St. Paul -- Gov. Tim Pawlenty did an about-face this noon, saying he now leans toward turning part of a nearly $2.2 billion state budget surplus into rebates for Minnesotans.
On Tuesday, the governor said he did not back a rebate, but when he learned of the size of the surplus Wednesday -- nearly twice what many expected -- he changed. If he does back a rebate, Pawlenty said he prefers one based on property taxes.
State law requires the governor to propose a rebate, but lawmakers do not have to pass one and even the governor would not be forced to support one.
The nearly $2.2 billion Minnesota budget surplus is impressive, but state finance officials say it is not as rosy as it would appear.
State Finance Commissioner Peggy Ingison today announced the state is projected to have a surplus in the two-year budgeting period beginning July 1.
ADVERTISEMENT
"This is good news," she said.
However, the announcement also came with a warning that the economy is likely to slow down after in future years, which would mean less money for state policymakers to spend.
State Economist Tom Stinson said he worries that record corporate profits of recent years are about to decline. Projections for corporate income tax revenues nearly doubled in today's report over earlier estimates -- adding $305 million to the next budget.
Minnesota spends more than $30 billion in every two-year budget.
State officials and consultants use economic projections to figure out how much money will be available to legislators and the governor to spend.
Besides concerns about corporate profits, Stinson said a declining housing market could be a problem, not only for state revenues but also for workers in the state's forestry and lumber industries.
"We already have seen layoffs and we expect to see more," Stinson said, adding that more than 2,000 jobs have been lost in part due to fewer homes being built.
"We don't see any significant improvement soon," he said about the housing situation.
ADVERTISEMENT
Overall, Stinson said, "there is more money than there was last February (when the most recent budget forecast was released), but there is more risk as well."
State law requires that the surplus be made available for rebates to taxpayers, but legislators would have to specifically approve such rebates. Gov. Tim Pawlenty and many legislative leaders oppose rebates.
Ingison warned that eventually about half of the surplus will be needed to pay for expected inflation. And with a potential economic slowdown, policymakers should not plan to have the rest available beyond the next budget, she added.
Legislators return to session on Jan. 3 to begin their budget work. Pawlenty will have already completed much of his budget proposal by the time he is sworn in for a second term on Jan. 2
Even before the budget forecast was released this morning, groups were asking for a part of the money to pay for things ranging from lowering the estate tax to adding money to welfare programs.
