Dayton budget in questionPublished 11:19am Friday, March 1, 2013
A brighter state financial picture has given area legislators even more reason to believe that Gov. Mark Dayton’s budget goes overboard.
State officials announced Thursday that the projected budget deficit lawmakers must solve this session has shrunk to $627 million, down from the November estimate of $1.1 billion.
Given the chance, Republicans urged Democrats to abandon their proposals to increase taxes and spending. But Gov. Mark Dayton, a Democrat, wasn’t ready to back off any of his earlier plans.
“I think Governor Dayton’s plan goes way too far — with the updated revenue forecast it reduces the need for expanding taxes,” said Rep. Bud Nornes, R-Fergus Falls. “I don’t know anyone that would be exempt from paying additional taxes.”
Nornes said Dayton’s plan would raise taxes on “just about every you buy except for food,” and that is hard with costs going up for consumers.
“You would pay additional taxes everywhere you go, from your income tax preparer to getting your hair cut or car fixed. I am expecting a number of things to be revised in the Governor’s budget — I just didn’t find anything I could support there.”
After crafting a two-year budget based on the early forecast, Dayton said he was surprised to see a more than 40 percent reduction in the projected deficit. That’s a $463 million improvement. Dayton said he plans to release a revised budget proposal within a couple of weeks.
But he would not say if it might include any changes in his proposed expansion of the state sales tax or his income tax increase on the wealthiest Minnesotans.
Sen. Bill Ingebrigtson, R-Alexandria, says as far as he knows Dayton is not planning on dropping any of his proposals, and the excise expansion is not good for business.
“I know (Dayton has) heard from the business community what kind of harm that’s going to do- it’s very troublesome for business,” said Ingebrigtson, adding that since the Legislature is only two months into the longest part of their session, there is still a lot of negotiating to be done.
Rep. Jay McNamar, D- Elbow Lake, also had concerns with the Governor’s proposed sales tax increases.
“It will hurt small business,” McNamar said. “But the Governor’s budget is still being looked at and so is the budget for local government aid to cities. What the Governor has proposed is not necessarily what we are going to do — as the LCA is proposed right now, it might not be so good for small towns in Minnesota.”
Regarding increasing taxes for the wealthiest Minnesotans, Ingebrigtson noted that it is the platform that Dayton ran his campaign on.
“If you’re asking do I think it’s going to pass, yes I think its going to pass, I’m certainly not in favor of it, but he has the votes,” said Ingebrigtson, explaining that because of a federal tax increase, combined with the proposed state tax, the wealthiest Minnesotans and business owners would see an overall increase of about four percent.
McNamar said he feels everyone should pay their fair share of taxes.
“I support Governor Dayton’s position on that,” McNamar said.
“The increased tax would impact 272 families in Otter Tail County,” said Nornes. “They have worked hard, they didn’t win the lottery, and they create jobs. They feel like the government is treating them as second class citizens claiming they are not paying fair share and quite frankly I’m sick of it.”
“I don’t know what my other options are going to be,” Dayton said. “I’ll have to access and talk with others and see what we think will be most effective to continue the positive track that we’re on.”
Dayton made it clear he still wants to increase spending on education and other priority areas of the budget. He also announced two new spending proposals: an up-front tax exemption for businesses on equipment purchases and property tax credits for renters.
Senate Majority Leader Tom Bakk, DFL-Cook, said he plans to continue aiming for a significant tax overhaul this session to help stabilize the state economy and end the recent cycle of deficits.
“I do still think strongly that we have to go through this exercise of tax reform to position Minnesota better in the future,” Bakk said. “I strongly support having that conversation. I frankly don’t think this even slows that down.”
The new forecast also shows a projected positive balance of $295 million in the current biennium. Under law, $290 million of that money will go toward delivering some of the delayed payments to school districts that were part of previous budget deals.
That leaves $810 million that the state still owes schools.
“We put it in the state statute that and excess revenue has to go to K-12, and that will certainly help the schools out,” Ingebrigtson said. “The amount owed K-12 was $2.4 billion two years ago, and now its down to $801million. We asked him (Dayton) to finish paying off the rest, but he’s not willing to budge.”
Despite its overall good news, the forecast also showed that the electronic pull-tab money needed to pay the state share of a new Minnesota Vikings stadium is falling well short of expectations. Far fewer than expected sites are offering the machines and the ones that are in place are generating less money than projected. Dayton said the initial projections were considerably off, and now a correction is needed to make up the difference.
“We’re not at that point yet but there are fall back revenue sources for the stadium,” the governor said. “There’s surtax on the suites and another lottery game. So we’ll work with legislative leaders, hopefully on a bipartisan basis, and see what makes sense to do.”
Dayton, who said state officials will try to more quickly approve gaming locations, said he believes the revenue will be closer to projections by next year.
Though things are looking brighter for the state budget, McNamar is still cautious.
“We are still projecting a deficit and that is a concern for me,” McNamar said. “The economy is turning around, but it would be absolutely devastating if the automatic budget reduction on the federal level stops our recovery.”
McNamar concluded that there is still more work to be done investing in jobs and education.
“That is our future,” McNamar said.
MPR News and Journal reports