Revenue chief warns budget cuts could slow tax returns

Cuts proposed for the Minnesota Department of Revenue in House and Senate GOP budget plans could prompt tax refunds to be delayed by "months" in future years, the department's top official warned last week.

Revenue chief Cynthia Bauerly criticized the plans passed in both chambers of the Legislature, saying that they'd force her department to cut up to 200 workers and make it harder for the state to collect taxes and fight tax fraud.

DFL Gov. Mark Dayton's budget plan for the next two years calls for a $20 million boost for the Department of Revenue from its current funding level. But Republicans, aiming to cut costs from what they see as a bloated department budget, would make significant cuts: a $12 million drop from current funding in the House bill, and an $11 million decrease in the Senate bill.

Bauerly said the GOP proposals would restrict her department's ability to keep up with demand for faster service from a growing population.

"We are hearing from taxpayers that they want refunds faster … there is a growing demand for customer services, and unfortunately these bills would mean a reduction in those services," she said.

Bauerly took particular issue with the House budget, which also mandates that the state create a free online filing system for tax returns by 2018 — something the commissioner estimates will cost more than $22 million.

But Republicans, including Rep. Sarah Anderson, R-Plymouth, disagree with those calculations. Anderson, the chairwoman of the House State Government Finance Committee, said the free filing system plan is modeled on one used in California, where the state "did not spend a single penny on it."

Anderson said the Department of Revenue budget has grown by about $30 million in the three budget cycles. Under Dayton's plan, the budget would grow by 12 percent over the current two-year cycle. The current biennial budget provides about $303 million for the department. Anderson said Bauerly's concerns amounted to "Chicken Little crying that the sky is falling."

"I think it's a little overly dramatic, and what she's saying is not truly the actual result of these reductions, which are minimal, if you consider that her budget has grown by $30 million in the last six years," she said.

Bauerly said things are running smoothly in the current tax season. By April 10, about a week before the tax-filing deadline, her department had processed 88 percent of the approximately 2 million returns already filed.

Erin Golden • 612-673-4790 erin.golden@startribune.com Twitter: @golden_erin