Dayton aims for restraint in supplemental budget

  • Article by: EDITORIAL BOARD , Star Tribune
  • Updated: March 6, 2014 - 6:24 PM

His proposal is short on spending, long on reserves.

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Gov. Mark Dayton

Photo: ELIZABETH FLORES • Star Tribune,

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Gov. Mark Dayton repeatedly uttered the words “fiscal discipline” and “restraint” Thursday as he presented his budget recommendations for the remainder of the 2014-15 biennium. Ten months after signing a $2.1 billion tax increase into law, DFLer Dayton has crafted a supplemental budget that bends in a more conservative direction.

The governor proposes to return in tax cuts fully half of the $1.23 billion surplus now forecast to accumulate in the state’s general fund by June 30, 2015. About 40 percent of his $616 million tax cut would go to businesses via repeal of three new sales taxes on business-to-business transactions, plus a $15 million boost in the tax-credit incentive for “angel” investments in start-up businesses. Those repeals are the state business lobby’s top priority for this year’s legislative session.

The bulk of the remainder of Dayton’s tax package would flow to low- and middle-income Minnesotans via measures that conform to the federal tax code. A number of those provisions would apply to tax year 2013 — provided they are enacted by the Legislature before March 14, Dayton emphasized.

Dayton’s haste is shared by the DFL majority in the House, which passed its $500 million package of tax cuts on Thursday. But similar urgency has not been evident in the Senate. If that ambling pace persists next week, DFL senators’ inboxes ought to start filling up. A failure to seize the chance to inject that much stimulus into the economy in the near term would be indefensible.

The governor’s tax package was expected. His proposal for the other half of the forecast surplus was not. It’s surprisingly lean in new spending — only $162 million, or 0.4 percent of the total biennial budget. That includes $20 million already signed into law to help low-income Minnesotans cope with high propane heating costs. Absent are proposals popular with many legislators, including enriched preschool aid to low-income families, funding for a new teacher evaluation program and a broadband development matching fund for greater Minnesota.

Dayton would use all of the rest, $455 million, to beef up the state’s reserve fund. While he declined to say “veto,” he indicated that he intends to vigorously defend that position. He’ll have to, given the swelling appetite at the Capitol for spending and, among Republicans, larger tax cuts.

We share Dayton’s view that a state whose next biennial budget is sure to top $40 billion needs a reserve fund larger than today’s $653 million set by statute. Prudence dictates that during flush times, reserves should be built up to prepare for the downturn that will inevitably follow one day.

But we see enough merit in a number of the spending proposals Dayton omitted that we’re rooting for gubernatorial flexibility as the 2014 session unfolds. A boost in reserves even half as large as Dayton is recommending would be significant — particularly if it were accompanied by a schedule of reserve-fund increases over the next several biennia.

We detect that interest in a larger reserve runs deeper in the Senate, which is not on the 2014 ballot, than in the House, which is. A bargain that gets a tax bill moving in the Senate next week in exchange for a major increase in the reserve fund this year and in years to come might serve both chambers’ interests. It would surely serve Minnesota’s.

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