Our viewpoint: Putting the state’s budget surplus into perspective

Minnesota’s politicians are embroiled in debate – what should we do with an extra billion dollars or two?

Granted, the problem of too much money is always better than the problem of not enough. Still, it’s time to rein in our leaders and add some practical observations.

First, the $1.9 billion budget surplus is a PROJECTED amount that will materialize over the next two fiscal budget years. There’s no safe or file cabinet in St. Paul bulging with cash.

Secondly, that $1.9 billion is based on a $42 billion budget. That’s about a 4.5 percent surplus – not a huge amount.

Our state’s budget reserve right now is $1.3 billion or 3.5 percent of our biennial budget. Minnesota Management and Budget recommends we increase that to just over 5 percent. That would require $700 million.

Finally, there is no guarantee our revenues will continue to grow as they have over the past couple of years. Is this surplus a sign of permanent growth? Or is it cyclical, and revenues will level off in the next year or two? Minnesota Management and Budget estimates growth will taper off starting in 2016.

The main reason the surplus exists is the strong job growth we’ve experienced. Minnesota is now at 3.7 percent unemployment. This is good news – our state certainly will be more robust when everyone who wants to work is working, and when those who were underemployed are making meaningful wages.

Our political leaders quickly fell into predictable camps. Gov. Dayton and DFLers have lots of ideas of how to spend the money: Education and transportation top the list, plus a myriad of other projects. Dayton’s most recent budget proposal suggests spending 80 percent of it, including major initiatives such as free pre-kindergarten for all four-year-olds.

Republicans started with the premise that some of the surplus – $200 million a year – should go to transportation improvements.

Within the past few weeks, a new chant has risen from many parts of the state: “Give the billions back, Minnesota!”

State House Speaker Kurt Daudt said he would support returning all of the extra money and would find the $200 million for transportation by cutting elsewhere in the state budget.

And in another tangent, Senate Majority Leader Tom Bakk says that we should take about $600 million to increase the state’s budget reserves.

The best answer lies solidly in the middle of these political stances.

The Legislature should take a portion of the surplus and build up our reserves, closer to the recommended 5 percent. This is just common sense – we have no guarantee how long our strong national and state economy will last.

Some of the surplus should be allocated to statewide needs. Let’s allocate a solid portion to transportation, improving roads, fixing deficient bridges and other vital statewide needs.

As we do so, we should acknowledge this still is not enough. Dayton says we need to spend $11 billion over the next 10 years to maintain and upgrade bridges, roads and highways throughout the state. The most recent Republican proposal offers $7 billion over 10 years, using bonding and realigning of existing funds. A long range solution to our transportation needs is essential, one that will require both parties work together and compromise.

We should consider some of the governor’s best proposals, ones that will benefit all corners of Minnesota: Expanding the state college grant program and either eliminating or reducing tuition at two-year colleges and technical schools. We also should agree that the new Child Protection Act should be fully funded, currently estimated to cost $52 million.

Dayton’s proposal to fund preschool for all four-year-olds is a bold plan – countless studies have shown that early childhood education pays off over a lifetime. Before moving ahead, however, major questions must be answered. Have the costs been fully and accurately explored? Will our school districts be able to accommodate preschool? Will taxpayers quickly be hit with building requests? Should dollars be concentrated in lower-income regions instead of throughout the state?

We also encourage Speaker Daudt and his fellow Republicans to continue to look for ways to cut spending. Every state program should justify its existence. Is it doing what was intended and is it still necessary?

Finally, let’s give some back. Both Republicans and Democrats have offered worthy ideas: Eliminate or reduce various taxes, increase the eligibility for the Child and Dependent Care Credit to benefit more middle class families, and pursue a Republican plan for a New Market Tax Credit to ecourage manufacturing in outstate Minnesota.

Let’s not fall victim to the “Jesse check” situation of the 1990s. Under Gov. Jesse Ventura, rebate checks were sent to most taxpayers in 1999, and income taxes were reduced. The rebates were shortsighted and the tax cuts were not sustainable in the long term. A few years later, Gov. Tim Pawlenty inherited a $4.3 billion deficit.

We urge our legislators to search for common ground on this challenging problem, and move toward the middle.

Let’s save a little, spend a little and give a little back. Common sense – not politics – should prevail.

– An opinion from the ECM Editorial Board

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