Walz budget is ambitious, pricey

Opinion editor's note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.

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Gov. Tim Walz has described his budget as transformational, holistic and long-range.

And it is all those things. The question is, can Minnesotans afford it?

Walz rightly wants to move the state beyond the crisis management of the last few years and end the intense gridlock in what was one of the nation's only divided state governments.

Now Minnesota has a DFL trifecta — governor, House and Senate. It also has one of the nation's largest projected surpluses, at more than $17 billion. But Walz and lawmakers must still think carefully about which investments to make and apply reasonable standards to what is sustainable and what taxpayers can bear.

The surplus indeed presents a once-in-a-generation opportunity to catch up on overdue investments in schools, health care and a host of items that can contribute to a more-robust future. Democrats have been lawmaking at breakneck speed, passing in weeks proposals that had been fought over for years — including bills on abortion-rights legislation, climate change, and driver's licenses for all.

Walz's budget would grow from $52 billion to $65 billion over the next two years — about a 25% increase. A little less than half of that is ongoing spending.

The package includes a rich $5 billion in tax relief, including child tax credits that Walz said would help reduce child poverty by 25%; reductions in Social Security taxes; and one-time $1,000 income-tax credits, or rebates, for individuals making up to $75,000 and $2,000 for couples earning up to $150,000, with additional credits for dependents.

Child tax credits phase out for households with more than $50,000 in income, but child care credits are available for households making up to $249,000. Legislators should take a hard look at whether that kind of logic holds. The rebates aside, ongoing cuts would permanently reduce state revenues.

Walz also calls for $1.5 billion in new taxes and fees: a payroll tax for paid family medical leave, a metrowide sales tax of an eighth of a cent for transit, and higher taxes on capital gains. Fees for parks, boating, fishing and vehicle license tabs would increase.

In an interview with an editorial writer, Walz said this "is a big package. I make no bones about it. You're not going to be very popular proposing new taxes, but what is the alternative to pay for these things?"

Walz said "creating the best state for children" also would make Minnesota more competitive. "It's about healthy starts, a healthy climate. We're looking a little more holistically here," he said.

He is right about competitiveness. Increasingly, Minnesota is a progressive island in the Midwest. "We are an aging population in a northern climate," he said. "We are going to have to work harder to compete." And yet, price must be a consideration.

For instance, Walz and legislators should think twice about fixing school spending to the rate of inflation and about a universal free school lunch program that would include the wealthiest families in the state.

A sales tax dedicated to transit would bring much-needed stability to a critical system. Still, the administration should be prepared with a detailed plan to restore public safety to mass transit. Otherwise, what sense is there to expanding a system shunned by those it intends to serve?

Jonathan Weinhaugen, president of the Minneapolis Regional Chamber of Commerce, told an editorial writer that there is much to like in the governor's budget but that he also has concerns.

The higher vehicle license tab and park fees Walz proposes are well-intentioned but are also regressive — falling hardest on working-class Minnesotans. And as other budget priorities are considered, we hope to see a more-defined emphasis on public safety to keep communities intact and revitalize downtowns, as well as a sustained focus on affordable housing.

House Speaker Melissa Hortman told an editorial writer that the governor's budget is a good first step, "but we need a lot more time to do a deep dive in each area." Aligned on basic values and a goal of "helping Minnesotans afford their lives," Hortman said lawmakers would benefit from hearing from Minnesotans. "We do learn things in testimony to make sure bills we're crafting will work," she said.

She said the more complex bills, such as paid family leave, "should go through all the necessary committees and then into conference. We want a bipartisan, bicameral group looking at final details."

That's a welcome change from a few leaders gathering privately to make critical decisions. Returning to a more-inclusive, open process should provide a bit of a brake and give lawmakers the time and space to consider what they're doing.