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Don Davis, Forum News Service, Published January 05 2013

Budget on minds as Minnesota lawmakers headed to St. Paul

ST. PAUL – Minnesota’s 201 legislators are headed to the state Capitol at noon Tuesday for the beginning of the 2013 session, with by far their most important task being to write a two-year budget.

There are some catches, the most unpredictable of which may be how the federal government’s budget problems will affect Minnesota.

A third of the state’s

$60 billion all-funds budget for the current cycle comes from Washington, an amount in question as Congress and President Barack Obama prepare for another round of national debt debate.

Gov. Mark Dayton plans to release his budget plan Jan. 22, and revise it when more is known about what Obama and Congress will do.

The state economist advises lawmakers to include plenty of padding in their budget, since it is impossible to predict what will happen in Washington. Legislative leaders, on the other hand, appear less concerned about the federal fiscal outcome.

“We are going to have to take that into account,” said House Speaker-designate Paul Thissen, DFL-Minneapolis, but added: “At the end of the day, the federal government always has come through with their commitments to the state, to a large degree.”

Washington politicians never have faced a $16 trillion debt they need to chop down. One of the unknowns is how continued federal budget debate will affect Americans’ spending habits and businesses employment decisions. Both could force down state revenues.

Dayton and lawmakers must agree to a budget during the session required to end by May 20.

Federal impact unknown

Even if the budget will be the session’s focus, other issues will come up. Thissen said lawmakers can do more than one thing at once.

The other topics expected to rise to the top include setting up a system to buy health insurance, a response to the Affordable Care Act, commonly known as Obamacare.

Also on the agenda are issues as wide-ranging as whether to legalize gay marriage, if a public works financing bill is needed, whether unions should be allowed for personal care attendants and home day care operators, election reform and whether sand mining needs more regulation.

Raising taxes will be part of the budget debate, likely centered on Dayton’s long-held belief that the rich should pay more. Sales, property and other taxes also will be debated.

The tentative congressional plan is to trim $1.2 trillion from federal programs over the next decade as part of the debt solution. Given the large percentage of the state budget coming from Congress and the White House, some is bound to disappear during the federal debt battle.

Based on a New Year’s federal tax deal, “we just don’t know how this is all going to work out,” State Economist Tom Stinson said, prompting his recommendation to leave a big cushion in the budget to cover congressional changes.

Democrats who control the Senate and House agree a sizable budget reserve is a good idea.

“Even in a more normal time, we should add money to the reserve,” said Sen. Richard Cohen, DFL-St. Paul, who will be Senate Finance Committee chairman. For years, the Legislature has tapped the state’s reserves to balance the budget.

Timing is important

After Dayton releases his initial proposal, House and Senate committees will begin going over the document. With a third of lawmakers new this year, that may take more time than usual since they will need to get up to speed on state spending.

“The Senate DFL has the most junior members that we have had since the 1970s,” Cohen said.

While the country may reach the debt limit in March, there is no guarantee any action will be prompt. If a federal decision is delayed too much, it could bump into the state Legislature’s May 20 adjournment deadline. The state must have a budget in place by July 1, the start of a new two-year cycle, or state government will shut down, as it did in 2011. No one is predicting that now, especially since Democrats are in control of the governor’s office, House and Senate.

Cohen said that the worst-case scenario is that federal officials take action that affects Minnesota after state lawmakers adjourn. The senator said such a move could force Minnesota legislators to return to St. Paul to change the budget.

Thissen and Cohen said a federal cut in Medicaid, called Medical Assistance in Minnesota, is their biggest concern. However, Thissen said, Obama has made a commitment to bolster health care programs for the poor and disabled, so severe Medicaid cuts are unlikely.

“In the short term, I am not overly worried,” Thissen said.

Added Cohen about any new federal debt legislation: “My best guess is it won’t touch anything that will impact the states.”

U.S. Rep. Collin Peterson is frustrated with recent Washington fiscal moves and was not as confident as Thissen and Cohen.

“They shouldn’t get in a position where they are relying on us ...” the western Minnesota Democrat and former state lawmaker said. “States expect us to send them money, but we are broke. You shouldn’t be in a position where you are expecting money from somebody who is broke.”

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