Reaction mixed from west central Minnesota lawmakers to revenue projection
WILLMAR — Minnesota’s revenue forecast shows a glass that could be viewed as both half empty and half full.
During a briefing Wednesday, state officials from the Office of Management and Budget said surplus revenue means the state can make a $1.3 billion payment to schools to repay part of the $2.4 billion shift in education funding.
But that still leaves a budget deficit of about $1.1 billion still owed to K-12 schools.
State budgets in recent years have been balanced in part by delaying payments to schools.
Rep. Paul Anderson, R-Starbuck, said the forecast was proof that action led by Republicans to “scale back spending” worked.
Anderson said the revenue forecast gave him “kind of satisfaction or vindication” on past legislative action that was taken to address a deficit that had been nudging $5 billion.
Fellow GOP Rep. Dean Urdahl of Grove City was also pleased with the revenue figures. “More money coming in indicates improvement in the economy and tax collections,” said Urdahl.
DFL lawmakers saw things a little differently.
Rep. Andrew Falk, DFL-Murdock, said the forecast confirms that “using shifts and gimmicks to balance the 2011 budget was ill-advised and worsened the state’s long-term budget problems.”
Besides the school funding shift, the state also borrowed one-time money from tobacco settlement bonds. When $900 million in inflation is factored into the shortfall, the state faces a $3 billion deficit, according to Falk.
Using one-time revenues to balance the budget in 2011 left a “structural deficit” that still needs to be fixed, said Sen. Lyle Koenen, DFL-Clara City.
“We’re not celebrating some big recovery, because that’s not the case,” said Koenen, adding that there needs to be true tax reform in the state to address long-term budget issues — reforms that don’t rely on one-time fixes. Koenen has been appointed to the Senate tax committee as well as a new “tax reform” committee.
There may be support for tax reform from both sides of the aisle.
Urdahl acknowledged the state has exhausted budget “gimmicks” and the Legislature needs to “give a good hard look at how to fix the structural problems” that could involve tax reform.
Urdahl said, however, he’s not persuaded that the state needs to raise taxes and said the state should first look at “revenue-enhancing remedies,” like continuing to improve the state’s business climate.
But Urdahl said some taxes may have to go up and others down.
Koenen said the Legislature will “definitely” look at Gov. Mark Dayton’s proposal to increase taxes on wealthy individuals and may even consider broadening the sales tax to other goods or services. But he said there would likely be trade-offs, like lowering the overall sales tax rate or giving tax breaks to businesses that create new jobs.
Anderson said he would support reforming property taxes to make that system more fair but said income taxes should be left alone.
Anderson said he has not signed the “no new tax” pledge and would consider supporting a new tax on Internet sales. And although he would support increased spending for some areas, such as nursing homes, he still believes solving the state’s budget problem has more to do with decreasing spending than increasing revenues.
“We’ve got work to do,” said Falk, who favors a “balanced approach” of spending cuts and increased revenues. “There will be some tax reform done,” he said, acknowledging that it will be challenging to get lawmakers on the same page.
While the state’s economy is slowly recovering from the recession, state officials said that could be put into a tailspin if Congress does not reach a budget agreement and sends the Minnesota and the rest of the country over the fiscal cliff.
If that happens, Minnesota’s next financial forecast in February will look a whole lot worse.
“We’ll be plunged into a recession,” said Urdahl.
It might be delayed until the last hour, but Anderson and Koenen said they are optimistic an agreement will be reached in Washington.
“I think Congress and the administration need to save face with the American people and get something done,” said Anderson.
Meanwhile, schools should expect to see a check arrive by the end of next week with a payment from the state. Many schools had to borrow money from banks to pay their bills because of the delay in state aid.