Spending

Walz, Senate GOP divided on overspending ahead of 2022 session

How to spend Minnesota’s record $7.7 billion budget surplus will be a defining dilemma for the 2022 legislative session, which begins Monday.

Gov. Tim Walz went big in his supplementary budget proposal to lawmakers this week, proposing to spend almost all of the surplus, $7.6 billion. The proposal faces opposition from Republicans in the divided Legislature who favor permanent income tax cuts.

Walz’s proposal is in addition to the state’s current $52 billion two-year budget. His plans include continued spending in the coming years, bringing the total price to $13.2 billion by 2025.

“If Minnesotans see what’s on offer, if they understand the position we’re in, that’s where we start to get the buy-in that gets bipartisan deals,” Walz told reporters this week, addressing the size of its spending plan.

The first-term Democratic governor, who is running for re-election this fall, has dozens of items in his proposal. Among them: more funding for K-12 education, paid family and medical leave, paid sick leave, subsidizing college tuition for high school students, and settling broadband in rural areas.

Minnesota’s 2022 legislative session begins Monday.

The biggest item is a $2.7 billion break for businesses that face higher taxes to fill a deficit in Minnesota’s unemployment insurance system. Corporate tax relief has bipartisan support.

But Republicans oppose many other elements, including the governor’s proposal to send one-time direct payments of $175 to most Minnesota adults at a total cost of $700 million. The Governor dubbed them “Walz Checks”.

“The governor’s proposal is insulting. It barely covers the monthly cost of diapers in my house,” said State Sen. Julia Coleman, R-Chanhassen, who has three children under the age of 3.

Republicans who control the Senate say they would instead seek permanent reductions in Minnesota’s tax brackets. They didn’t say how badly they wanted to fix the rates.

“We’re still working out those details,” Senate Majority Leader Jeremy Miller, R-Winona, told reporters. “These will roll out in the next two weeks. But you can expect a very significant tax relief package from Senate Republicans.”

Walz said permanent income tax cuts would risk leading to large budget deficits during an economic downturn.

Like Senate Republicans, the House Democrats have not released details of their spending proposals, other than a $100 million plan for public safety this week. But they said the Legislative Assembly needed to do more than cut income taxes.

“If Senator Miller says we’re not doing any more running expenses, we might as well not do the legislative session at all,” said House Majority Leader Ryan Winkler, DFL-Golden Valley, “because I promise you that Democrats in the House won’t just go for a big permanent tax cut and quit smoking.”