Projected surplus sets up fight over gas tax, health care

The projection by finance officials that Minnesota has a $1.5 billion budget surplus led legislative Republicans to say Thursday that DFL proposals to raise the gas tax should now be off the table. But Democrats, including Gov.-elect Tim Walz, aren't budging.

Walz will use this forecast to assemble his first two-year budget proposal, which is due in February. In responding to the surplus news Thursday, he was vague on what might be in that spending plan. But he made it clear that the gas tax increase he campaigned on to pay for transportation projects was still in the mix.

"This is the type of infrastructure investment and planning that should extend beyond administrations to get this right," he said.

Walz said "generational investments" are needed in education, health care and transportation. He said the people he talked to on his recent listening tour agree. Walz said one-time spending of surplus money isn't enough.

"We are not laying down red lines in the sand. What we're saying is that Minnesotans were very clear throughout this tour that infrastructure and infrastructure investment was a major priority for them," he said. "Long-term investments are going to have to make that happen."

Republicans disagree. They say there's plenty of money for transportation without raising taxes.

Senate Majority Leader Paul Gazelka, R-Nisswa, said the surplus shows that state government can live within its current resources. He said this is not the time to be considering a gas tax increase.

"I'm thinking about where the people are," he said. "We care about what the people have to pay. And if they have to pay more at the pump, we don't want that to happen. Now that we have this kind of surplus, I think we can navigate around that."

Gazelka said instead of raising taxes the Legislature should consider cutting them. He mentioned a tax break on child care expenses and social security income, as well as a reduction for all tax brackets.

"There's going to be much more openness for that than there was prior to this forecast," he said.

The incoming new DFL majority in the Minnesota House is urging fiscal restraint.

House Speaker-designate Melissa Hortman, DFL-Brooklyn Park, said the projected surplus is considerably smaller than it appears once inflation is included. The potential return of red ink in future budget cycles makes it irresponsible to talk about a lot of new spending and tax cuts, she said.

Hortman said a gas tax increase is a fair discussion to have. But she said the highest priorities for the session are education funding and health care access.

"We are closer to our next recession than we are far from the last one," she said. "We have to be cautious as policymakers to ensure that we leave the state in good fiscal order, not only through this next biennium, but as we head to potentially tougher waters in the future."