Capitol Watch: Ray of hope on 2024 session spending

Give Gov. Tim Walz credit for consistency. Each November when the budget forecast is announced, he preaches fiscal restraint. And each May when the legislative session ends, he signs budget bills that spend all of the available money. There’s hope this year things could end differently.

Walz stuck to form when the November forecast came out last year, telling the legislature to “be measured.” He then released a very modest spending plan for 2024 totaling $226 million. DFL legislative leaders proposed more spending, but they eventually negotiated targets of $512.2 million, a remarkedly restrained amount for the same group that spent the entire $17.6 billion surplus last year and still raised taxes.

Remember the February forecast showed an improved outlook for the economy and the state budget for the current two-year budget cycle, leaving us with $3.7 billion on the bottom line. The forecast for the next budget cycle also improved but predicts the state will spend $1.4 billion more than it will take in ($66.2 billion in spending against $64.8 billion in revenue). As long as they leave enough of the $3.7 billion surplus in the bank to cover that $1.4 billion shortfall, the budget will remain balanced.

In that context, the $512.2 million in proposed spending almost looks fiscally conservative. That’s our ray of hope for the session so far. With the “trifecta” Democratic government in place for the last two years, this column is usually very negative, so if you want to remain hopeful, stop reading now.

Reality

The trouble for taxpayers is that the session isn’t over until the third week of May. That means there is more than enough time for the spenders at the Capitol to assert themselves and blow up the budget targets. That’s what happens most of the time, sadly.

It’s also a sad state of affairs to write that spending an additional $512.2 million after last year’s session is hopeful. Real hope would come from a budget that cuts spending drastically in order to lower tax rates.  

The largest single expenditure is $109 million for what’s known as the Tyler Settlement, from a class action lawsuit that found state law regarding property forfeiture was unconstitutional. Hennepin County lost the court case but state taxpayers have to repay the money to homeowners who lost their property.

The budget includes also $31 million for one-time pension contributions for teachers. Someday we’ll have to write a column on why state taxpayers cover pension costs for teachers, who work for local school districts. Other big ticket items include $53 million in tax aids and credits, $43 million in education spending, $42 million for human services and $36 million for judiciary spending.

The spending item with the best chance of blowing up the budget targets is a childcare proposal that attracted a lot of attention at the beginning of session. There will be huge pressure to spend more in that area with the election looming in November. So far, Gov. Walz’s message on childcare spending has been “wait until next year.”

Some other budget notes:

• These numbers do not include plans to borrow almost one billion this year for capital projects around the state.
• The $3.7 billion surplus is in addition to the state’s budget reserve of $2.91 billion and cash flow account of $350 million.

This post was originally sent to subscribers of the Capitol Watch email. To subscribe and see this content first throughout the legislative session, click here.