The state’s economic recovery has been so robust that state leaders are able to pay down a giant share of the remaining debt to E-12 public schools, Gov. Mark Dayton announced Monday.
“This is a great success,” Dayton said. "It's a tribute to Minnesota's economy and its employers and its employees."
Minnesota will repay another $636 million to public schools, about $200 million more than predicted in July. The additional money came largely from unexpected savings in state spending, largely health and human services costs. The state's balance to schools is just $238 million.
Dayton and DFL legislative leaders made the announcement at a Capitol news conference, highlighting what they say is the freshest sign that the state has nearly crawled out of the worst recession since the Great Depression. The last economic downturn resulted in deep cuts in most areas of the budget, drained reserves and caused government leaders to resort to accounting shifts and borrowing from schools to balance the budget.
Republicans say the state’s economic rebound came as a result of the budgets that they crafted and fought for, not Dayton. They said that their insistence on not raising taxes kick-started the economic recovery and allowed the state to pay off schools faster. This is the same budget that led Dayton and Republicans to lead the state into a three-week partial government shutdown.
Senate Minority Leader David Hann, R-Eden Prairie, said the positive outcome of this budget was worth the acrimonious standoff with Dayton, even though it might have cost them majorities in the House and Senate in the next election.
“I think the long term effects are beneficial,” Hann said."No one likes to see a government shutdown, nobody likes to see the debate come to a place it got to, but what we are adamant about at that point is that we did not want to increase the tax burden on this economy."
Rather than impose deeper cuts or raise taxes, state leaders withheld $2.8 billion in school payments to balance the budget over the last two budget cycles. The lower payments caused cash-flow problems for some school districts, which had to borrow money to cover their financial obligations.
State law now requires any surplus to first go to repay any school debt. Only then can the money can be used to increase government spending or lower taxes.
Dayton and a new slate of DFL legislative leaders approved a new two-year budget that includes about $2.1 in new taxes, mostly in the form of higher income taxes for the state’s top earners and three new businesses taxes.
DFL House Speaker Paul Thissen and Senate Majority Leader Tom Bakk endured criticism and praise during an hourlong talk at the Minnesota State Fair on Thursday.
Fairgoers who walked by the DFL booth criticized the legislative leaders for a new sales tax on agriculture equipment repairs and their inability to boost the state’s minimum wage, which has fallen more than $1 below the federal base wage of $7.25 an hour.
“All I see are taxes coming at us,” said David Werner, a farmer from Montevideo. “How can we say the DFL is representing us when they are slapping taxes on the ag related programs they never taxed before?”
Thissen said that lawmakers took a sizable step to lowering property taxes for farmers in the last legislative session, though he said not enough was done in that area in the last budget.
Massive cuts in state aid to cities and counties during the eight years GOP Gov. Tim Pawlenty was in office caused local property tax collections to double, Bakk said, to about $8 billion.
“I am pretty proud of the fact that we bent the curve on taxes,” said Bakk, DFL-Cook.
Republicans have criticized Democrats for raising more than $2 billion in new taxes, which they say will become a drag on the state’s economy and threaten the business climate. Most of the new taxes come on the state’s top earners and some businesses.
Some attendees thanked Bakk and Thissen for balancing the budget and their commitment to improving the state’s education system.
“This was a strong year for Minnesotans,” said Thissen, DFL-Minneapolis.
Attorneys for the Minnesota Senate on Wednesday pressed a federal magistrate to dismiss a lawsuit brought by a former staffer after his side wrongfully released a list of lawmakers who allegedly had romantic affairs.
Senate attorney Dayle Nolan said that lawyers for former Senate GOP communications chief Michael Brodkorb violated a judge’s order to keep the list private and then he bragged about it in the news media. Short of tossing the lawsuit, Nolan asked the judge not allow the list to be used in the upcoming trial and force the other side to pay the Senate’s legal fees caused by the incident.
“What would be unjust is for Minnesota taxpayers to pay for this fiasco,” Nolan said.
Brodkorb attorney Greg Walsh said the incident was a mistake and that their team scrambled to fix it quickly.
“Mr. Brodkorb had no knowledge of this filing,” Walsh said.
Brodkorb, a brash political operative who often clashed with member of his own party, was fired by fellow Republicans in December 2011 after former Senate Majority Leader Amy Koch, R-Buffalo, admitted the two were having a romantic affair. They were both married to others at the time.
Koch stepped down from Senate leadership and Brodkorb filed a wrongful-termination lawsuit, arguing he was treated differently than female staffers who had similar affairs with elected officials.
The Senate asked for sanctions after Brodkorb’s attorneys electronically filed a list of lawmakers suspected of having affairs in a way that allowed them to the seen by the public. The list is protected by a court seal and should have remained private. The Associated Press and Minnesota Public Radio were able to download the documents before the error was corrected. Neither published the names of the 10 former senators, one current senator and six staff members who Brodkorb alleges had similar affairs but remained employed.
Chief Magistrate Judge Arthur J. Boylan did not ask questions during the 30-minute hearing and said he would take it all under advisement.
The Senate has already spent more than $200,000 in legal fees and set aside another $500,000 for the trial set for next year. Attempts to resolve the lawsuit outside of court have not been successful.
The fight to raise the minimum wage came to the State Fair on Tuesday, as labor groups and faith leaders urged fairgoers to press lawmakers to raise the state’s base wage to $9.50 an hour.
The federal $7.25 minimum hourly wage, “is not enough,” said Shar Knutson, president of the Minnesota AFL-CIO. “It is simply wrong to pay poverty wages to someone who works hard for 40 hours a week or even more."
Gov. Mark Dayton swung by the event at the sweltering AFL-CIO pavilion and said all workers should be paid a living wage so they can support their families and have an honest shot at the American dream. He said a lower minimum wage forces more working people onto public assistance.
“I believe the minimum wage should be at a level so that someone working full-time can support a family of four above the poverty level and get more skills and more experience,” Dayton said. “If we are underpaying people, we the taxpayers are making up the difference.”
Business groups, particularly in the grocery and retail industry, have fought hard against higher minimum wages. They argue that a higher minimum wage will boost prices and force them to operate with fewer workers, hindering their competitiveness. The argument is particularly intense in border communities, where companies are competing against businesses in neighbor states where taxes can regulations can be less.
Despite widespread pressure from labor groups, the DFL-controlled Legislature was not able to agree to a minimum wage increase during the last legislative session. Senate Democratic leaders said they could not approve the $9.50 an hour by 2015 that House DFLers sought, in part due to concerns about border communities. The Senate’s final proposal included a gradual increase to $7.75.
State Rep. Ryan Winkler, a lead advocate for a higher minimum wage in the state House, the issue proved more politically vexing than advocates were prepared for during the last session.
The Golden Valley DFLer said he expected more conversations with Senate Democrats in coming months and hopefully a breakthrough in the upcoming legislative session.
Minnesota’s minimum hourly wage is actually $6.15 for large employers, but most employers are required to meet the federal minimum wage. About 93,000 Minnesotans earn at or below the federal minimum wage.
The state has secured the money to pay the first year’s debt on the new Minnesota Vikings stadium.
A one-time tax on tobacco inventory brought in $30 million, about $3.5 million more than state leaders agreed to set aside for the state’s first bond payment on the $975 million new stadium.
The Minnesota Department of Revenue reports that the money will be available Sept. 1, which is months before construction begins on the new stadium.
Current projections show that state will need about $20 million for the first year's bond payment and then about $33.5 million a year after that for the life of the bonds.
Revenue Commissioner Myron Frans said those payments could change slightly once the February forecast is known and after they lock in an interest rate when they sell the stadium bonds this fall.
State leaders turned to the one-time tobacco tax after the initial stadium funding source, revenue from new electronic pull-tabs and bingo games, fell profoundly short of estimates.
Frans said the one-time tobacco inventory tax is the only cigarette money going to the stadium. The state ended a corporate tax break and will set aside that money to pay the rest of the state’s share of the new stadium.
The additional $3.5 million from the one-time tobacco tax will also go into the state’s general fund.
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