Minnesota Gov. Tim Walz has made it clear he wants to leverage the state’s historic $17.6 billion budget surplus to fulfill some of Democrats’ long-standing priorities.
The governor has already proposed roughly $12 billion in new spending — including tax rebates and credits, paid leave, education funding and economic programs — and he hasn’t released his full budget. It is expected to come Tuesday.
Walz and his fellow Democratic-Farmer-Labor Party members, who now have narrow control of the House and Senate, say they plan to use the state’s surplus to help lower- and middle-income families.
“What is the biggest problem we are currently fighting? I think it is this issue of persistent poverty,” Walz said Tuesday in response to a question from a student when he visited Adams Spanish Immersion Elementary School in St. Paul to discuss how his budget would benefit children and families.
“We have people who are homeless, we have people who are hungry, we have people who can’t get health care,” he said. “We think there’s the opportunity for everybody to succeed.”
Republicans, in the minority in both chambers, are focused on how to rein in Democrats’ spending plans, ensure better oversight of taxpayer money and permanently cut tax rates.
“The governor’s latest proposal only seeks to waste the surplus on reckless spending and growing government,” David Hann, chairman of the Minnesota GOP, said this week after Walz announced some of his budget priorities. “Our state deserves better than more reckless Democrat tax-and-spending sprees.”
A closer look
Here’s a closer look at what Walz has proposed so far, which includes about $7 billion in ongoing spending:
Tax rebates
Walz says his budget will include a rebate to taxpayers that will return some of the budget surplus. Last year, he proposed checks of $1,000 per taxpayer or $2,000 per family with income eligibility limits. The one-time cost of the rebates is about $4 billion.
Tax credits
This week, the governor detailed plans for new and expanded tax cuts to help parents afford child care and the other costs of raising kids.
Child care credits of $4,000 per child up to $10,500 would be available to families earning up to $200,000. A child tax credit of $1,000 per kid with a cap at $3,000 would be phased out for family incomes above $50,000.
Both child-related tax credits would reduce state tax revenues by about $1.65 billion annually.
Paid family and medical leave
About $667 million of one-time money from the surplus could be used to cover startup costs for a paid leave program that would provide up to 12 weeks of time off at a portion of a worker’s salary. A 0.7 percent payroll tax would cover ongoing costs and could be split between employers and workers.
The new tax would raise about $1 billion a year to pay benefits in a way similar to the state’s unemployment insurance. Roughly 300 new state employees would be needed to operate the program.
Education spending
Walz wants to increase schools’ per-pupil funding, currently about $7.4 billion a year, by 6 percent in his next budget, which would cost about $717 million. After that, the funding formula would be tied to inflation, long a wish of school leaders, with an estimated annual cost of about $740 million.
Districts would also receive a share of $750 million to reduce the cost of educating students with special needs and those learning English. Another $389 million would pay for universal school meals.
Schools would also see about $54 million to expand student access to counselors and mental health services. Additional funds would go to boost academic programs, college readiness and workforce programs.
Altogether, Walz has proposed more than $2 billion in new school spending in the coming budget.
Child care, preschool and other family proposals
Walz wants to create a new state Department of Children, Youth and Families that would oversee things like child care subsidies, preschool scholarships and home visits for new parents.
He hopes to expand access to child care by increasing what the state pays to help lower-income parents pay for care, simplifying licensing and growing the workforce.
There also would be an increase in early-learning scholarships and more money for college savings.
Altogether, Walz’s proposals for children and families not tied directly to K-12 schools is about $1.4 billion in added spending.
Economic programs
In addition to a paid leave program, Walz has proposed grants, credits and tax breaks to help grow Minnesota business and industry worth $454 million in the next two-year budget.
There’s also roughly $682 billion aimed at workforce programs to address employment gaps in key industries such as health care, long-term care and teaching.
Altogether, Walz has proposed about $1.4 billion in spending on businesses and workers.
Climate, soil, water and agriculture
The governor’s budget proposal includes a goal of transitioning Minnesota to entirely renewable energy by 2040. There’s also money for electric vehicle infrastructure and to better weatherize homes.
Walz also wants new money to improve soil and water quality and help farmers. The climate and agriculture piece of his budget is about $538 million.
What comes next?
Walz is expected to introduce another piece of his budget, focused on health care, on Monday. He will present the entire plan Tuesday — the first complete look at how the governor wants to use the state’s budget surplus.
Remember, of the $17.6 billion, about $12 billion is in the bank and is one-time money and an estimated $6 billion is expected to be collected over the next two years. After that, state officials estimate Minnesota will still see a tax revenue surplus of about $4 billion a year if there are no broad changes to tax rates.
House and Senate leaders will continue vetting their own budget proposals over the next few months. The state budget is due before the legislative session concludes at the end of May.
A lot could change between now and then; most notably, there’s another financial forecast due in February. But barring any unexpected changes, with Democrats’ trifecta of control over state government, Walz is likely to get a lot of what he wants in the next state budget.