Gov. Tim Walz proposes boost in education spending, tax credits for Minnesota families

Minnesota families with children could see thousands of dollars in tax breaks and school funding would climb under a spending plan Gov. Tim Walz announced Tuesday.

The DFL governor's proposal is a $5.2 billion piece of his two-year budget that will be fully revealed next week. He called for historic spending on schools, including a 4% increase in the basic amount the state spends on each student, more money for special education, mental health and free breakfast and lunch for all students.

"This budget will tackle and eliminate child poverty, put money into families' pockets and fund our schools. We know a world-class education is the greatest pathway to expanded economic opportunity," Walz said as he put forth the plan at Adams Spanish Immersion School in St. Paul.

Walz must negotiate with leaders of the Democratic-controlled House and Senate to reach a final state spending and tax plan for the next two years. DFL legislators have offered similar ideas, although the scope of some plans differ.

One of the biggest pieces of the governor's family and children-focused budget is an expansion of the state's child and dependent care tax credit, which his administration said would help about 100,000 households with child-care costs. Families that earn less than $200,000 could get up to $4,000 if they have one child, $8,000 for two children and $10,500 if they have three kids.

On top of the child-care credit, he is pushing for a child tax credit for lower-income Minnesotans, which could give families $1,000 per child, up to $3,000.

Increased family stability from state tax credits leads to improvements in test scores, school attendance, high school graduation rates and college enrollment, Lt. Gov. Peggy Flanagan said.

"In short, when we increase family income we improve family outcomes," she said.

Democrats who control the House and Senate have also said education and supporting families are top priorities. Walz is a former high school social studies teacher and "we think a lot alike," said retired teacher Sen. Mary Kunesh, DFL-New Brighton, at a Tuesday news conference with legislators, many of them former educators.

Kunesh is pushing to spend about $500 million in one-time cash this school year to help with special education, school meals, bus services and English language learning expenses.

"All of those aspects are one of the priorities of the governor as well," she said. "How we sort it out at the end of the day will be determined, but I would like to see this done and done quickly."

In addition to the fast cash infusion, legislators are also developing education funding plans for the next two years. They want to spend more than what Walz proposed for special education and English learners. Kunesh said they also support implementing automatic education funding increases tied to inflation, something Walz wants to start in 2026.

State leaders expect to have a record-breaking $17.6 billion budget surplus to help them achieve their goals, although they have often noted the risk in using one-time money to set up programs that require ongoing spending. Budget officials will update the surplus estimate in February, offering a better picture of just how much there is to spend.

While Walz's tax credit proposals were not immediately met with criticism, Republicans decried other pieces of the plan. Sen. Jason Rarick, the GOP lead in the Senate Education Finance Committee, noted there is already funding available for families who need help paying for lunch and said linking school spending to inflation will lead to tax hikes.

The idea that brought the most ire from House and Senate Republicans was for a state government reorganization, which Rarick said in a statement would lead to a "guaranteed explosion in spending."

Walz wants to create a new state agency called the Department of Children, Youth, and Families, which would take over some work now handled by the education, human services and corrections agencies.

The new department idea harkens back to the 1995 creation of a Children, Families, and Learning Department under Republican Gov. Arne Carlson, who merged the work of various agencies with a similar goal of addressing "the needs of the total child." Eight years later, GOP Gov. Tim Pawlenty renamed it the Department of Education in what he described at the time as an effort to get back to the "core mission" of educating children.

While Carlson's department merger included education, Walz's proposal would not.

Walz's hope for a new agency would be part of broader state government change. A Walz spokesman said consideration is being given to splitting the work of the sprawling Department of Human Services into three agencies.

"We have a state agency that's responsible for some of our most dangerous predatory offenders ... [that's] also responsible for our children and their day care," Walz said. "It makes no sense."