Minn. House speaker talks budget surplus, tax cut priorities
Rep. Melissa Hortman says tax cuts should go to those who need it most while prioritizing pay raises for teachers and caregivers.
While the DFL-led Minnesota Legislature has accomplished a number of priorities thus far this session, several big decisions lie ahead when it comes to the budget surplus and potential tax cuts.
House Speaker Melissa Hortman, DFL-Brooklyn Park, provided an update in a recorded interview Thursday, March 2, with KAXE’s Heidi Holtan on The Morning Show. Hortman explained the considerations in play when determining the best use of the billions in surplus and Democrats’ position on proposed cuts to taxes paid on Social Security benefits, along with providing insight into legislators’ push for swift action this session.
Among the items on the DFL's wish list are pay raises for teachers and caregivers for seniors and vulnerable adults.
Listen to Hortman’s interview here or read the transcript of Holtan’s Q-and-A with the state representative below.
KAXE Morning Show conversation with Melissa Hortman
Heidi Holtan: This week, Minnesota Management and Budget released a new economic forecast that projects a $17.5 billion budget balance for the next biennium, mostly leftover from the current biennium. As a result of recent change in law, this new forecast also takes inflationary costs into account. DFL Rep. and Minnesota House Speaker Melissa Hortman joins us now to talk about the budget and what's been happening in the Legislature in 2023. Speaker Hortman, thank you for being here.
Rep. Melissa Hortman: My pleasure. Thanks for having me.
HH: Well, first, you promised a swift pace. How has this happened and why did you want this to happen?
MH: Well, I think Minnesotans get frustrated that as the Legislature has this 20-week session, typically they see most of the action in the last five weeks. And I've heard, for all the years I've been serving, that people say, “You guys are like college students or high school students, you leave your assignments to the very last minute.” And so those things where we could act early, those things that are not large budget items, I figured there's no, there's no time like the present to start getting things done.
HH: Well, let's talk about this budget. For most Minnesotans, including myself, it's hard to understand to the point of $17.5 billion and what that means.
MH: Yeah, the tricky thing there is, there's a bunch of one-time money. So as we looked at the future budgets, we can only use $5 billion, which is ongoing. So, in a $50 billion budget, for example, if we were to look at those folks who do the work that is just so valuable in our society of taking care of seniors in long-term care or taking care of folks with developmental disabilities in group homes — if we were just to raise a personal care folks' salaries to $20 an hour, that's $4 billion in an ongoing expense.
So you start to look at the needs we have in our budget compared to the ongoing surplus and you see there's a little challenge there, right? We want to increase funding on education because we're about 20 years behind in really investing. And we also want to do tax cuts, because we know for Minnesotans, they're not necessarily in as prosperous of a situation as the state. So the challenge is using the one-time large $12 billion surplus and the ongoing smaller $5 billion surplus to meet all the needs we have.
HH: You know, I said at the beginning that this is including inflationary cost. Is that new to this?
MH: It is new and you know we were the only state in the country not counting inflation on the expenditure side. So we were counting inflation on the income side, so we assumed that people would make more money every year, but we were assuming in our budget forecast that the cost to the state would be unaffected by inflation. And that's just not responsible budgeting. As people know, the price of a gallon of milk, the price of a dozen eggs, it goes up with inflation. And so when the state has to provide services, those things are all impacted by inflation. So this is a much more honest and accurate look at the budget.
HH: I wonder if — you talked about tax cuts, will you talk about what that might mean? We've also heard things about Gov. (Tim) Walz and checks and child tax credits. Can you help us understand?
MH: Yeah, absolutely. The difficult thing with tax cuts is figuring out who really needs a tax cut and how do we how do we make sure that we're providing those tax cuts and not putting the state into fiscal problems in the future. So when we look out, I think the big focus area for Democrats is on those working folks who are struggling to make ends meet and not, you know, providing tax cuts to millionaires and billionaires. It's sort of the Republican approach is cut everybody's taxes. The Democratic approach is look at people who need it, seniors living on a fixed income, families raising children, folks that are working to get by.
HH: We are talking today with Minnesota House Speaker, DFLer, Melissa Hortman. I mentioned this swift pace at the Legislature this year. Is that just because the Democrats have control of both the House and the Senate? How is it working with the Minnesota GOP during this session?
MH: Well, we've had a couple really great bipartisan votes. In terms of moving quickly, never has a tax conformity bill moved so quickly, so that was really credit to both sides for not politicizing a tax bill early in session. So I think you maybe have heard the Revenue Commissioner Paul Marquart saying we're ahead of schedule in terms of people filing their taxes for 2022 and getting refunds. That was a unanimous vote in the House and the Senate to do income tax conformity with the federal changes. About $100 million in tax cuts in the first two weeks of the legislative session.
So things are moving faster because we have a Democratic trifecta. I think what Minnesota voters are seeing is that it is effective when they make a clear decision and one party is in charge. But on the other hand, we've had really great bipartisan bills. Another example would be providing unemployment insurance to folks who were laid off in the taconite mines up north.
HH: I wonder if we can talk a little bit about Social Security taxing. During the election, I was confused by what I would hear from both sides. Republicans were saying to completely cut Social Security tax and DFLers are not in favor of a complete cut — it was hard to understand what that means. Can you lay that out for us?
MH: Sure, right now any retired couple that's making about $80,000 or more is not paying anything on their Social Security taxes. There's a subtraction. But the way that it works right now with this subtraction, it's confusing to people. And so what we're looking at is if, we just say like, let's say you're a married couple that's earning a certain amount per year, then in that case you would just pay no taxes on your Social Security.
You know, right now, about half the people in the state of Minnesota who receive Social Security income pay no taxes on that income, but they think they do. And so we have to make it more clear that if you're a married couple, let's say making $150,000 or more in retirement or a single making a certain amount in retirement, then you wouldn't pay any taxes on your Social Security. So in that situation it would be very easy for a person to say, “Hey, I don't make — you know, my husband and I, we don't make more than $150,000 in retirement, so we're not paying any taxes on Social Security.” But like you said, right now it's a little bit confusing. So we're looking to probably clean that up in the tax bill this year.
HH: Yeah, there was — I see things in the media that are saying like, poor, elderly people that they're being taxed, everyone is being taxed and it's hard to make ends meet because of this taxing. So how would you respond to that?
MH: Anybody who is relying on Social Security income to survive is not currently paying taxes on that. It is only people who have investment income or retirement income in addition to their Social Security that are paying any tax on Social Security. So there's a lot of people who right now aren't paying any tax on their Social Security. But it's, you know, it's frustrating for people because they think that they are. And when they think that they are, that feels very unfair.
HH: This is kind of a great example of not listening to campaign promises. And you know, kind of looking at where the information that you're getting, even in media, where that's coming from.
MH: Well, yes. I mean I think you hit the nail on the head. A lot of things can't be explained in a one-word sentence. They require a paragraph. And the political campaigns sometimes will oversimplify issues to try to get an emotional reaction from people. But I think anybody when you sat down and talked and said do you think people making $500,000 in retirement, do you think that they deserve a tax cut of multiple thousands of dollars? And at the same time, we wouldn't be able to give teachers a raise or folks who take care of people in nursing homes a raise.
I think the average person would say, “Well, no, you know, maybe somebody making $500,000 a year or $250,000 a year as a single, maybe that person doesn't need a tax cut as much as some of our first-year teachers probably need a raise or people who are taking care of somebody in a nursing home or in a group home, somebody with developmental disabilities — they probably need a raise more than somebody who's wealthy needs a tax cut.
HH: While we have you here on KAXE, I wonder if we can talk about some of the things that have already passed. Earlier this morning on Morning Edition from National Public Radio, they had a story on Texas and it was with some doctors there and how they aren't even allowed to talk to their patients. It was the story of a woman who’s had twins and one of them was not viable and basically doctors have to kind of whisper things like, “The weather's nice in Albuquerque.” You know, to tell them that. So what's happened in Minnesota and what do you think it means on a larger scale in terms of the United States?
MH: Well, you know, we acted really quickly to protect reproductive healthcare options in Minnesota because so often there are complex situations that none of the rest of us can understand. And the decision should be between the doctor and the patient. You're seeing these stories out of other states like the ones you're talking about. I think there was an article in the Star Tribune on Sunday as well where there are fetal conditions incompatible with life. And you know, we're seeing women have to go to great lengths to get the medical care that they need because their doctors are afraid of being prosecuted.
Really sad story on National Public Radio this morning about a woman who had to have a total hysterectomy rather than the health care that she needed and preserving her ability to have children in the future. And she had a she was pregnant with a fetus who was not developing a skull. And so these are really difficult situations and none of us in legislation can write out all the exceptions, so we just, ultimately we have to trust patients to make the right healthcare decisions and we have to trust doctors and let them, you know, complete the treatment for their patients consistent with the ethics of the medical field, which require them to provide care to their patients.
HH: Speaker Hortman, before we go, constituents can can get involved in the process of the legislative session. It's not just the lobbyists that the legislators listen to, is that correct?
MH: Absolutely. People I think, don't realize how powerful they are. If they take the time to write in or take the time to drop by the Capitol. That's not always the easiest, but email is very easy and it really informs our decisions on lots of issues. Because we're asked to vote on so many things that we don't know about that well, all of them.
So for example, when there's a credit union person in our community or a banker in our community or school counselor, that kind of information that they can share with us on their professional experience really helps us make better decisions. So I would encourage everybody to take the time to get in touch with your state representative and get in touch with your state senator.
HH: That is Minnesota House Speaker DFL Representative Melissa Hortman. Thanks for your time today.
MH: Thank you. Have a great day.