Betting on a Balanced Budget

As we enter the stretch run of the 2015 legislative session and count the days to our May 18 scheduled adjournment date, there’s reason for hope — and concern.

After four months of committee hearings and floor debate, a strong state economic and budget forecast, and ongoing deliberations about a variety of topics ranging from transportation to education, health care to economic development, we’re approaching the final week of our official work in St Paul. Importantly, a deal may be within sight.

However, the Senate, House, and Governor remain significantly apart on a few key issues. What to do with the projected budget surplus? How best to pay for a sustainable and comprehensive transportation funding package? What about our ailing school budgets or pressure on local property tax payers? Or the future of MinnesotaCare, our state’s long-running program for working Minnesotans who lack health coverage?

While we work toward answers, the Senate has been consistent in its priorities: first and foremost, continue the responsible stewardship of our state budget. We took office facing $3 billion in deficit, shifts, and unaccounted-for inflation. We don’t want to make rash short-term decisions that jeopardize the state’s newfound budget stability. Rather, we recognize the combination of inflation and “one-time” funds reduces Minnesota’s projected $1.87 billion surplus dramatically. We’re not going to spend – or cut – money the state simply does not have.

Second, we want to strike the right balance between smart investments and targeted tax cuts. While calls to “give it all back” sound great and drive the House’s $2.2 billion in proposed tax cuts, the Senate budget devotes $250 million to shore up the state’s budget reserves and proposes nearly $500 million in targeted tax cuts, credits, and direct aid to our communities for property tax relief.

Importantly, the Senate budget also directs additional resources to our schools for early childhood education and school readiness, facility maintenance, and basic formula funding. These smart investments not only offer a strong return for our students, schools and state, they also serve to reduce the pressure on local property tax payers.

To be sure, the 2015 legislative session provides us with an opportunity to continue our recent budget success. It also given us an opportunity to address a growing long-term problem by negotiating a comprehensive transportation funding package.
Experts contend Minnesota underfunds its roads and bridges by as much as $1 billion annually. While it’s perfectly reasonable to tap some of the state’s surplus or one-time funds, this approach – at best — only addresses half the problem. And in the process, the shift would threaten to create an ongoing hole in our state general fund.

It’s clear that any long-term solution that doesn’t jeopardize our budget stability will require new revenue. The transportation proposal put forth by the Senate and Governor essentially calls for an increase in the gas tax – a constitutionally dedicated user fee for roads and bridges that can be easily adjusted on an annual basis depending upon the price at the pump.
Given the importance of transportation funding – for our economy and car maintenance alike – and the genuine interest among legislators in addressing the problem, it’s become the lynchpin in our budget talks. Once we determine if and how much of Minnesota’s one-time surplus or general funds will be devoted to transportation, we then can determine what other priorities such as additional tax cuts or education formula funding we can muster.

Given the growing challenges facing our schools, many of us would like to see a stronger effort to provide additional formula funding. Dedicated transportation funding outside the state general fund would free up more dollars for education, lead to more stable school budgets, and reduce pressure on our communities to come up with new revenues through property taxes.
Likewise, dedicated transportation funding would allow the legislature to advance novel reform proposals seeking to address the increased property tax burden facing agricultural land owners who’ve seen their land values soar, but commodity prices plummet. The same could be said for strategic investments in workforce housing, broadband deployment, or local pilot programs in early childhood education or telehealth.

This legislature has an opportunity to solve long-term problems and strike a reasonable balance between smart investments and targeted tax cuts. Let’s not gamble with this budget; let’s get it right.

Senator Matt Schmit
Matt Schmit is from Red Wing and represents District 21 in southeastern Minnesota. He is the vice chair of the Jobs, Agriculture and Rural Development Committee.

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