Dayton: If budget surplus holds, I want to cut taxes

Baird Helgeson and Rachel E. Stassen-Berger

Minnesota's rebounding economy has brought the state a $1.08 billion surplus for the remainder of the two year budget cycle, according to a new state economic forecast.

That's good news for state leaders, who had pinned their hopes on the state steadily pulling itself out of the worst financial downturn since the Great Depression.

Gov. Mark Dayton said that he will not make any final decisions until he sees an updated forecast next year but if the state has extra money, he wants to cut new business to business taxes and give the middle class a tax break.

Some of the money is already out the door. The first $246 million must be used to complete repayment of the K-12 school property tax recognition shift. Additionally, $15 million will be transferred to the state airports fund, restoring money originally borrowed in 2008. This forecast completes repayment of all accounting shifts from prior budget solutions. That leaves a bottom line surplus of $825 million, budget officials said.

House Speaker Paul Thissen, asked about Dayton's idea of tax cuts if the surplus holds, says "we have to look at the whole totality" of the choices in front of them.Thissen, DFL-Minneapolis, said the DFL controlled House will consider the tax cut proposals but did not immediately embrace the idea.

"What's going to be better for growing Minnesota's middle class," Thissen said.

Senate Deputy Majority Leader Katie Sieben, DFL-Newport, said "it's too early to say" whether the DFL Senate would support ending the business-to-business taxes as Dayton proposed.

Senate Minority Leader David Hann, R-Eden Prairie, said that if Dayton follows through on the idea of tax cuts he would find a willing partner in the Senate Republicans.

Minnesota Management and Budget Commissioner Jim Schowalter said the forecast highlights the state's recovery compared to the rest of the nation. On the national level, economists are seeing slower growth than expected and more uncertainty caused by continued political budget and spending showdowns.

Minnesota is "one of the leading states in the country in terms of economic performance," Schowalter said.

Dayton says he would only follow through with his tax cut proposal if the state has a surplus in the forecast that will come out in February. Budget forecasts tend to shift significantly between those two economic predictions. (See history of those shifts here.)