- Associated Press - Thursday, December 3, 2015

ST. PAUL, Minn. (AP) - The tug-of-war over how to spend Minnesota’s projected budget surplus began as soon as state finance officials announced Thursday it clocked in at nearly $1.9 billion, a figure that will become the focal point in next year’s legislative session.

After squirreling some of it into rainy day funds and paying off old loans, lawmakers will have roughly $1.2 billion left to haggle over. But with a shaky outlook to the nation’s economy, state financial officials cautioned that the sum may shrink before lawmakers return to St. Paul in early March.

Still, the state’s top Democrats and Republicans couldn’t help but start building legislative wish lists, filled with tax cuts, early education initiatives and fixes for the state’s ailing network of roads and bridges. And though much of the discussion - and money - would likely be eaten up by those big-ticket items, other priorities like grants for broadband Internet expansion also may be on the table.

“We’ll make it enough,” Gov. Mark Dayton said. “We won’t be able to do everything everybody wants to do, but that’s a given.”

Lawmakers’ priorities largely fall in line with work left unfinished from the state’s budget finalized in the spring, which pumped millions of new money into Minnesota schools but paused talk of taxes and a major transportation package and left $865 million to use in 2016.

With news that the budget surplus had more than doubled due to higher-than-expected tax collections and lower costs in health care programs, Republicans and Democrats alike agreed the outlook was good for tax relief.

“It is time for meaningful, significant, permanent tax reductions,” Republican Senate Minority Leader David Hann said. “We’ve got to get the money back to people who are struggling with their own family budgets.”

What shape those tax cuts would take is unclear. Dayton referenced a child care tax credit his office proposed earlier this year, while House Speaker Kurt Daudt suggested reviving the House GOP’s previous attempt to eliminate taxes for senior citizens on Social Security income. Daudt also said he’d like to see the tax cuts split between everyday Minnesota residents and relief aimed at businesses.

Among those jockeying for a property tax cut for businesses is the United for Jobs Coalition, a conglomeration of business groups led by the Minnesota Chamber of Commerce, saying the current property taxes are outsized compared to Minnesota’s neighbors.

But Dayton vowed he wouldn’t cut taxes unless it was matched by funds for his own priority: early education. The budget surplus gives the Democrat a chance to revive his stalled push to provide free preschool across the state. He declined to detail what shape his education proposal might take, saying he’ll outline specifics after the updated economic forecast is released in February.

“With this surplus, it makes no sense to me that we would reject an investment for our earliest learners,” said Rep. Erin Murphy, DFL-St. Paul.

The surplus could shoulder a heavier burden when lawmakers try to hammer out a multibillion-dollar package to fix roads and bridges over the next decade, as Dayton declared his hopes to raise the gas tax “dead” with such a large sum at the state’s disposal.

He and fellow Democrats Senate signaled a willingness to tap into state money to get road and bridge repairs on track; the Senate had previously advanced a plan to raise wholesale gasoline taxes to pay for construction. Daudt said the GOP would continue its push to route existing taxes on car sales, rentals and parts into a dedicated fund for road repairs.

Dayton also unveiled his wish spend an extra $100 million for broadband Internet development grants in rural Minnesota.

He also criticized the Legislature for only spending $10 million in the state’s current budget.

“We’re catching up for the lack of funding in this current year. That may not be the right number, but it’s got to be significant,” Dayton said.

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