With an additional $832 million available this year for Gov. Mark Dayton and lawmakers to work with thanks to a positive budget forecast, the DFL governor said Friday that he wants more than half that money to benefit the two ends of the learning spectrum.
"I propose that we invest our collective good fortune in our collective better future," Dayton said Friday, after state budget forecasters said a projected surplus had swelled to $1.9 billion from $1 billion just three months earlier.
To that end, Dayton said he'd seek an additional $444.2 million in spending to bolster several priorities. He's suggested an additional $238 million to ensure full statewide access to pre-kindergarten programs, rather than partial access as he initially proposed.
Dayton also backed an additional $127.5 million to freeze tuition for two more years at all public higher education institutions, plus $25 million more in state grants for college students.
In addition, Dayton said he'd propose setting aside $50 million to implement expected recommendations from a Child Protection Task Force working to bolster that system.
Dayton also flagged $3.7 million for the Minneapolis Park Board, which he'd initially proposed penalizing for what he called its delays to the process of approving a new light-rail route through southwest Minneapolis. On Friday, the Park Board and Metropolitan Council reached a deal meant to end those delays.
With that additional spending, about $388 million in additional surplus dollars would remain. Dayton said he would fully detail his revised budget proposal on March 9. The extra dollars could leave some room to negotiate with Republicans on their priorities for the surplus, which include tax relief, spending on road and bridge repairs, and additional money for nursing homes.
Democrats and Republicans at the Capitol agreed Friday that Minnesota's projected $1.9 billion budget surplus is great news for the state, but there was considerably less agreement on what to do with it.
"Today is good news for Minnesotans," said House Speaker Kurt Daudt, R-Crown, echoing comments by Gov. Mark Dayton and DFL legislative leaders.
But, where Dayton and DFL allies suggested greater spending on areas like education and transportation, the GOP's emphasis was as-yet-unspecified tax relief -- and the argument that Dayton now should jettison his proposal to raise state taxes on gasoline for transportation projects.
"I think this surplus means Democrats can stop talking about a gas tax in St. Paul," Daudt said. That's after Dayton said just a few minutes earlier that he intended to proceed with that proposal, which involves a new, 6-percent-per- gallon tax on gas at the wholesale level. Daudt said a portion of the surplus should be spent directly on rebuilding roads and bridges.
Daudt was elusive about what kind of tax relief Republicans might pursue. But he suggested at least $900 million, or about half the new surplus figure, should be returned to taxpayers. Whether that might come in the form of wide-reaching relief, like an income or sales tax cut or rebate, or more targeted relief through tax credits or carve-outs to smaller subsets of taxpayers, he wouldn't say.
"Anything is on the table," Daudt said.
Various Republican lawmakers have already introduced bills tending toward the latter approach, with tax relief for businesses meant to promote new job creation, tax relief for farmers and other proposals.
Still, it was clear Republicans have their eyes on spending some portion of the surplus. Besides roads and bridges, Daudt and other GOP leaders expressed an interest in boosting state payments to nursing homes and spending more on schools, among other possible priorities.
"We will be proposing spending but it will be spending targeted at results," said Senate Minority Leader David Hann, R-Eden Prairie.
As new spending requests from interest groups flooded in via press release, Democratic legislative leaders said the new money available should be focused toward programs that aid working families.
"We hope to hear the priorities of communities across the state," said Senate Deputy Majority Leader Jeff Hayden, DFL-Minneapolis.
The state's budget office on Friday reported that Minnesota's projected budget surplus grew to $1.9 billion, up $832 million from a previous projection, setting the final stage for budget negotiations at the Capitol.
The Minnesota Management and Budget Office, which publishes the twice-yearly budget and economic forecast, attributed the nearly doubling of the budget surplus to an improvement in the state's labor market, lower gas prices and a stronger U.S. dollar.
Officials said that since the November budget forecast, revenues are projected to rise an additional $616 million, or 1.5 percent. Projected spending, based on current law, is down $115 million, or 0.3 percent.
"Today's news is very good news, over the last few years, we have righted the ship," said Myron Frans, the recently appointed budget commissioner. In recent years, “we were facing large deficits as we began the budget process. By focusing on balanced budget proposals, we’ve paid back our schools, enhanced strong revenues for the state… we’ve carefully managed our state budget."
He went on: “Minnesota is truly a success story. We have a balanced and diverse economy. And we have a growing economy.”
Friday’s economic forecast showed improvements in the national and state economies that are expected to drive higher wage growth and an uptick in household formations, said state economist Laura Kalambokidis.
Higher consumer confidence nationally “is buoying consumer spending, which is the largest driver of the U.S. outlook,” Kalambokidis said.
Gov. Mark Dayton told reporters that the surplus, which he credited to the state’s well-performing economy, should be used to invest in education and transportation, his two main priorities. Though he’s not opposed to offering tax cuts as Republicans are putting forth, he said spending on schools and the state’s infrastructure would be a way to spur future economic development.
“Inevitably, there will be another national economic slowdown or downturn, and Minnesota’s economy will be affected like everyone else’s,” he said. “Our budget surplus will disappear, so I propose that we invest our collective good fortune in our collective better future.”
Friday’s revised figure will provide the framework with which legislators will craft their respective budget proposals. Dayton has already proposed a $42-billion budget, with the majority of new spending earmarked for education. He said Friday that his revised budget will call for an additional $444.2 million in spending to fund his legislative priorities.
He will present his revised proposal in early March.
DFL legislators said the surplus will provide additional money to fund their priorities, which include universal pre-kindergarten, a child-care tax credit similar to Dayton’s and increasing the state’s contribution to schools by boosting the per-pupil funding formula.
Republican legislators meanwhile are calling for much of the surplus to be returned to taxpayers. They also oppose a separate $11-billion transportation proposal by Dayton which calls for new sources of revenue, including a wholesale gas tax and an uptick in the metro-area sales tax .
This is a developing story. Check back later for updates and more details.
Expanding on a recent proposal by DFL. Gov. Mark Dayton, a Republican senator wants to offer a $1,000 non-refundable tax credit for families with young children to help offset the cost of child care.
The so-called Toddler Tax Credit, sponsored by Sen. Karin Housley, R-St. Mary's Point, would provide an estimated $500 million tax relief for families with children under the age of 5.
“The costs that go along with raising young children put a lot of financial strains on our families,” Housley said in a statement. “Any type of tax relief we can give these families will be a welcome break.”
Housley's proposal would have no income limits, unlike Dayton's proposal which would cap it $124,000 for households that claim the child-care tax credit.
The two proposals are aimed at addressing high child-care costs in Minnesota, where the cost of child care compared to median income makes the state the third-least-affordable in the country.
Child care costs most acutely affect single-parent households, according to a 2013 report by Child Care Aware, an industry group that compiles state-by-state data.
The average cost for child care annually was $13,876 for a single-parent household, eating up more than half of the parent’s annual median income, according to survey and census data. For married, two-parent households, the cost of child care annually ate up just more than 15 percent of their median income.
Senate Majority Leader Tom Bakk said he and Gov. Mark Dayton cleared the air in a private conversation Wednesday morning, settling once and for all on the legislative path out of the commissioner pay raise dispute that fractured their relationship, and also agreeing they have too many shared priorities as DFLers this session to let their feud fester.
Dayton hosted Bakk and other top DFL lawmakers at a breakfast meeting Wednesday at his official residence. "The way it kind of ended was he and I in the corner talking, and he actually put his hand on my shoulder and I put mine on his," said Bakk, DFL-Cook.
"The governor and I just have way too much work to do to be at odds with each other this session. I think we're fine," Bakk said. He said they agreed to jointly appear at a March 5 news conference to tout DFL transportation priorities this session.
Dayton's Deputy Chief of Staff, Linden Zakula, called it "a congenial and constructive meeting."
House Minority Leader Paul Thissen, also present at the meeting, said the tone between Bakk and Dayton was cordial and that the larger group discussion remained focused on issues.
The public falling out two weeks ago between the Capitol's two most powerful DFLers came after Dayton revealed that he had raised salaries for about 30 state commissioners to the tune of nearly $900,000 a year, with a handful getting an additional $35,000 a year in salary. Republicans and some DFLers bristled at the size of the raises, despite the 2013 Legislature having granted the governor the power to raise them without further legislative oversight.
Under the deal to resolve it, struck largely between Dayton and Republican House Speaker Kurt Daudt, the raises will be temporarily put on hold. Come July 1, Dayton could reinstate them to the full amount; but after that, the Legislature would regain the final authority on whether further raises are granted.
That's a major surrender for Dayton, who initially defended the raises as necessary to recruit and retain top talent for his cabinet. But the issue because a political distraction for the governor, who more recently has spoken repeatedly of the need to retrain the focus of the session on issues of more wide-ranging impact to Minnesotans.
The raise issue got attached to an unrelated stopgap spending bill that distributes about $16 million to several state agencies that encountered unanticipated costs in recent months. A House-Senate conference committee was set to meet Wednesday afternoon to finish up that legislation, and Bakk and Daudt both said they expected their respective chambers to take a final vote on the matter on Thursday.
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