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$1.2B Surplus Estimate To Feed Session Appetites

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ST. PAUL, Minn. (AP/WCCO) — A bullish budget forecast showing a $1.233 billion surplus added steam Friday to a bipartisan push for tax relief, but also sparked a “bidding war” over how much taxpayers will get back.

Money available for lawmakers to disperse grew by 50 percent from the last forecast a few months ago, according to a much-anticipated report by the Department of Minnesota Management and Budget. It’s the last one to be provided before November’s election, and will guide session decisions.

Majority House Democrats immediately ratcheted up calls for swift passage of a $500 million package of tax cuts and repeals in this election-year session, a position also embraced by Democratic Gov. Mark Dayton.

Dayton held a press conference Friday to talk with reporters about the surplus, which he called great news for the state. He called the surplus a dramatic improvement over previous forecasts.

“Those surpluses did result from thousands more Minnesotans working and earning higher income,” Dayton said. “There’s enough room there for a very significant tax cut. This is going to get into a tax cut bidding war and everyone is going to try to top everyone else.”

Meanwhile, Republicans said the reason for the surplus is because of last year’s tax increases.

“Unfortunately, what is means is that Democrats have taken too much money from Minnesota taxpayers,” House minority leader Kurt Daudt said.

Daudt said Republicans plan to repeal some of the business-to-business taxes.

Republicans, who are a minority in both chambers, launched a bumper-sticker ready “Give It Back” campaign that calls for returning the full amount to taxpayers. They invited people to suggest the best method for a rebate.

“Tell us how you’d like to receive your money back,” House Minority Leader Kurt Daudt said, standing near a placard bearing the slogan. “Minnesota, this is your money and Minnesota we want you to get your billions back.”

One wild card remains: Where Senate Democratic leaders land in the tax cut debate. The Senate, unlike Dayton and House legislators, isn’t on the fall ballot, and haven’t committed to anything. Senate Majority Leader Tom Bakk said Dayton’s hope of signing a bill into law by March 14 is a “pretty aggressive timeline” that he thinks will be difficult to achieve.

Bakk favors using a chunk of the surplus to bolster the state’s rainy day reserves. House Speaker Paul Thissen differed on that score.

“To keep this middle-class economic recovery going, now is not the time to keep stuffing cash under the mattress,” Thissen said.

Dayton said he supports adding to the reserves, but didn’t say how much.

The House could vote as soon as Thursday on a plan to free businesses from new sales taxes imposed just last spring and give income tax filers more deductions and exemptions. Some of the cuts would be retroactive, meaning filers could claim them when submitting returns this spring.

The forecast represents an estimate of current and future tax collections compared with spending commitments through June 2015. In releasing it, state finance officials said the surplus is $408 million higher than what they projected in early December. That report showed $825 million was left after the state paid off final IOUs to schools that amassed during deficit times.

“Our economy is certainly warmer than our weather,” Minnesota Management and Budget Commissioner Jim Schowalter said Friday, yet another frigid winter day. “This forecast does suggest that we’re in solid shape for the rest of this budget period. But what it doesn’t do is ensure that future.”

Minnesota has its lowest unemployment rate in more than six years — 4.6 percent — and added thousands of jobs last year. The housing sector is picking up as demand grows and foreclosures wane. Income growth has risen at a modest pace, feeding robust tax collections.

State Economist Laura Kalambokidis said those dramatically higher tax collections probably won’t persist because some stemmed from accelerated payments.

Officials with Minnesota Management and Budget said a combination of stronger revenue and lower-than-anticipated spending fed the surplus. The state budget for two years is still pegged at $39 billion, but some areas saw less demand for dollars than lawmakers who set the budget planned.

As usual, lawmakers sought to claim credit for the good fortune or highlight risks. A budget adopted last spring raised taxes by $2.1 billion to erase a deficit.

Thissen said it shows “the gloom-and-doom predictions of Republicans are not bearing out.”

Senate Minority Leader David Hann scoffed at the idea the GOP was rooting for failure.

“We’re proud that the economy has recovered,” he said.

Looking to the horizon for fiscal years 2016-17, the surplus for the next two-year budget is even bigger at $2.6 billion. But those longer-range estimates can change quickly and don’t account for natural inflationary growth that would slice the projection by more than $1.1 billion.

Aside from tax cuts, there is also talk of using extra dollars to pay cash for construction projects the state would otherwise sell bonds to fund. And special interests, ranging from caregivers for the elderly to advocates for early childhood education programs, also have eyes on the pot of money.

Dayton said he will submit a formal plan to legislators for the surplus next week.

Lawmakers are allowed to remain in session until May 19, but a short to-do list this year could mean an earlier break for the campaign trail.

(TM and © Copyright 2014 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2014 CBS Broadcasting Inc. Used under license. All Rights Reserved.This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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