Minnesota's $1.9B budget surplus – here's what people want to do with it

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Minnesota is projecting a budget surplus of almost $1.9 billion for the coming two years.

Minnesota Management and Budget's November forecast projects an extra $1.871 billion more in state coffers than expected, meaning lawmakers are likely to once again have extra cash to consider using during the upcoming legislative session.

Around $665 million of this will be allocated to budget reserves and environmental funds, following state law enacted recently that requires a third of any surplus to be saved, in order to protect the state against deficits in the future.

That will leave about $1.2 billion for the legislators to spend on other areas they feel need extra funding, though this could rise by the time the budget office releases its final forecast in February.

Here's what Minnesota's lawmakers and officials have been saying about how they want to spend it (comments will be added as they're made).

Gov. Mark Dayton

One of the telling comments from the Governor on Thursday was when he described his previously mooted gas tax increase to fund transportation projects as being "dead" as a result of the surplus.

He is keen to spend some of the surplus one improving the state's roads and bridges (in which he's in agreement with GOP leaders) as well as saying he'd be willing to consider a middle-class tax cut.

He also intends to revisit his desire to provide more funding to pre-K education, that prove a major bone of contention during the negotiations earlier this year. He also mentioned spending $100 million to invest in statewide broadband.

The Minnesota GOP

With GOP and DFL officials unable to reach a deal on tax cuts and long-term transportation plans in the last legislative session, Republicans are already pushing for much of the surplus to be dedicated to these two areas.

House Leader Kurt Daudt signaled he will make these two issues a priority when lawmakers return for the next legislative session, scheduled to start March 8.

The Minnesota DFL

Minnesota House minority leader Rep. Paul Thissen urged caution on tax cut plans, arguing they should benefit "ordinary Minnesotans" and argued his GOP opponents only intend to favor "the rich."

He also suggested other areas where the money should be spent, some of which are similar to calls made by Gov. Dayton and the House GOP.

Greater Minnesota officials

">In a statement, Le Sueur Mayor Robert Broder, who is also the president of the Coalition of Greater Minnesota Cities, says that legislators have "no excuses" not to increase the funding to local governments to help non-metro communities across the state.

"They need to finish this unfinished business and pass a modest increase in [Local Government Aid] funding," he said. "Lawmakers should not squander this historic opportunity – now is the time to invest in Minnesota communities and the result will be better roads, safer neighborhoods and stronger businesses."

How did we end up with a budget surplus again?

Last year the state had a final surplus $1.9 billion and discussions on how to spend it proved controversial, with a legislative special session required to avoid a government shutdown when GOP and DFL lawmakers couldn't reach an agreement in time.

The Associated Press reports much of the forecast 2016-17 surplus could be the result of the failure of said lawmakers to agree on funding packages for long-term transportation plan and tax cuts, which it says left $865 million of this year's budget unspent.

Aiding this leftover cash is higher than expected projections from the state's sales tax and corporate taxes, according to Minnesota Management and Budget's report, which is helping offset a lower than expected amount raised from individual income tax receipts.

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Savings meanwhile are being made within state departments, with Human Services expected to spend $416 million over the 2016-17 fiscal year, while lower health care rates and Medical Assistance program payments will cut costs further.

Looking ahead, Minnesota is expected to have strong budget growth going forward, with preliminary figures suggesting a surplus of just over $2 billion for the 2018-19 biennium.

But there are risks. Minnesota is nearing "its full employment potential" as job vacancies have soared to their highest level since 2001 at the same time as there being "weak growth in the labor market."

"This is impeding the state’s ability to increase employment," the MMB says, with the state's unemployment rate having hovered at around the 4 percent mark for several months now.

They also note that the state is facing challenges in its manufacturing, mining and agriculture industries, while the housing recovery has slowed because not enough new homes are being built.

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