Phillips: How would you spend your surplus?

By: 
David Phillips

What would you do if you found out you had an extra $1.33 billion? Would you spend it, invest it, save it for a rainy day — or do all three? Most of us would never dream of having to make this kind of decision, but, in a way, all of us in Minnesota did find out we had this amount of “extra” money last week.

At least that’s what Minnesota Management and Budget (MMB) announced in its November budget forecast. After fully funding state government for two years, there will be a $1.33 billion surplus available in the fiscal year 2020-21 biennium.

Of course, that money doesn’t actually flow directly back to the bank accounts of Minnesota residents for us to spend, invest or save. Instead, we have elected officials representing us who determine what happens to that surplus.

Those officials aren’t shy about telling us what they would like to do with the extra money. Our newspaper email inbox was full of ideas from a diverse group of people.

One use of the money had already been determined prior to the statement announcing the amount of the surplus. There was an automatic allocation of $284 million to the budget reserve account, bringing the reserve balance to its statutory target level of $2.36 billion.

As for the use of the remaining surplus, here are some of the ideas.

State Sen. Jeremy Miller (R-Winona), who was first elected in 2010 when Minnesota was facing a massive $6 billion budget deficit, said Senate Republicans should continue to focus on funding education and mental health services, addressing the opioid crisis, funding roads and bridges long-term, providing targeted tax relief, and additionally funding the border to border broadband program.

“But we still have a duty to be good stewards of the taxpayer’s dollars and hold government accountable for its mistakes,” he said. “We can’t let the good news of the surplus distract us from the places we have to improve. I have serious concerns about the significant waste and fraud at the Department of Human Services, and the Senate will continue to provide strong oversight and accountability to make sure that agency gets back on track.”

Senate Majority Leader Paul Gazelka (R-Nisswa) said that since state government fully funded its priorities last session, it’s time to give it back.

“Minnesota is just one of 13 states that still taxes Social Security income,” Gazelka continued. “We will look at fully exempting every senior citizen from paying taxes on their Social Security, providing relief for farmers through section 179, and income rate cuts for families. We also want to look at one-time options like: tab fee decreases, school safety improvements, cash for roads and bridges, and keep our borrowing through a bonding bill low in light of the extra cash on hand.”

House Minority Leader Kurt Daudt (R-Crown) advocates repealing the 1.8 percent provider tax for health care, which is estimated to cost $875 million for the rest of the biennium. This will reduce health care costs, he said.

However, House Majority Leader Ryan Winkler (DFL-Golden Valley) was much less rosy in his assessment of the forecast. He said that while the numbers were positive and show the economy is generating more revenue than expected, the state continues to deal with racial disparities, rising homelessness, along with unaffordable housing and health care.

Because the forecast does not factor inflation into its conclusions, Winkler said the surplus is not what it seems, and the future costs of providing the same level of services the state provides today will mean shortfalls in the years to come.

The Minnesota Chamber of Commerce also had recommendations on the surplus, which President Doug Loon said is a clear indication that more dollars need to remain in the pockets of families and businesses.

“Today’s forecast presents an opportunity for policymakers to enact reforms to best position Minnesota for a strong and growing economy,” he said. “According to the 2020 Minnesota Business Benchmarks report, uncompetitive taxes are hindering growth opportunities. Let’s finish an item from the 2019 session that received bipartisan support to encourage small businesses and farmers to invest and grow in their Minnesota operations by joining the majority of other states that have fully conformed to the federal income tax business expensing rules.”

Gov. Tim Walz said the people of Minnesota have themselves to thank for this good economic news —  “for living here, raising their families here, and contributing to the state’s economy.”

He said Minnesota’s economy is also working because state officials “have been disciplined, kept our eye on the long-term, and invested in the things that make our state grow.”

He added that Minnesota is in the best position possible to weather future economic uncertainties, but it must exercise caution to protect the state’s fiscal stability and budget for the next generation by protecting the state’s infrastructure and passing a robust bonding bill.

“And it means making intentional, strategic investments to ensure we are creating opportunity for all Minnesotans — especially those who feel left behind from the state’s strong economy. Whether that’s farmers who are struggling to make ends meet, neighbors who don’t have a place to sleep at night, or businesses who can’t find the workers they need,” he said.

He ended his statement with the analogy that Minnesotans who are heading out on the ice this winter to play hockey know you don’t go to where the puck is, you go to where the puck is going to be.

And, where the puck is going to be in this case isn’t obvious.

MMB Commissioner Myron Frans said that while the forecast is positive, there are still challenges ahead. He cautioned that lawmakers need to keep the budget reserve, capital investment and inflation in mind as they begin work in the next session, which will begin Feb. 11.

“This forecast is an indication of Minnesota’s strong economic fundamentals,” Frans said. “But I would not be a thoughtful budget commissioner if I failed to mention that we need to be careful in planning and our decision making to ensure that we maintain budget stability going forward.”

We’ve heard from state officials about the surplus, but they still need to take direction from their constituency.

So, what is your idea on the $1.33 billion surplus? It’s not every day we get to decide on what to do with an extra billion-plus. Make sure state officials get your input on what to do with “our” surplus.