State surplus: Help rural Minnesota help itself
As As Minnesota legislators look to the start of the 2022 session Jan. 31, they face a divisive battle on what to do with a projected record $7.7 billion surplus. If future revenue projections are on target, that surplus could grow in the remaining 19 months of the current two-year state budget.
It represents an unexpected turnaround from the pessimistic budget planning that took place as the COVID-19 pandemic was expected to have long-lasting, devastating impacts on our economy. Last February, the state was expecting to see close to a $1.3 billion deficit as a new budget forecast was readied. Instead, it saw a $1.6 billion surplus. Now it is nearly five times larger.
We can expect a lot of heated political rhetoric on how to best use the state’s projected surplus. We can only hope members of the House and Senate, and Gov. Tim Walz, focus on the needs of Minnesota’s rural communities.
How could the state’s budget planning be so far off? Some are jumping to the conclusion that it was all generated by taxing people and businesses too much. While taxes may be high for the current economic climate, there are other significant reasons behind the surplus rising so rapidly.
Billions of dollars have flowed into Minnesota in the form of extended unemployment benefits and through the Paycheck Protection Program that allowed employers to retain employees and pay them with federal assistance. There was financial help with child care subsidies and the child tax credit to families. There was assistance for state Medicaid expenses.
According to the Pew Research Center, instead of Minnesota seeing a pandemic depression, its economy was juiced by the federal inflow of funds. Revenues were higher than they would have been in a year without COVID-19. A small amount of the projected surplus, $364 million or 4.7%, was due to state spending being less than projected.
All that federal cash found its way into the economy and was taxed, raising far more in revenues than expected.
The Minnesota Management and Budget office projects “that the state will remain in surplus for the next four years. Requiring out-years to be in balance is another way Minnesota keeps a check on unsustainable budgets,” MinnPost reported.
Another economic boost will be provided to the state in the coming years through the $1.2 trillion federal infrastructure bill into law by President Joe Biden. Minnesota’s share of those funds for roads, bridges, public transportation, and broadband expansion comes to close to $7 billion. It will infuse more cash and taxes into the state’s economy.
Under state law, part of the surplus must go to the state’s rainy day fund to secure its operations should there be an unexpected downturn in the economy. Minnesota’s rainy-day fund was replenished with $870 from the surplus raising it to $2.7 billion.
Help rural Minnesota help itself
So far, both Democrats and Republicans agree that some of the state surplus should be returned to taxpayers. Those rebates will help Minnesotans with the higher gas and heating bills they are seeing today.
Also, lawmakers should look for sources of government waste to ensure our taxpayer dollars are spent wisely. Wasting taxpayers’ dollars offends us all. Abuse of easily manipulated federal and state programs should be prosecuted.
Yes, give taxpayers rebates and root out waste, but handing out checks won’t solve our long-term rural Minnesota challenges. We need more of a “hand up” than a “hand out.” Help us to help ourselves and you will see growth in rural Minnesota. Handing out checks is a temporary feel-good gesture. It doesn’t address the long-term challenges we face in our struggle to attract residents and see our businesses grow.
If you are pro-business, you must also be for programs that facilitate growing the rural labor force. According to the Minnesota Department of Employment and Economic Development, more jobs are available today than people looking for work. Our need for employees is especially dire in rural Minnesota.
We desperately need state support for financing the construction of workforce housing. We have jobs, but they can’t find a place to live when people come here to work.
Legislators should finance programs that facilitate putting the people in rural Minnesota to work. That means assistance with child care affordability and availability. Such measures will also make rural Minnesota more attractive to young families.
For decades, rural Minnesota schools have operated on lean budgets that get continually cut due to declining enrollment as our population dwindles. Legislators should commit more funding to quality education in rural Minnesota. State support will take pressure off the need to raise additional levies to subsidize the cost of teaching our children.
Republicans want to see the state stop taxing Social Security benefits. They want to see the state’s taxes on individuals, property owners, and businesses reduced.
They support replenishing the state’s unemployment trust fund that was drained during the pandemic. Minnesota received $1billion from the federal government to subsidize its payments and must pay it back. If it doesn’t, employers will pay higher rates through their payrolls.
Democrats and Gov. Walz have tried to get legislation passed in recent sessions that provides funds for a paid family and medical leave program. Republicans, backed by businesses, have opposed the proposal. Democrats will bring this legislation back as a priority in the 2022 session.
Democrats also support more funding for education, support for child care programs, and tax relief limited to the middle class.
Republicans and Democrats had earlier allocated $250 million for frontline workers in the state’s fight against the COVID-19 pandemic. However, they have been stuck on how to allocate the funds. Adding to the base amount from the surplus could solve their disagreements.
Before getting overly optimistic about the size of the surplus, a few words of caution: That forecast doesn’t consider inflation on state spending.
In the 2022 session, we hope our rural Republicans and Democrats will focus on programs that will help rural Minnesota grow – housing, child care, and education.