Minn. House passes bill to tap reserves to pay back schools

By Jim Ragsdale

The House approved a Republican-backed measure to use state reserve funds to pay down debts to public schools following a debate that previewed some of the themes that may reappear in Legislative elections in November.

"When you have cash on hand, you pay your debts," said Rep. Pat Garofalo, R-Farmington, sponsor of the measure, which would take $430 million out of the state budget reserve and return it to schools. It passed on a 74-59 vote with largely Republican support.

Democrats called the strategy reckless financing that could force the state to take out short-term loans to meet its cash obligations. They offered amendments to close corporate tax loopholes and provide a regular source of revenue to pay down the school debt. The amendments were not voted on directly when Speaker Kurt Zellers, R-Maple Grove, ruled them to be not "germane" to the subject matter of Garofalo's bill.

"The dominant feature of the Republican majority for 16 months ... is all about protecting corporations," said House Minority Leader Paul Thissen, DFL-Minneapolis, referring the the time Republicans have been in control of the Legislature.

The vote and its lengthy debate had considerable political value to each side as the sort of action that makes for good campaign brochures. DFL Gov. Mark Dayton said he opposes the bill, making it unlikely it could win his signature. He has called it an attempt by Republicans to fix a problem they created -- the debts to schools -- before they face the voters.

Modest surpluses due to an improving economy and less demand for subsidized health care have allowed the state to replenish its cash-flow account ($350 million) and budget reserves (648 million), and to begin paying back schools. In order to make its books balance, the state shifted payments to schools; the debt now stands at about $2.4 billion.

But DFLers said it was a fiscally irresponsible move, and they offered amendments aimed at taxing corporations to provide a stream of revenue for paying down the shift. The DFL amendments focused on profits funneled through offshore "tax havens" where the corporations do no real business.

"We have a fundamental choice here," said Rep. Frank Hornstein, DFL-Minneapolis, "Of corporate tax loopholes overseas versus funding our kids and funding our schools." Rep. David Dill, DFL-Crane Lake, said draining reserves "goes against everything I've ever been taught" in financial planning.

"We wouldn't do it at home," he said. "We wouldn't do it in our business. And we shouldn't do it here."

Republicans argued that the state's recovery is dependent on an improving business climate. Rep. Keith Downey, R-Edina, said the DFL amendment would "kick our best businesses in the teeth." Rep. Sarah Anderson, R-Plymouth, said: "We can't have a quality education in this state if we do not have a strong economy." She said the DFL bill sent a message to businesses that "we don't want you here in Minnesota."

The two sides offered competing statistics to show that Minnesota ranks low in both teacher-student ratio and in perceptions of its business climate. Democrats focused on the education statistic, while Republicans cited the business climate issue.