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Walz proposes billions in child tax credits, education spending, creation of new agency

The $12 billion package includes billions in additional education spending, including more than $800 million for universal lunch for public school students.

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Minnesota Gov. Tim Walz and Lt. Gov. Peggy Flanagan read a book to a kindergarten class at Adams Spanish Immersion School in St. Paul on Tuesday.
Alex Derosier / Forum News Service
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ST. PAUL — Minnesota Gov. Tim Walz on Tuesday, Jan. 17, unveiled his administration’s education spending plan, proposed child tax credits and made his pitch for the creation of a new state agency dedicated to children and families.

The $12 billion package is the first piece of Walz’s budget proposals and includes billions in additional education spending, including more than $800 million for universal lunch for public school students. It would also provide billions in child tax credits over the next few years, something the administration said would put a significant dent in child poverty.

At his second inauguration Jan. 2, Walz said his main priority in his next four years as governor is to put children and education at the center of his agenda. Addressing reporters at Adams Spanish Immersion School in St. Paul on Tuesday, Walz said the plan is the first step toward that goal.

“We're here today to fulfill and put out the pledge that we made, to make Minnesota the best state in the country for a family to live, and to make sure that every child gets the opportunity to thrive,” Walz said. “We're going to make sure that that world-class education, that we already deliver, that those opportunities are there for every single child. And we're going to do that in an approach that we think looks at the child holistically.”

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Walz and other state officials provided details of the plan to reporters in the Adams school library, after the governor, Lt. Gov. Peggy Flanagan and first lady Gwen Walz read to a classroom of kindergarteners.

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Walz and Flanagan are proposing a 4% increase to the general education funding formula next year and 2% the year after — what they say will mean $717 million in additional education funding for the next two years and $1.48 billion in 2026-27.

They’re also calling for a more than $1 billion increase to the child care tax credit in 2024-27. Under the proposal, families making under $200,000 with one child can receive up to $4,000 a year for day care. Families with two children could receive up to $8,000. Families with three could receive up to $10,500.

The bill brings Minnesota’s tax code into alignment with the federal code, which underwent several changes in recent years as Congress passed pandemic-relief bills.

Another proposal includes providing lower-income families $1,000 per child, with a maximum credit of $3,000 — what the administration says could reduce child poverty by 25%. The credit would start to phase out for families making $50,000 a year or more and would result in $1.3 billion in tax cuts over the next four years. A proposed Department of Children, Youth, and Families would take over administering family programs such as early childhood education and public assistance for families.

Walz and Flanagan are also calling for $158 million for student mental health funding for counselors, nurses and social workers.

The proposal is the first piece of the governor’s budget recommendations, and more details are set to come next week, Walz told reporters. The governor is required to make his recommendations to the Legislature in January of a budgeting year, and lawmakers and the governor must pass a budget for the next two years by June.

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Gov. Tim Walz presents details of his new plan to make Minnesota the "best state in the country for kids" at Adams Spanish Immersion School in St. Paul on Tuesday.
Alex Derosier / Forum News Service

Democratic-Farmer-Labor lawmakers, who now have majorities in both the Senate and the House, have signaled they, too, want to make education a priority in the budget. Walz will have to work with them on a final plan, which could look different from Walz’s initial proposals after the legislative process. The exact numbers could also change after the Department of Revenue releases another budget forecast in February. Minnesota’s most recent two-year budget was more than $50 billion.

Minnesota has a historic $17.6 billion budget surplus, which has only continued to grow as lawmakers have not passed any significant legislation on how to use the money. Much of the surplus is one-time cash and will not appear again in future budgets.

Meanwhile, Republicans, who no longer have a majority in the state Senate, described Walz’s proposal as unnecessary government expansion and questioned how the plan might hold schools accountable for their performance after significant funding increases.

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“The Democrats’ education spending proposals are really a public relations stunt to send even more money into struggling schools without any accountability to parents or student achievement,” said Sen. Jason Rarick, R-Pine City, a leading minority member on the Senate Education Finance Committee. “Providing free lunches for every student ignores the already available funding for families who need financial assistance.

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Jason Rarick

"Neither Senate Democrats nor Gov. Walz explains the impact eliminating these programs will have on other funding that is tied to free and reduced meals.”

Rarick further added that the creation of a new state government agency was “another guaranteed explosion in spending.” Senate Republicans said they continue to support the special education cross-subsidy which Walz proposed cutting in half. The cross-subsidy is the amount school districts contribute to special education programs.

GOP lawmakers also pointed out that the Legislature in 2021 passed the biggest increase to the school funding formula in 15 years on bipartisan lines.

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Alex Derosier covers Minnesota breaking news and state government for Forum News Service.
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