Governor Walz unveils $65 billion two-year budget plan, including direct checks and big investments in education

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ST. PAULO, Min. — Governor Tim Walz on Tuesday unveiled his proposed $65 billion state budget for the next two years, a comprehensive plan that would make significant investments in his top priorities and revive his call to send one-off checks to taxpayers.

Includes record funding for K-12 Education and additional money for affordable housing, mental health, public safety, building electric vehicle charging infrastructure, and more.

“These are the kinds of things that make sense for Minnesota at a time when we have a budget surplus, when it’s time to invest, when it’s time to keep our reserves at the highest level they’ve ever been. while reducing the tax burden on Minnesota workers,” said the Walz. “I’m excited about this budget. I’m proud of Minnesotans. I think it builds on a long tradition of progressive taxation and investing in things that matter.”

Walz has announced sections of his budget recommendations in recent days, but on Tuesday he and other administration officials focused on a list of fiscal proposals they consider historic. A slice of that includes his so-called “Walz checks,” an idea he first floated last year to return some of the colossal budget surplus — totaling $17.6 billion, according to the latest budget forecast — to taxpayers.

“People can make good decisions for themselves and some of their surplus needs to go back into their hands,” the governor said on Tuesday.

But the scope of these direct, one-off payments has changed over time. In his latest speech, Walz slashed the income thresholds that determine who qualifies. If lawmakers pass them, a single filer earning $75,000 or less will receive $1,000. For families earning $150,000 or less, that check would double to $2,000, plus $200 per dependent up to $2,600.

That would affect 2.5 million Minnesota households, according to an estimate by the governor’s office. DFL leaders have not adopted previous plans for cashing checks.


Minnesotans could get checks from the state

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Before the rebate checks reach Minnesotans’ pockets, state legislators still need to pass them.

“Legislators are going to want some things the governor isn’t interested in, so there’s going to be a horse trade,” said Larry Jacobs, a professor of politics at the University of Minnesota. “I think eventually there will be an agreement, but as we start the session, the tax cuts are one of the sticking points.”

The tax package also includes tax credits to help families meet rising childcare costs and additional credits for low-income Minnesotans in an effort to reduce child poverty. He is also backing $219 million in tax cuts on Social Security benefits, which his office says will impact 350,000 families, although this plan falls short of making all those benefits tax-free.

These recommendations mark a starting point for the legislature, which will ultimately draft the state’s spending plan before the end of the session. Many of Walz’s priorities mirror those of the ruling DFL lawmakers in the capital, creating a more favorable environment for passing the governor’s agenda in his second term.

But there are also tax increases. Walz suggests a 1.5% surcharge on capital gains and dividends from individuals, trusts and estates over $500,000, and 4% on such income if it exceeds $1 million. Buried in a 200 plage document, the governor also recommended an 1/8 cent increase in subway sales tax in seven countries for regional transit.

Those tax increases drew the ire of Republicans, who are powerless in the minority to stop the DFL’s agenda, but were quick to criticize the governor’s plan. GOP leaders said Democrats broke campaign promises to fully exempt Social Security from the state income tax – a priority for Republicans who have the backing of some newly elected Democratic senators and it was part of an agreement between legislative leaders and the governor last spring that eventually fell apart.

“Huge government growth in agencies. Huge government growth in taxation. This is a very, very worrying budget,” said Senate Minority Leader Mark Johnson, R-East Grand Forks.

Republicans also expected the governor to consider cuts in income tax rates, arguing that the $17.6 billion surplus is a sign the state is overcharging its residents.

“If we can’t cut taxes now, when can we?” said House Minority Leader Lisa Demuth, R-Cold Spring.

Also among the hundreds of provisions outlined in the document are seed funding needed to get a paid sick leave and family program off the ground in the coming years, and state support for a regulatory framework should lawmakers legalize recreational marijuana.

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