Jockeying begins over how to spend Minnesota's $7B surplus

Get ready for a gold rush at the Minnesota State Capitol.

What's new: State budget officials are projecting a record $7.7 billion surplus — meaning there's loads of cash for lawmakers to spend in the upcoming legislative session and beyond.

The big picture: The major tension at the politically divided Legislature will be over how much to give back in tax cuts versus spend on new programs.

Driving the surplus: Higher-than-expected tax collections related to income, consumer spending and corporate profits led to revenues that were "out of the ordinary, even in these extraordinary times," Minnesota Management and Budget commissioner Jim Schowalter said.

• That trend is expected to continue into the new year.

What they're saying: There's already no shortage of suggestions for how to spend the cash.

• DFL Gov. Tim Walz ticked off a range of possible uses, including paid leave, housing and lowering the costs of energy and health care. Addressing climate change and gun control could also be on the table, he said. Many legislative Democrats echoed those ideas.
• Senate Republican Leader Jeremy Miller said tax cuts for individuals and businesses will be his caucus' "top priority." House GOP Leader Kurt Daudt floated freezing future energy taxes, directing more funding to law enforcement and eliminating the state tax on Social Security benefits.
• The president and CEO of the Minnesota Chamber called backfilling the Unemployment Insurance Trust Fund deficit, a move that would avoid a bigger payroll tax increase for employers, a "no-brainer."
• The Coalition of Greater Minnesota Cities urged action to address child care shortages and upgrades to cities' "aging wastewater and drinking water facilities."

• Statewide teachers union Education Minnesota, meanwhile, called on lawmakers to increase school funding.

Of note: Walz said while he's open to relief for the "middle class," he's "not interested in a tax cut for the 1% of the 1%."

• He said he expects a deal to address unemployment debt.

Between the lines: An abundance of cash doesn't necessarily make it easy for lawmakers to agree — just look at the stalemate over distributing $250 million in federal funds for frontline pandemic workers.

• Election-year politics could also come into play, as Walz runs for another term and legislators prepare to battle for control of both chambers.

What's next: The Legislature reconvenes in late January.

• Walz will unveil any supplemental budget proposal around that time, formally kicking off what's expected to be months of negotiations.