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Watch Out! Minnesota Has Bags Of Money!
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Watch Out! Minnesota Has Bags Of Money!

Here's who should benefit from that tantalizing budget surplus.

To:      Rep. Kurt Daudt, Speaker of the Minnesota House

Sen. Tom Bakk, Minnesota Senate Majority Leader

State Capitol St. Paul, Minn.

Dear Speaker Daudt and Majority Leader Bakk:

We have entered one of the most dangerous times for taxpayers. It’s not a time of budget deficit, but even worse, a projected surplus of $1.9 billion. As you know, during times of deficit, each billion dollars that is cut calls forth a battalion of critics who alert the rest of us to the impending demise of civilization as we know it. But in a time of surplus, givebacks, tax credits and fee reductions are essentially unlimited; these are often called tax expenditures, but they come with battalions of smiley emissaries bearing promises of paradisical results.

Our local newspaper has been tracking these so-called tax expenditures as the requests continue to mount. Of course, politicians of all stripes prefer the tax expenditure side of the ledger because it is virtually impossible for the average taxpayer/voter to get a clear understanding of how much his or her taxes will actually go up as a result of these expenditures.

Cash expenditures and tax expenditures are almost exactly the same thing, because all money is fungible. Money in a state budget is like water; it will seep everywhere and find its own level. That is why we frequently talk of liquidity and cash flow.

Gov. Mark Dayton has put forth his plans for the surplus, which include increasing pre-kindergarten offerings for all Minnesota students, more infrastructure spending on roads and bridges, and significantly beefing up the “rainy day” fund. Inherited wealthsters, military veterans, medical device companies, pizzeria owners and others have joined the midway-barker-style cacophony, calling for their part of the surplus.

Surpluses can be messier than deficits. And they are dangerous because one-time surplus expenditures have a way of becoming long-term programs that can never be eliminated.

And because the State Fair is still half a year away, let me don my straw hat, loud striped jacket and cane to make my own plea for how the surplus should be spent: Spend the entire surplus on tuition relief for Minnesota students who attend the University of Minnesota and its branches, and for Minnesota students who attend any MnSCU institution. Minnesota students who attend our public institutions have very few lobbyists and very little influence at the Capitol when it comes to spending money and surpluses. As a result, their interests get mediated through the bureaucracy of those two educational systems.

How much would this cost? Currently, tuition at the University of Minnesota amounts to $844.3 million, or approximately one-fourth of the university system’s entire budget, and $793.5 million at MnSCU institutions. Both of these amounts include some money from the state already allocated to tuition relief in the approximate amount of $105 million. While it is difficult to deduce from published sources exactly how much of the total tuition amount comes from non-Minnesota residents, a good approximation would be $250 million; couple that with the $105 million in already provided tuition relief, and approximately $1.25 billion of the total surplus would be taken by total tuition relief for all Minnesota residents.

That would leave just enough of the surplus for full funding of the governor’s expansion of pre-K schooling and some contribution to the rainy day fund (but not the entire amount).

This plan for the surplus also has other advantages. If the state is truly serious about expenditures that build toward an even more prosperous future, education is the key. Business benefits immediately because many of the workers needed today and in the near term are the graduates of MnSCU and the U of M. Various student surveys have suggested that graduation delays are frequently caused by an inability of students to pay the ever-increasing tuition costs (about $13,000 annually at the U, $7,500 at MnSCU institutions). So graduation rates would likely go up and people could join the workforce earlier (and start paying taxes).

More to the point, this shift in resources would indicate that Minnesota is serious about supporting the younger end of our population spectrum, where we can get the biggest bang for the buck. And it would send a very positive message that, in Minnesota, we are serious about our public institutions of higher learning. In fact, we are so serious that we would like to encourage Minnesota residents to stay right here and get their education at one of the fine public institutions.

Surveys by both MnSCU and the University of Minnesota over the years have shown that students who graduate from either system are likely to stay in our state and add to our educated employment base. That’s a good thing, and something badly needed in our neck of the woods.

Finally, to those critics of both MnSCU and the U of M who are concerned that those institutions waste money (they include former Gov. Arne Carlson), this program would channel significant funds to students and not to the institutions. The Legislature would still determine the level of direct funding to the institutions based on the priorities it sets. As a state, we have invested billions upon billions of dollars in both of these higher ed institutional systems, and making it easier for Minnesota residents to use these investments and stay at home makes a great deal of sense.

So you have a simple message for all the people approaching you in the hallways with their hands out for some portion of the surplus: NO. The money will instead go not to their clients and employers, but to their well-educated children. Hopefully, their children will thank you.

Sincerely yours,
Vance K. Opperman
For Better Educated Minnesota Students

Vance K. Opperman (vopperman@keyinvestment.com) is owner and CEO of MSP Communications, which publishes Twin Cities Business.

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