- Associated Press - Tuesday, February 28, 2017

ST. PAUL, Minn. (AP) - Minnesota’s Republican-controlled Legislature and Democratic Gov. Mark Dayton will have more money to haggle over in the new budget, after state budget officials announced Tuesday that the projected budget surplus has grown to $1.65 billion.

Top lawmakers had expected a $1.4 billion surplus, based on December estimates, but both sides have largely been in a budgetary holding pattern since session began in early January, as they waited for Tuesday’s estimate.

Stronger-than-expected tax collections buoyed the surplus, which budget officials said helped offset some state programs with slight cost overruns. Dayton, lawmakers and the state’s economist were scheduled to address the larger surplus later Tuesday morning.

Lawmakers have until late May to pass a new two-year budget. But several years of hefty budget surpluses have proven that extra money to spread around doesn’t ease the task - especially when power is split at the Capitol.

In the Legislature’s last budget-setting year of 2015, House Republicans clashed with Dayton and the then-Democrat controlled Senate, requiring a June special session to finalize budget bills that met Dayton’s veto pen. With the GOP now in control of the Senate, Republicans could push Dayton even farther, as in 2011 when they deadlocked, prompting a 20-day state government shutdown.

Dayton has already fleshed out his own budget proposal, a rough framework that he’ll likely retool in the coming weeks. The stronger surplus could embolden the governor to push harder for early childhood education and a statewide public health care option - two of his flagship goals laid out in his January State of the State address.

In all, Dayton is calling for a nearly $46 billion two-year budget, replete with extra funding for his prized new preschool program and $300 million in tax relief.

Even before the final scope of the budget surplus came into view, Republicans said they would press Dayton to devote more dollars to tax relief. They’ve started lining up some massive tax cuts, including phasing out the state’s tax on Social Security income, which eventually could cost more than $500 million a year.

And while Dayton continues to push for a gasoline tax to pay for a backlog of road and bridge repairs, the surplus will figure heavily into that ongoing transportation funding debate. Republicans have signaled they could tap some of the excess budget to finalize a funding package that has eluded Minnesota lawmakers for years.

As lawmakers awaited an updated readout on the state’s financial standing, the Legislature has focused on smaller policy items, such as passing premium relief to offset massive health insurance hikes, moving to allow Sunday liquor sales and finally getting Minnesota in line with federal ID standards for domestic flights.

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