MARSHALL - Saying that taking from reserve funds would put the state's newly-achieved fiscal stability at "unacceptable risk," Gov. Mark Dayton on Thursday vetoed a House GOP bill that would have dipped into budget reserves to pay back schools from past funding shifts.
The state owes schools more than $2 billion because it slowed down aid to them while dealing with a budget crisis. They are in line for $315 million in repayment this year because of a solid economic forecast, but Republicans would have put another $430 million on top of that.
Republicans drew on newly-replenished state budget reserves as their payment source to pay schools back more quickly.
"It's a stupid proposal," District 20A Rep. Andrew Falk, DFL-Murdock, said. "We've spent the last four years refilling the budget reserve account - once we get it back to fiscal health the first thing they do is propose spending down two-thirds of it to repay money owed to the schools? I want to see the schools repaid, but we wanted to do that by closing tax loopholes; that would be ongoing revenue."
"There was a little bit of politics involved here," said District 21A Rep. Chris Swedzinski, R-Ghent. "I have a feeling it has more to do with politics. I'm a little disappointed in this veto."
Swedzinski said schools will get paid back eventually and thinks now was the best time to do it with reserves in place. He said even after taking out the $430 million to pay back schools, there would still be about $600 million left in reserves.
"The money will get paid back, we'll just have to wait a few more months to get it done," Swedzinski said. "If you grow the economy you can pay back bills, but the governor would rather have a tax increase to do this and allow the economy to absorb the increased costs. Even though the economy looks stronger it's still fragile. I think the Legislature understands that, and the House and Senate are working on issues to maintain it."
Dayton said he shares the Legislature's desire to repay the debt to school districts in a timely manner, which is why he supported legislation that would repay them with revenue raised from closing corporate tax loopholes that would allow companies to avoid paying state taxes on foreign operations. He said the House bill does nothing more than raid the budget reserve to pay back the rest of last year's school shift.
"this action would wrongly perpetuate the terrible legislative practice of the past decade: Trying to solve an immediate financial problem by substituting a larger problem, which will not be visible until later," he said. He called the transferring of $430 million from the state's budget reserves to buy back the rest of last year's schools shift "superficially appealing."
Swedzinski said it's wrong to think the bill would've drained reserves too much and noted that the school shifts go back further than last year, as the current Legislature was handed shifts from the previous one.
"In talking to my school districts, they would've really enjoyed having that money coming in," Swedzinski said. "With the latest surplus, we certainly would've enjoyed doing that. If you see a relative at Thanksgiving and you owe him money and you have cash in your pocket, you should probably repay them."
Dayton said fully funding state reserves should be the Legislature's highest priority and that maintaining reserves is an "economic necessity, not a budget convenience."
District 20B Rep. Lyle Koenen, DFL-Clara City, said taking from reserves would cause the state cash flow problems in the remainder of this biennium.
"If you look at the forecast for the next budget period, it shows a deficit again; if you take from reserves now it makes me wonder what would happen next year," he said.
Koenen said a more long-term, sustainable plan to paying schools back is needed because of the sheer amount of money the state owes schools and called the GOP's proposal a knee-jerk reaction that "wasn't thought out very well."