The political potency of a budget surplus

It can't have been easy for Gov. Tim Walz to build a state budget, given his background in the United States Congress.

Congress hasn't balanced a budget in nearly two decades, whereas Minnesota law requires Walz has to submit one as governor. And budget impresarios will be looking to see that his budget balances for the next four years — not just the next two — a customary practice instituted by former Gov. Arne Carlson in the 1990s.

Walz also made a lot of spending promises on the campaign trail: two years of free college, universal prekindergarten, smaller class sizes, more local government aid.

So it was a little surprising that Walz's budget, after he announced some revisions last week, retains $562 million in surplus.

Republicans argue the extra money should be returned to taxpayers. Setting aside the policy debate, I'd submit that running surpluses — as Minnesota DFL governors have done for years — is smart politics.

"It resonates with the public because everyone thinks they should build up some kind of cushion if they're able to, to protect from bad times," said state Sen. Richard Cohen, D-St. Paul.

As the party that wants an activist government, Democrats have the most to gain from building up public trust that comes from surpluses, strong bond ratings and other indications of sound fiscal practices.

Back to Walz: By all accounts, he quickly adjusted to the realities of being governor rather than one of 535 members of Congress who want every project in his or her district funded.

"When you're governor, you have to live with the effects," said Bob Hume, a longtime senior adviser to former Gov. Mark Dayton, whose budgets during his second term consistently showed large surpluses and built up more than $1.5 billion in budget reserves. "He has to go into his next budget, which is into re-election, and he's going to have things he wants to do in the future."

Hume cautioned that there are political costs to those surpluses: Influential interest groups want spending now, to heck with surpluses.

But another political advantage of fiscal probity comes during the inevitable downturn, which Republicans will likely use to pursue their goal of shrinking government.

"Having that money on the bottom line and holding on to a fiscally sound groundwork will pay huge dividends when the economy starts to turn," Hume said.