Gov. Mark Dayton and the Democratic-led Legislature are disagreeing about how to use the $1.2 billion state budget surplus. It’s a good problem to have but one where Dayton’s position is more prudent.
The governor would like to push about $120 million more of the surplus to the state’s budget reserve and generally was opposing spending by House and Senate of that amount on extra bonding. Dayton proposed more be borrowed for bonding, up to $1.2 billion, arguing the state’s improving financial condition allows it to afford more borrowing.
Democratic House and Senate leaders are grappling with an agreement made with Republicans last year that they would keep bonding this year to about $850 million. They too see a need to fund more projects, but because they are unlikely to get Republicans to bend on the agreement from last year, they are proposing the some construction projects be funded with $200 million from the state’s cash surplus. That way, they don’t need Republican votes to approve a higher bonding amount.
We’ve supported a higher reserve and in fact a bipartisan commission recommended Minnesota have a near $2 billion reserve when all reserve funds are considered. Even under Dayton’s push for a higher reserve, the total would be well short of the $2 billion level at about $1 billion. The governor’s own financial team recommended a reserve of $1.3 billion.
But Democrats have options. They could investigate options for paying cash for their new Senate office building or they could pay cash for the Capitol restoration.
Few would argue there are billions of dollars in needs for infrastructure and state assets around Minnesota. Southwestern Minnesota badly needs $69 million in bond to complete a water system. That project might garner some Republican votes. You can’t get more basic than that.
Negotiations on the bonding bill are fluid. Let’s hope reasonable people can agree to the appropriate amount of financing and the need to bolster budget reserves. Borrowing costs are low, and even upping the reserve slightly will have at least a psychological impact that we are being cautious with surpluses that have been rare in the last decade.