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Walz budget would raise gas tax, emphasize education, health care

Gov. Tim Walz presents his “One Minnesota” budget at a Feb. 19 press conference. Photo by Paul Battaglia

Education, health care and community prosperity are key targets for funding in the 2020-21 biennial budget proposed by Gov. Tim Walz.

With the latest budget and economic forecast currently projecting a $1.5 billion surplus – and a new forecast expected next week — Walz’s $49.5 billion “Budget for One Minnesota” would increase state spending by about 9 percent during the next biennium, with E-12 education (from early childhood education through secondary years) and health and human services each receiving 9 percent increases.

“This budget reflects the morals of the people of Minnesota,” Walz said releasing the budget at a midday news conference. “This is the budget Minnesotans voted for by historic margins.”

Indeed, Walz frequently spoke of increasing the gas tax to improve transportation infrastructure while on the campaign trail last year, and his budget calls for a 20-cent increase in that tax.

It also advocates for a $1.27 billion bonding bill to be passed this legislative session. Typically, larger bonding bills are left for even-year sessions. Those investments would focus primarily upon transportation, higher education and housing.

[MOREView the budget by agency, bill area]

 

Education

The largest expenditure in the budget is E-12 education, which makes up 41.1 percent of Walz’s proposal. The bulk of the projected surplus would go to new education funding in the next biennium, with $733 million for pre-kindergarten through grade 12, and $158 million for higher education, including $62 million in grants to students.

Walz said the increased spending will focus upon closing funding disparities between schools by increasing the basic state funding formula by 3 percent in Fiscal Year 2020 and 2 percent in Fiscal Year 2021, for an estimated total of $523 million. He also spoke of an increased commitment to recruit and retain teachers of color.

 

Health

“Skyrocketing costs for care and prescription drugs keep Minnesotans from getting the care they need,” Walz said. His proposal to combat the problem is threefold:

  • create a subsidy program that would reduce monthly premiums for recipients of insurance through MNsure;
  • establish a tax credit that would ensure that no individual pays more than 10 percent of their income on health care; and
  • create a statewide public option known as ONECare Minnesota to increase access to health care.

Walz said his proposal would bring down prescription drug costs and increase access to dental benefits.

 

Community prosperity

“This budget puts forward the single greatest investment in Greater Minnesota in the history of our state,” Walz said. “And it invests in some of the most meaningful state initiatives to lift up communities of color to have ever been proposed.”

New investments include $70 million for a grant program to ensure that all households have high-speed internet access by 2021. An additional $60 million would fund a new program of paid family and medical leave, and another $44 million would expand access to the child care assistance program and raise rates paid to providers.

Governor Walz Press Conference 2/19/19

Housing is also part of Walz’s focus. “Through the budget and bonding bill, I am investing over $170 million to increase access to housing that is affordable in Minnesota.”

The governor also advocated for increasing the Minnesota Family Investment Program cash grant by $100 per month. And the budget would restore funding levels for Local Government Aid and County Program Aid to 2002 and 2000 levels, respectively.

 

Gas tax, other revenue sources

Walz painted his proposed 20-cent increase in the gas tax as a necessary investment in improving roads, bridges and transit.

“Minnesota’s crumbling infrastructure is putting our safety at risk,” he said. “A recent independent report found that there are over 1,000 Minnesota bridges and hundreds of miles of roads that are in poor condition.”

Other funding for transportation and transit would be generated by an increase in registration taxes and motor vehicle sales taxes, and authorizing $2 billion in trunk highway bonds over eight years, starting in 2022. Investments in Twin Cities-area mass transit — including 10 new bus rapid-transit lines in the next 10 years — would be funded by a one-eighth of 1 cent sales tax increase in the metro area and $20 million in general-obligation bonds. 

Walz shared other ideas for increasing revenue. One is keeping the 2 percent health care provider tax that’s set to expire at the end of this year. Another concerns conformity to the federal Tax Cuts and Jobs Act of 2017, which the state intends to do, but “we are also going to protect Minnesotans by keeping our deductions and exemptions that help families. … The largest source of revenue for this budget comes from conforming to the new foreign income provisions and reducing special deductions for businesses.”

 

Will taxes be cut?

Walz said this budget would provide $440 million in tax relief, cutting taxes by over $220 million for farmers and small businesses. It would include $100 million to expand the working family tax credit, which Walz claims would lower taxes for 46,700 households by an average of $227.

He also proposes increasing the subtraction for Social Security payments, and providing a $50 per acre property tax credit for farmers who provide buffer strips of land near public waters and drainage systems.

 

Republican response: 'Absolutely absurd'

“Governor Walz’s budget is a recipe for one expensive Minnesota,” said House Minority Leader Kurt Daudt (R-Crown). “With a $1.5 billion surplus, it’s absolutely absurd to propose raising taxes by more than $3 billion. … There’s no question that we’re headed toward a deficit under this plan.”

House/Senate Republican Media Availability 2/19/19

“This uncontrolled spending will give Minnesota the reputation of being a cold California,” said Senate Majority Leader Paul Gazelka (R-Nisswa). “If we’re not careful, we’ll move to the position of No. 1 taxed state in the union.”

As for how Walz’s priorities may fare in the House, Speaker Melissa Hortman (DFL-Brooklyn Park) said in a statement, “Minnesotans value providing world-class educational opportunities for all of our children, affordable and accessible health care, and greater economic security. Governor Walz’s budget reflects these Minnesota values, and we share these goals. We will review the details of the Governor’s budget and the February economic forecast, then we will begin to craft the House budget proposal over the next several weeks.”


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