Gov. Tim Walz proposes bigger rebate checks as surplus grows

Gov. Tim Walz on Thursday called for spending more of the state's record-breaking projected budget surplus on public health, a financial boost for some retirees and bigger tax rebate checks for millions of Minnesotans.

State leaders found out last month that they had an estimated surplus of nearly $9.3 billion that they could use in the current legislative session, a $1.5 billion jump from the previous forecast.

"We're seeing our economy, even at a time of turmoil, being resilient. One of the best things we can do for that economy and for families is put money into their pockets right now," the DFL governor said as he pitched boosting the sum of his suggested "Walz checks" in a revised supplemental budget proposal.

Before the surplus grew, Walz proposed $175 checks for individuals and $350 for married couples. On Thursday, he said he would bump that up to $500 for single tax filers earning up to $164,400 and $1,000 for couples making up to $273,470.

Republicans, who control the Senate, said Minnesota has been over-collecting tax money as people are struggling with inflation and high gas and grocery costs. Instead of rebate checks, GOP legislators are pushing for permanent tax cuts, including cutting Minnesota's first-tier income tax rate and eliminating taxes on Social Security.

"The best thing we can do right now in the Legislature is give Minnesotans relief with permanent, ongoing tax relief, so it's not just one time," Senate Majority Leader Jeremy Miller, R-Winona, said after Walz announced his updated budget.

Earlier this year, Walz laid out a detailed vision for the bulk of the surplus dollars, including increased education spending and expanded tax cuts for people who have kids in child care or elementary through high school.

Some of the big-ticket additions Thursday to that plan are $73 million to ensure a 2.5% cost of living increase for retirees on Minnesota public pension plans next year, an additional $23.5 million a year in public health funding, $20 million for emergency shelter services and $20 million for a Main Street Economic Revitalization program.

Other new items in his proposal for the current two-year budget cycle, which ends June 30, 2023, include spending more than $9 million on cybersecurity protections and almost $14 million to replace the State Patrol's helicopter, which Walz said is outdated. "This air cover is a really effective way to make pursuits safer," he said, and also is used to respond to wildfires.

The governor and Lt. Gov. Peggy Flanagan unveiled their new spending ideas while standing in front of a gas pump outside a Holiday gas station in New Hope. Some House Democrats have been calling for a summertime gas tax holiday, which would eliminate the state's tax of 28.5 cents per gallon from Memorial Day to Labor Day.

While Walz didn't propose a summer gas tax holiday, he said if the Legislature passed a bill coupling that with the rebate checks, "I would certainly sign it."

Walz and legislators passed a roughly $52 billion two-year state budget last year and don't need to approve a supplemental budget this year.

This week at the Capitol, there was little indication that state officials would be able to break through partisan divides in the coming months to agree on tax and spending measures.

They blew past a contested Tuesday deadline to replenish the state's depleted unemployment insurance trust fund and repay the federal government for helping cover unemployment benefits during the pandemic. Democrats wanted action on the trust fund to be coupled with $1 billion checks for front-line workers, while Republicans disagreed with combining the two.

Miller said Thursday he is open to spending $250 million on front-line workers, the amount that legislators agreed to last year.

"We will consider any proposals to put more money back in people's pockets," Miller said, but repeated that Senate GOPers believe permanent tax relief is better than one-time checks.

While state leaders have big hopes for the forecasted surplus, budget officials put out a report this week that emphasized the nearly $9.3 billion sum is not a guarantee.

Minnesota is expected to bring in about $57.3 billion in revenue over the two-year budget cycle, officials wrote. But that is an estimate, and the recent years have been highly unpredictable.

The state's Revenue Forecast Uncertainty Report uses the accuracy of past forecasts as a guide. It said if this forecast is in line with previous ones, the total revenue outcome should be within a range of $1.57 billion more or less than projected.