Dayton, lawmakers, special interests eye the budget

Gov. Dayton holds a news conference about his plan for the child care tax credit. Tim Pugmire/MPR News
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The eyes are always bigger than the stomach.

After several weeks of pledging budget restraint Gov. Dayton and state lawmakers are starting to eye the budget pie.

The state budget is projected to show a $1 billion surplus over the next two years. But the requests for a slice of that surplus far exceed the money available.

The requests range from cradle to the grave in terms of tax cuts and spending hikes.

Dayton is proposing to spend nearly $100 million over the next two years to expand tax cuts for parents with children enrolled in day care. Dayton said his plan would increase the income limit for the tax credit, making 92,000 more families would be eligible.

Flanked by parents and children when he made the announcement, Dayton said Minnesota is one of the most expensive states in the nation for child care.

“On average in Minnesota, child care costs $901 per month or over $10,000 per year for just one child in a child care center,” Dayton said. “Those costs often force parents to make difficult choices between high payments for quality care or quitting their jobs to care for the children.”

Right now families making up to $39,000 annually are eligible for the credit. Under Dayton’s plan families making up to $124,000 would be eligible.

Sen. Dave Senjem, R-Rochester, and other Senate Republicans  pitch their plan to eliminate the state income tax on Social Security benefits. Tom Scheck/MPR News

Michelle Steffan, of Minneapolis, said the $1,200 credit that she would receive under Dayton’s plan would allow her to work again three days a week as a physical therapist. She said the cost of child care forced her to quit working a year ago after her second son was born.

“To have both boys in at three days a week, it was exactly what I was making for a salary,” Steffan said. “I love what I do, but it was also the first time that I had children, so I figured if I was going to be working in order to put my children into daycare, it seemed that maybe I should spend a year or so with them.”

At the same time Dayton was detailing the child care credit, members of the House Tax Committee were debating a Republican-backed bill to cut taxes for some business owners by about $350 million over two years. The measure represents a partial rollback of the new fourth tier income tax rate that DFL lawmakers passed in 2013.

House Tax Chair Greg Davids of Preston said he’d look at the governor’s child care proposal, but he wants to see how it fits with the cost of other tax relief ideas.

“I’m very pleased that we have the governor moving in the right direction of giving money back that has been overcharged, taken from Minnesotans, by giving it back to Minnesotans,” said Davids, R-Preston. “So, I’m certainly open to the idea.”

While Dayton is focused on tax cuts for children, Republicans in the Minnesota Senate are looking at the other end of the age spectrum. They’re pitching a bill that would eliminate the state’s tax on Social Security income.

The plan would cost $127 million over the next two years and would give a tax break to more than 637,000 Minnesotans.

Sen. Carla Nelson, R-Rochester, noted that 38 other states don’t tax Social Security benefits. She said Minnesota should follow suit to help keep people here after they retire.

“Money walks,” Nelson said. “Minnesota can ill afford to have policies that export wealth, and that’s what this policy is doing. It is high time that we encourage retirement in Minnesota.”

Senate Republicans may face an uphill battle in passing their proposal, since Democrats control the Minnesota Senate.

Senate DFLers haven’t put forward a tax cut package. Instead, they’re pushing a plan that would provide free college to students attending the state’s two-year colleges and technical schools.

Sen. Leroy Stumpf, DFL-Plummer, said he thinks the college plan would cost as much as $150 million over the next two years.

Meanwhile, The Coalition for Greater Minnesota Cities and the Greater Minnesota Partnership said today they want lawmakers to spend $45 million more on state aid to cities, $400 million a year on transportation projects, up to $200 million for rural broadband, $50 million for rural housing and $15 million for job creation.

In total, their proposal would spend nearly the entire surplus without spending an additional penny on education or health care.

Former Republican Rep. Marty Seifert is now lobbying for the Coalition of Greater Minnesota Cities. He said Republicans won control of the House last year because rural Minnesotans felt neglected.

“Good policy is good politics,” Seifert said. “We are presenting, I think, a very modest program that will make some big game-changing changes for rural Minnesota.”

Backers of the proposal emphasize that metro and suburban parts of Minnesota would also benefit from their plan.

Groups advocating for nursing homes and assisted living facilities also called for more money to help keep their doors open. They’re seeking $200 million to help keep long-term care facilities open and increase staff salaries.

MPR News’ Tim Pugmire and Catharine Richert contributed to this report.