When it comes to the important work underway at the State Capitol in St. Paul, the months before the projected May 17 adjournment will be dominated by the most important single action — adoption of a budget that affects the lives of every Minnesotan.
In January Gov. Tim Walz proposed a $52.4 billion budget for the two years beginning in July 2021. He adjusted the proposal Feb. 26 based on significantly altered projections by the state’s Department of Management and Budget.
The announcement was surprising news for our state’s 134 House and 67 Senate members. A surplus of $1.6 billion, rather than a $1.3 billion deficit, is now anticipated. This is the result of an increase in consumer spending, reduced costs of state child care and early learning programs, federal stimulus checks and optimism related to the COVID-19 vaccines.
Management and Budget Commissioner James Schowalter said, “This change is really large, and unusual under the circumstances in part because it’s so late in the biennium.”
An understated Walz said, “The state needs to come out of this stronger than we were, we need to invest in places that were hit the hardest.” Walz urged policymakers to target businesses that have been hurt the most. He said it is necessary for families “that were asked to go through this are brought back. And now it looks like that we have the capacity to be able to do that.”
There is also a positive impact from the state’s share of the $2.2 trillion federal CARES Act, which extended jobless benefits, added a $600 weekly “top-off” to those benefits and sent checks directly to Minnesotans homes.
The state forecast does assume that the U.S. House passed $1.9 trillion COVID stimulus proposal of President Joe Biden will become law at some significant level of funding, thus providing additional financial relief for Minnesotans.
While some economic sectors made it through the past year in decent shape, others suffered greatly. The state’s hospitality industry alone last year lost 123,000 jobs (44%).
In 2020, working Minnesotans’ income fell by 0.6%; this year it is projected to increase by 6%.
Smooth sailing is not, however, anticipated as Walz and his DFL allies have proposed increased support for lower-income Minnesotans who have been greatly affected by the uneven impact of the pandemic-induced recession. A proposed increase in state income taxes for higher-end earners and higher corporate taxes are both on the table.
Republicans, who control the State Senate (34-33) and DFLers — who have a 70-64 majority in the Minnesota House — will also be required to spar over how to manage a projected $1 billion inflation estimate for the coming budget.
House Speaker Melissa Hortman (DFL-Brooklyn Park) says the budget “currently does not meet the needs of all Minnesotans,” urging lawmakers to pull together in recovering from the pandemic and thrive once again. House Minority Leader Kurt Daudt (R-Crown) disagrees, arguing that raising taxes will “slow our economic comeback and make it harder to bring back jobs.”
Senate Minority Leader Paul Gazelka (R-East Gull Lake) wants to help small business by fully implementing the Paycheck Protection Program to demonstrate that “we have their backs.”
Our state’s leaders need to start now to communicate and negotiate a two-year budget that will keep the economy moving, while at the same time help a significant portion of the population that struggled through the past year and anticipates a difficult recovery ahead. These include hourly employees in hospitality and other service industries hit hard by pandemic shutdowns. We urge great caution in raising taxes and also remind our leaders that the future remains uncertain.
Walz’s state economist, Laura Kalambokidis, has wisely urged caution. “We’re going to continue to monitor it closely…the path of the pandemic is not done.”
We need to temper our optimism with caution as we move ahead to a post-pandemic Minnesota, building on our economic strengths while leaving no one behind.
— An editorial from the APG of East Central Minnesota Editorial Board. Reactions are welcome. Send to: firstname.lastname@example.org.