With tax cut and public works spending talks stalled, the state's balance sheet is in good shape

Minnesotans may be frustrated with the gridlock in St. Paul, but the bean counters love it.

Although lawmakers passed a major tax cut bill, Gov. Mark Dayton vetoed it because he said there was a drafting error that would have cost $100 million, leaving interest groups like farmers and smokers disappointed they didn't get their levy breaks. The Legislature also finished its session without a major borrowing package for roads and infrastructure projects, as is customary during election years.

The resulting fiscal austerity has left the state's books in good shape.

That's probably why Myron Frans, the commissioner of Minnesota Management and Budget, sounded so chipper in a recent interview.

The failure to pass a public works bill was a missed opportunity to fix the state's aging infrastructure, he said. But still, "From a checkbook point of view, we're in a good position," he said.

Despite $172 million in new spending for the coming year — on items like prekindergarten, broadband for rural Minnesota, and programs to close economic disparities among the races — state coffers have $729 million surplus for the final year of the two-year budget cycle, with a projection of more than $1 billion for the next two-year budget cycle.

This may help explain Dayton's tough stance in current negotiations with House Republicans to finish the unfinished business: If the DFL wins the November election and takes control of the full Legislature, he will have a big pile of money to fund his priorities and seal his legacy on issues like education, clean water and transportation.

The vetoed tax cut package passed both chambers with large, bipartisan majorities. It would have cost the state $259 million in the first year and $544 million in future bienniums.

Forecasters have projected a state budget surplus six times in a row. Revenues are growing faster than expenses, Frans beamed, like a proud papa.

For Republicans, this is a sign that government is taking in too much money and should give it back to taxpayers, as they have argued since taking the House in 2014.

As for the future, Frans said much will depend on the performance of the economy. The key impediment to faster economic growth, Frans argued, is a lack of qualified workers due to the low unemployment rate. Which, he said, is a good reason to spend on education and training.

Republicans tend to disagree and say the problem is Minnesota's taxes and regulatory burden.