.

        Most cities have housing codes that only allow so many people per house. What do you do when five people no longer cuts it and ten is illegal? It’s better to take action now than wait till it becomes a crisis.

      • Submitted by Anthony Walsh on 03/16/2016 - 12:18 pm.

        Living Large In Fantasyland

        “I believe the idea is to make living on minimum wage relatively uncomfortable so that people are encouraged to improve their earning potential. ”

        Right, because there so many people out there making minimum wage by choice. And obviously, there are so many of those already working (juggling) two or more part time jobs to keep what they have, and all they need is a little more economic pain to get them to do something about it. And obviously, there are hundreds of thousands of unfilled jobs out there that pay better, are attainable to someone in their situation, with a business that will pay better wages and are willing to train, that hasn’t been off-shored yet.

        Maybe this guy has some idea on “what the idea is”: “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” (F.D.R, 1933, Statement on National Industrial Recovery Act) “By living wages, I mean more than a bare subsistence level — I mean the wages of a decent living.”

        • Submitted by John Appelen on 03/16/2016 - 09:59 pm.

          Choices

          I think many of them did have a choice:
          – Did they choose to work hard to learn in the K-12
          – Did they choose to stick it out or did they drop out
          – Did they choose to avoid having children while young
          – Do they choose to show up consistently at work, work hard, treat everyone with respect, communicate professionally. etc
          – Do they strive to learn and improve everyday
          – Do they choose to take on extra responsibility

          Here are some facts and data.
          https://www.minneapolisfed.org/publications/fedgazette/a-minimalist-picture

      • Submitted by Bill Willy on 03/17/2016 - 08:59 am.

        The Litany

        Anyone who does a search on some variation of “U.S. productivity growth and the minimum wage” will find a raft of “interesting articles” that all say the same thing. Although I have no hope of it making a dent I suggest you give it a try sometime.

        Here, for example, is a relevant and seemingly appropriate snip from one of the many articles that come up:

        “The median worker saw an increase of just 5.0 percent between 1979 and 2012, despite productivity growth of 74.5 percent—while the 20th percentile worker saw wage erosion of 0.4 percent and the 80th percentile worker saw wage growth of just 17.5 percent.

        “Conservative economic ideologues look at that information and conclude that the fault lies with American workers. Too lazy, bad choices, uneducated sluggards…..you know the litany.”

        http://www.ohio.com/blogs/mass-destruction/blog-of-mass-destruction-1.298992/maximum-greed-over-minimum-wage-1.506729

        • Submitted by Anthony Walsh on 03/17/2016 - 09:31 am.

          On The Litany

          I think it says a lot about someone that would use a list of what really is excuses to blame the worker to say or imply that it is natural and fair that they be in the position they are in, it’s all on the worker for being in that position, and there’s no reason to do anything about it, and by extension, it is the right of business to take advantage of that and make poverty a part of their source of profit. I got mine, screw them if they didn’t walk the straight and narrow straight enough, right?

        • Submitted by John Appelen on 03/17/2016 - 10:08 am.

          Repetitive

          I know I sound repetitive, however here we go.

          Though some workers are somewhat at fault. I mean just think of all the kids who can not meet the basic K-12 graduation standards, or the modern kids who think many of the good paying jobs are too dirty, too distasteful, too hard, etc. Many of my peers started out driving a fork lift, assembling, working road construction, etc and moved into the office and up with time.

          The real problem is that American Consumers want low cost high quality products and services, and they really do not care who designs, builds, and/or provides them as long as it saves them money. The Catch 22 here is that Americans want to make more, more, more… While paying less, less, less…

          Just imagine the impact if American consumers chose to buy only vehicles that scored a 50 or better on this index…. Especially those folks who want jobs kept in the USA and American Unions kept strong.
          http://www.american.edu/kogod/autoindex/2015.cfm

          • Submitted by Bill Willy on 03/17/2016 - 12:19 pm.

            Meanwhile . . .

            As you’re being repetitive (and adding education, American Consumers, Catch-22’s and unions to the list):

            “Corporate Profits Grow and Wages Slide

            “Corporate profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years.”

            http://www.nytimes.com/2014/04/05/business/economy/corporate-profits-grow-ever-larger-as-slice-of-economy-as-wages-slide.html

            “Why are US corporate profits so high? Because wages are so low . . .

            “U.S. businesses have never had it so good.

            “Corporate cash piles have never been bigger, either in dollar terms or as a share of the economy.

            “The labor market, meanwhile, is still millions of jobs short of where it was before the global financial crisis first erupted over six years ago.

            “Coincidence?

            “Not in the slightest, according to Jan Hatzius, chief U.S. economist at Goldman Sachs:

            ‘The strength (in profits) is directly related to the weakness in hourly wages, which are still growing at just a 2% nominal pace.’ ”

            http://www.blogs.reuters.com/macroscope/2014/01/24/why-are-us-corporate-profits-so-high-because-wages-are-so-low/

            Yet you keep insisting businesses refusing to pass any more of those profits on to employees than “the traffic will bear” has little, if anything, to do with employee’s (and their family’s) steadily deteriorating financial situation. They, the education system, American consumers, unions, etc., etc., etc., are the culprits. Never ever ever the Sacred Business Entities in Question, amen.

            • Submitted by John Appelen on 03/18/2016 - 12:14 am.

              Agreed

              I do not doubt that there are some greedy manipulative businessmen out there. Just like there are some greedy manipulative citizens in all walks of life.

              The reality though is that American businesses make choices to maximize profits to satisfy their investors. And many of us are their investors who demand those “higher than market average” returns from our IRA’s, 401Ks, College Savings funds, etc. Have you ever said I am going to invest in a low return fund that helps American workers? Likely not, just like most people do not say I am going to take on some additional expense and reliability risk to help the workers in a Strong Union State.

              It is much easier to blame the businesses who are making the exact same decision we consumers do. The decision to optimize the value to the company, their shareholders, their customers, etc. If you are unwilling to buy a car that was designed and built in Michigan, why would expect a business to stay there?

              Also, if American Consumers refused to buy high foreign content goods and were willing to pay more for high domestic content goods… What do you think the companies would do?

              Both foreign and domestic firms make large profits because American consumers only care about features, quality and cost. Do you really think it would be a good thing to make Apple manufacture in the USA when Samsung could produce elsewhere for much less money. How long do you think Apple could last? Lower margins, less R&D funding, likely lower quality, etc.

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