With massive surplus, Pawlenty backs off his no rebate rhetoric
St. Paul -- Rebate or no rebate? That's the $2.2 billion question. Whether to rebate part of the nearly $2.2 billion state budget surplus will be among the hot topics when Minnesota legislators return to St. Paul on Jan. 3. The surprisingly big s...
St. Paul -- Rebate or no rebate? That's the $2.2 billion question.
Whether to rebate part of the nearly $2.2 billion state budget surplus will be among the hot topics when Minnesota legislators return to St. Paul on Jan. 3. The surprisingly big surplus -- double what many observers expected -- brought on the question about whether to send taxpayers checks as happened during the administrations of Govs. Arne Carlson and Jesse Ventura. Gov. Tim Pawlenty, who begins his second term on Jan. 2, on Tuesday said he did not support a rebate.
However, he did not see the surplus amount until Wednesday morning; that's when he began leaning toward a rebate. Democrats, who will control both legislative bodies the next two years, are cooler to a rebate, but DFL leaders did not dismiss it. No state policymaker gave specifics about how he would deal with the surplus, but nearly everyone agreed property tax relief must be high on the agenda.
However, interest groups ranging from the state's largest businesses to welfare recipients had their ideas about what to do with the money, and were not shy about saying so in the hours after state officials announced the size of the surplus.
State Finance Commissioner Peggy Ingison said the state now expects $913 million more to be available in the current budget, which ends June 30, than previously forecast. And an additional $297 million is projected for the two-year budget beginning next July 1.
It has been five years since the state has seen such a big surplus.
Most of the added money is coming from increased individual and corporate income tax receipts. Lower-than-expected-spending freed up a bit of money.
However, Ingison warned that the surplus is not as good as it may sound.
For one thing, nearly $1 billion is what state officials call one-time money, meaning it will not be available in coming years. Also, much of the rest of the money would be needed to increase the next budget to pay for inflation and cost-of-living raises if lawmakers do not make cuts elsewhere.
On top of that, the state's economy could go south, leaving lower revenues for the state.
Ingison said Pawlenty and legislators need to approach the surplus with caution and concern, and look to increasing the amount of state reserves instead of spending all the money.
Pawlenty called the surplus "great news for the state of Minnesota" but, like legislative leaders, echoed Ingison's concerns.
"We need to continue to live within our means," the Republican governor said.
The surplus triggers a legal requirement that Pawlenty deliver a proposal to rebate part of the surplus to taxpayers.
While he would not commit to supporting a rebate, the governor on Wednesday did indicate he leans that way.
Sen. Tom Bakk, a Cook Democrat who will be chairman of a property tax committee, said he hopes the new money will allow permanent property tax cuts.
House GOP leader Marty Seifert of Marshall said his colleagues would favor a rebate: "We will be looking at taxpayers first, special interests second."
All policymakers said they would be careful about spending money, but that the surplus was good news for many areas.
"This is good news for our schools, our health care system, and, more than anything, property taxpayers," Rep. Al Juhnke, DFL-Willmar, said. "There's reason to be cautious in the out years, but this year's projected surplus should allow us to enact meaningful property tax relief and begin to address the challenges facing our schools and health care system."