Rebate, cash for projects take up bulk of state budget surplus

ST. PAUL (AP) — Out of the state’s $1.9 billion budget surplus, Minnesotans will receive $500 million in property tax rebates and another $400 million in permanent property tax reductions.
Of the remainder of the surplus, public works projects and education took home major shares. The education spending was particularly significant because it was a nonbudget year.
House Speaker Phil Carruthers, DFL-Brooklyn Center, said the surplus spending was balanced with tax cuts, reforms, investments in education and an agreement to set aside money for the future.
But House Minority Leader Steve Sviggum, R-Kenyon, wanted to send more back to taxpayers.
“We were able to at least push the Democrats to sending one half of the money back,” Sviggum said.
The two leaders’ comments are a preview of how the surplus decisions will play out in the fall election campaigns. All 134 House seats are up for election, and Gov. Arne Carlson is not seeking re-election.
The gubernatorial candidates will be asked how they would spend a future surplus.
The Legislature puts together the state’s two-year budget in odd-numbered years. In the off years, it spends through supplemental bills.
Out of this year’s surplus, lawmakers agreed to put nearly $500 million toward public works projects to pay cash rather than borrow, which Senate Majority Leader Roger Moe, DFL-Erskine, said would save money over the long haul.
Kindergarten through 12th-grade education will receive $124 million. That’s more than 10 times as much as schools received during the 1996 session, the previous nonbudget year session.
Carlson has signed the highest supplemental budget approved for higher education, $73 million.
Some of the higher education spending will be used to change how the state determines grants for students. In the calculations, a student’s responsibility for the cost of his or her education will drop from 50 percent to 47 percent.
The state’s budget reserve will be increased by $100 million, bringing it to $622 million, or slightly more than 5 percent of annual spending. The account exists as a cushion against an economic downturn.
Finance Commissioner Wayne Simoneau was extremely pleased with that decision.
“This is just part of … watching the horizon to see what’s going to happen,” Simoneau said. “I think future legislatures also will take a hint from this and say, Yeah, we really do need some kind of reserve.'”
In addition to spending the $1.9 billion, lawmakers agreed how to spend part of a future surplus, if there is one. They agreed that the first $200 million of any surplus in November would go into a tax reform account. Carlson wanted the money to be used as a down payment on income tax rate reductions.
The next $400 million of that surplus would go to pay cash for other projects rather than borrow.