State budget picture looking up

by Brian Bakst, Associated Press

St. Paul, Minn. — (AP) - The state's gain could be yours, too.

A strong budget report released Tuesday -- showing $524 million in unexpected tax collections since February -- is boosting the likelihood finance officials will predict a budget surplus when a comprehensive economic forecast is issued Nov. 30.

If the current trends hold, the surplus would trigger an obscure law forcing state leaders to consider a tax rebate, much like the checks taxpayers got when Jesse Ventura was governor.

While the governor would be required to present the Legislature a rebate plan, lawmakers don't have to accept it.

Tuesday's report and the rebate law could factor into the fall election campaigns. That's especially true in the governor's race, where the tax issue has been a flashpoint in debates and television commercials.

David Strom, president of the conservative Taxpayers League of Minnesota, said voters deserve to know whether the candidates will fight to uphold the rebate law.

"Their response will separate the men from the boys on taxes," he said. "Right now, the whole debate is how much more you can spend given the amount of money pouring into the treasury."

Republican incumbent Tim Pawlenty is counting on a budget surplus to fund a plan to pick up college tuition costs for top students as well as an unspecified amount of new spending for K-12 education.

His DFL rival, Attorney General Mike Hatch, has also eyed up a potential surplus to pay for some of his new programs, including a $10 million annual state commitment to stem-cell research.

Neither Hatch nor Pawlenty was immediately available for an interview on the budget report.

Independence Party nominee Peter Hutchinson has tied his spending proposals to hoped-for reductions in state health costs.

Pawlenty is touting his role in the fiscal turnaround. When he took office in 2003, the state was staring at a $4.5 billion projected deficit.

Pawlenty issued a statement on the report, saying "it shows our efforts to keep a lid on taxes have kept Minnesota's economy on the right track."

The new report focuses largely on tax patterns from July through September.

In that stretch, collections were $73 million more than earlier predictions. Corporate income taxes led the way, ahead of projections by 32.6 percent or $76 million.

Sales taxes were actually weaker than expected by $17 million.

Authors of the report say there is some reason for caution. They note that the economy is slowing, housing construction is down and payroll growth is disappointing.

But Finance Commissioner Peggy Ingison, who has worked in that agency since Republican Arne Carlson was governor, said the state's budget seems to be on solid ground, including $1 billion in reserve funds.

"There's a pretty good chance that this money we've got will hold up," she said. "We'd have to have a projection of more than 500 million going the other way before we'd start to worry."

(Copyright 2006 by The Associated Press. All Rights Reserved.)