Walz tweaks budget plan to reflect slower economic growth

Published 8:04 pm Friday, March 22, 2019

ST. PAUL — Gov. Tim Walz announced a series of tweaks to his budget proposal Friday to reflect projected slower economic growth but stood by his tax plans, which have aroused strong Republican opposition.

The Democratic governor said at a news conference that his administration took a hard look at his proposed two-year budget for 2020-21 and scaled back some proposals while sparing his priority areas like education and health care.

Walz unveiled his initial budget proposal a month ago, which was based on earlier projections of a $1.5 billion surplus. It included what he called a “fiscally cautious and prudent” cushion of $789 million in anticipation of a weaker economic forecast in late February that cut the surplus to $1 billion. That lower projection prompted him to order changes to preserve a cushion of $562 million and leave the state in a “fiscally solid place” heading into the 2022-23 budget, he said.

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“The revised budget is balanced, it is fiscally sound,” Management and Budget Commissioner Myron Frans said. “Our revised budget continues to invest in education, health care, community prosperity and provides a positive balance in ’22 and ’23.”

Altogether the changes Walz announced Friday include reductions in proposed new spending of $131 million, tax changes that would bring in an additional $65 million partly through closing what he called corporate tax loopholes, returning $142 million in unspent health care reinsurance funds to the general fund, and new spending of $37 million that would go mostly to higher education. The overall general fund budget would dip from $49.5 billion to $49.4 billion.

His proposed new spending also includes an extra $2.1 million to strengthen oversight of the state’s Child Care Assistance Program following a critical legislative auditor’s report last week that found significant levels of fraud within the program. And it includes $1.1 in additional funding to address continuing fallout from the botched 2017 rollout of the MNLARS vehicle registration system. But he dropped a proposed $700,000 increase in his office budget for outreach efforts.

Republican leaders criticized Walz for standing by his earlier proposals for a 20-cent gas tax increase to fund road, bridge and public transit improvements; for preserving a 2 percent tax on health care providers that expires at the end of the year; and for replacing the state’s health care reinsurance program, which pays carriers to help hold down premiums on the individual market, with a more direct premium subsidy for consumers.

While the House Democratic majority supports Walz on those plans, they’ve met with strong GOP resistance, which matters in the Senate, where Republicans hold a narrow three-seat majority. Senate Finance Committee Chair Julie Rosen said in an interview that the revision still spends and taxes too much.

The Vernon Center Republican said the governor “has been unable to say no to anyone” as he tries to keep his campaign promises. She said there’s a lot of waste in his budget instead of wiser spending. But she said the two sides will bridge their differences eventually. The Senate GOP budget proposal will come out next week and will show that the state doesn’t need to raise taxes, she said.

“And after Easter we’ll start working on a compromise,” she said. “But a compromise does not necessarily mean an increase in taxes.”

Republicans generally favor funding transportation improvements and the health care programs supported by the provider tax out of the general fund instead, and they count preserving the provider tax as a tax increase, which Democrats don’t.

“The governor should focus on helping Minnesotans keep more of their hard-earned money, and work to fund basic priorities like roads and bridges with our state’s budget surplus, rather than making health care more expensive and driving up the cost of everyday goods and services for all Minnesotans,” House Minority Leader Kurt Daudt said in a statement.