Partisan divide grows over how to use state surplus

With two months left in the legislative session, Democrats who control the Minnesota Senate and Republicans who control the House are starting to fight over spending and taxes.

The budget debate took center stage this week when the Republican Party of Minnesota launched a TV ad campaign telling Gov. Mark Dayton and lawmakers to return a $1.9 billion budget surplus to taxpayers.

Many Republican lawmakers agree. House Speaker Kurt Daudt of Crown said he's open to returning all of the surplus, and perhaps more, in the form of various tax cuts. Daudt also proposes more spending on transportation, education and nursing homes — an approach he said would require less spending elsewhere.

"There'd still be growth; it might be less growth than what was anticipated," Daudt said. "But remember, our constitution also says one Legislature can't bind the next. So what we all need to do is stop talking like the base is the expected level of spending. We really start with zero here in Minnesota and we'll build a budget from there. And that's what our committees are doing."

State Rep. Jim Knoblach, chair of the House Ways and Means Committee, said state spending has grown too much in the past few years and needs to be trimmed back. As an example, he cited the state Medical Assistance program, which pays for health care for people with low incomes.

No one should assume that programs are forever or that funding is on autopilot, said Knoblach, R-St. Cloud.

"We're looking at all programs," he said. "And in some areas we will be making some cutbacks in programs that we think aren't as effective as they should be."

Senate Democrats have their own ideas for spending surplus money, most related to education. They're also talking about tax relief. But Senate Majority Leader Tom Bakk said tax cuts won't come at the expense of other budget areas.

"Speaker Daudt hasn't gone through that process, yet," said Bakk, DFL-Cook. "But he will find out, as their committees start to work through all of the state departments. Saying you want to cut things is a lot easier than actually doing it."

Bakk said Senate Democrats will have a broad outline later this month for proposed tax relief, proposed spending and the amount they want to leave in reserve. He wants a cushion similar to the $600 million reserve they left two years ago.

Bakk said after a decade of managing budget deficits, he hopes other lawmakers will share his cautious approach.

"It's just a matter of, I think, educating of what some of the risks are about overcommitting when you have a budget surplus," he said. "I would argue giving all the money back in the form of tax cuts is overcommitting and potentially putting the state's fiscal house in jeopardy."

Democrats and Republicans also are at odds over transportation funding. Dayton and Senate DFL leaders are proposing a wholesale gas tax to pay for needed projects. House Republicans oppose any tax increases, and they plan to roll out an alternative approach next week.

So far, Dayton has offered the most budget details. He put out his initial $42 billion, two-year plan nearly two months ago and next week will announce revisions that reflect the latest economic forecast.

The governor already has said he'll propose additional spending on universal pre-kindergarten and higher education. His primary tax relief proposal is an expansion of child care tax credits.

Dayton urged House Republicans to move beyond promises and put out their own budget specifics.

"I think we're past the point in the session where rhetoric should be allowed to stand on its own," he said. "It's time for action."

MPR News' Tom Scheck contributed to this report.