Should state's constitution be amended to return budget surpluses to taxpayers?

While economic forecasts have state budget surpluses shrinking by the year, some legislators nevertheless argue that being in the black means that taxpayers should be getting some of that extra cash back.

One making such an argument is Rep. Wayne Johnson (R-Cottage Grove), who thinks there ought to be a law against spending surpluses on state programs. That’s why he’s sponsoring HF4, which proposes that a constitutional amendment appear on the ballot in 2026 asking if a portion of projected future budget surpluses should be returned to state taxpayers.

The House Taxes Committee had a vigorous debate about the bill, as amended, Tuesday, so much so that the committee chair, Rep. Greg Davids (R-Preston), chose to lay the bill over for future consideration, rather than bring it to a vote to send it to the House Ways and Means Committee.

There was even some debate about whether that would be the appropriate next destination for a bill proposing a constitutional amendment, with suggestions that the House rules committee and perhaps the elections committee may need to be involved.

If the constitutional amendment were to meet voter approval, a tax relief account would be funded using money from a projected surplus. The surplus would be equal to the amount by which projected revenues exceed 105% of projected expenditures, as determined by the November budget forecast.

The Legislature would then be required to appropriate money from the proposed new account each biennium for income or property tax refunds or to offset income or property tax reductions. Refunds or tax reductions that reduce a taxpayer’s liability for tax below zero would not be allowed.

Revenue Department officials said the bill would have no immediate impact, since revenue is not projected to exceed expenditures in the November 2024 forecast.

“Instead of creating new ways to spend surpluses, this would actually put it back to the people who created the surplus,” Johnson said.

But DFL members raised several concerns about the bill, with Rep. Andy Smith (DFL-Rochester) suggesting it was too unclear about its process and Rep. Zack Stephenson (DFL-Coon Rapids) invoking the memory of March 2020, when the COVID-19 pandemic quickly turned the state’s economic forecast upside down.

“If this was in effect, what then?” Stephenson asked. “Is the Legislature able to do anything when something happens after the February forecast, or are we just stuck?”