How to handle a massive surplus

In a dramatic reversal of fortunes, Minnesota's latest economic forecast is now projecting an almost unimaginable $7.7 billion surplus for the next budget period.

That doesn't even include the gusher of federal funds that may be coming if the U.S. Senate passes the massive Build Back Better bill that already has passed the House.

In another departure from previous surpluses, much of this one is made up of ongoing funds rather than one-time windfalls. Individual income taxes, sales taxes and corporate taxes are all posting at robust levels, with the higher tax receipts expected to continue.

Minnesota Management and Budget Commissioner Jim Schowalter said the economy is learning to adapt to the ongoing pandemic, but noted that the surplus is "out of the ordinary even in these extraordinary times." The state's fiscal position, he said, is strong enough that "we have the opportunity to take actions unimaginable last year."

The question, as always, is which actions?

Democratic Gov. Tim Walz has said the funds could be used to provide ongoing paid family and medical leave, to boost child care, to improve health care and to lower energy costs, which are expected to take a heavy toll on Minnesotans this winter.

Predictably, Republicans have a different view. Senate Majority Leader Jeremy Miller said Republicans will focus on tax relief across the state.

We'd like to focus on that last part. There are a couple of easy compromises that legislators can tackle right off the bat when they reconvene in January.

First on the list should be the too-long-delayed $250 million in "hero pay" for frontline, essential workers who risked so much during the darkest days of the pandemic.

Democrats wanted bonuses of several hundred dollars or more to go to more to a broad base that would have included workers in health care, child care, schools, airports, groceries, courts and others. Republicans pushed for larger bonuses of more than $1,000, but limited to a smaller pool of mostly health workers, including those in hospitals, clinics and nursing homes, first responders and others.

There is now ample funding to offer a meaningful bonus to a broader number of Minnesotans who provided vital services during the days when there were neither vaccines nor treatment. Coming together on this would help establish a pattern of legislative give-and-take that will be necessary to a sensible apportionment of the broader surplus.

Both sides already have mentioned proposals with substantial merit. Inflation, while falling far short of the old days of double-digit rises during the 1970s, in November reached an uncomfortable 6.8% rise over the previous year. That's no cause for panic, but it's enough for Minnesotans to feel a distinct pinch at the gas pump and grocery store. Its impact always falls hardest on those with the fewest resources.