To his credit, many of Gov. Mark Dayton’s latest recommendations for the 2016-17 state budget are geared toward years well beyond the next biennium. They aim to shore up the well-being of young families and the education of Minnesota’s next generation.
But the state’s fiscal past was also a prominent theme Tuesday as DFLer Dayton presented his ideas for deploying a forecast $1.9 billion biennial surplus for the public good. Leading Republicans have proposed rebating some or all of that sum to taxpayers. Dayton likened that idea to the “frenzy” of tax cuts of 1999-2001 that proved to be a prelude to a dozen years of recurring state deficits.
Dayton is right: That is a chapter in state history that today’s lawmakers should avoid repeating. The lesson, though, is not simply to avoid cutting taxes as an economic expansion falters. It’s to avoid costly permanent measures — either tax cuts or spending increases — with what turns out to be a temporary windfall. Legislators should evaluate Dayton’s 2016-17 proposals with that cautionary note in mind. He seeks $1.7 billion in new spending and about $200 million in tax cuts. That leaves a scant $13 million on the projected 2016-17 bottom line.
As Dayton noted, the Legislature showed repeatedly between 2002 and 2012 that when a crunch comes, spending increases can be reversed more easily than tax cuts. But better still is a budget with enough built-in shock absorbers to minimize the need for either move. The state’s reserve fund now sits at $1.35 billion, the largest in state history. But that’s roughly $700 million below the 5 percent level economic experts recommend.
The biggest-ticket item in Dayton’s budget is universal preschool for 4-year-olds. That effort, when fully implemented, would cost the state roughly $300 million per year and is likely to stretch local school facility budgets. Legislators should ask whether scholarships to preschoolers from needy families would provide more targeted early education at lower cost.
Similarly, Dayton proposes to meet the $220 million price set by the state’s two higher education governing boards for tuition freezes in the coming two academic years. Legislators should ask whether those tuition freezes could be extended at lower cost — or, better yet, whether Minnesota could better maximize its college-educated population by targeting more help at lower-income students via the Minnesota State Grant Program.
Questions of that sort seem increasingly in order. Recent headlines have told of job losses at Target, General Mills and two Keewatin taconite plants; weak crop prices; a sputtering U.S. stock market, and a slowing global economy. Dayton said economists have told him that the state is likely nearer in time to the next recession than the last one. We hope that awareness leads to caution, not frenzy, during the next two months of budget-setting at the State Capitol.