State faces expected surplus, of both money and ways to spend it

The Capitol, St. Paul
Minnesota Management and Budget officials will release a forecast Wednesday that gives state leaders an idea of how much they'll have to work with next year.
Jeffrey Thompson | MPR News file

With interest groups already lining up for a share of an expected surplus, Gov. Mark Dayton and state lawmakers find out Thursday morning how much extra money they'll have available next year.

Minnesota Management and Budget officials are scheduled to release their latest economic forecast, a twice-a-year report on state revenues and expenditures. Their forecast will set the stage for potential budget adjustments in the 2016 session.

Most signs point to another budget surplus.

Groups that help care for elderly and disabled people in home- and community-based settings want a $90 million state funding increase next year. Pam Gonnella of Eagan, co-chair of the Best Life Alliance, said during a news conference this week that the money is needed to address a shortage of workers.

"Funding for the home- and community-based services must be a funding priority in 2016," she said.

The same day, another group was making the case for $600 million in new spending for roads and bridges. Margaret Donahoe of the Minnesota Transportation Alliance said a funding increase that includes some surplus money would help boost the state economy.

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"There is an impact, a direct link between having that infrastructure available and attracting businesses, creating more jobs, creating more economic opportunity," she said.

There's already money on hand. Lawmakers left nearly $900 million unspent last spring when they failed to reach a deal on tax cuts or transportation funding. Those issues are expected to get another look next year.

And recent MMB updates have shown revenues running ahead of expectations.

But Dayton doesn't like to speculate about economic forecasts. He said this week that he's waiting until he sees the numbers.

"Obviously we're already starting with a healthy bottom line, $863 million," he said. "So I expect it will add to that, but I don't know how much."

If there's another surplus, Dayton said, he will push again for universal preschool funding. But given the session's late start on March 8, the governor said he won't be in a rush to start working on specific spending proposals.

"We've got another forecast before the session begins. There will be a lot of ideas out there," Dayton said. "But I think it will be premature to make any real hard-and-fast decisions until the end-of-February forecast."

State law requires that a third of any surplus go to the state budget reserve.

Republican House Speaker Kurt Daudt is expecting a surplus. He's also getting an early start on taking credit for it.

"I'll remind everybody when we do the forecast that Democrats wanted to spend all of that money," he said. "It was the fiscal restraint of Republicans holding them back, the reason we have that money there, and the reason we will be putting more money into our reserves."

House Republicans will push hard next year for tax cuts. Last session, they passed a $2 billion package, while Senate Democrats came in at less than $500 million. Daudt said a budget surplus highlights the need for significant tax relief.

"When Minnesotans see that government has a surplus ... I think a lot of Minnesotans think that, well, that means we're collecting too much money from Minnesotans," he said. "So I think we owe it to them to give some of that money back."

Heading into an election year, Democrats want to cut taxes too. DFL Senate Majority Leader Tom Bakk said he expects next session's tax-bill negotiations to simply pick up where they left off last spring.

"When you have a surplus like we're running now, there's an opportunity to spend some of that money on tax relief, specifically in the property tax area," Bakk said.

Lawmakers from both parties are expected to expand on their ideas once state finance officials reveal how big the surplus will be.