Just as the grass turns green and the robins reappear, another sign of spring emerges at the Minnesota Capitol: legislative gridlock. Out of sight from all but a few lobbyists and far from the minds of the public, legislators are only now starting to deal with the stark reality of the $6.4 billion state budget shortfall.
But any signs of real budget discussions seem to be a long way off. While it is no surprise about not having an agreement on taxes with the governor, who has been clear from the outset that he wants no tax increases, the two legislative bodies are heading in different directions. The DFL-controlled Senate wants another $2 billion in new revenue, while the House seems to be willing to settle for a mere $1.5 billion in new tax dollars.
Then there is the issue of how much federal money the state will receive via the federal stimulus package. The House has put the number at $2 billion, while the Senate states the number will be $2.6 billion and the governor reports the federal relief will be $3.6 billion. Having engaged in these budget debates for 16 years, I know that there is one thing that is required at the beginning of the process: agreement on the starting point. Without an agreement on the amount of the new federal dollars Minnesota will have to spend over the next two years, it would appear nearly impossible to reach a reasoned budget solution.
Slow work on federal tax conformity
The legislative session is now more than half over, having started in early January, and to date very little has been produced. As I pen this article, the House/Senate Conference Committee on H.F. 392 is meeting; this legislation is commonly referred to as the federal tax conformity bill. Since the state Legislature adjourned last spring, the U.S. Congress has made numerous changes to the federal tax code. Therefore the Legislature must decide if Minnesota will adopt these changes or not, in order for Minnesotans to properly complete their 2008 tax forms.
If the House and the Senate fail to complete this basic task during the first three months of their work schedule, it does not bode well that they will be able to come to an agreement on a total revenue package in just seven weeks, before the May 18 constitutional adjournment. If there is no agreement on conforming to the changes in federal tax law, thousands of Minnesota taxpayers will be paying higher state taxes or have to file amended returns in order to claim their refunds.
Lack of progress on such basic tax issues as conforming to federal tax law changes sends the signal the House and Senate Tax Committees lack any real leadership; conforming to federal tax changes is considered “tax policy 101.”
When I was chair of the House Tax Committee, the issue of federal tax conformity was handled with a phone call to my Senate counterpart, then Senate Tax Committee Chairman Larry Pogemiller. We didn’t wait until two weeks before the April 15 tax filing deadline to resolve this issue.
Prospects for timely action don’t seem good
If there is failure of the House and Senate to reach a timely agreement on an issue like federal tax conformity and the leadership can’t agree on how much one time federal money there will be to help balance the State’s budget, how and when will these same legislative leaders possibly agree on a balanced state-budget solution?
Without a budget agreement by the end of the current biennium (June 30, 2009), legislators will be tempted to pass legislation to continue state spending at its current level. Continued spending at the current level will only make balancing the budget more difficult going forward.
Instead of waiting until June to start daily budget discussions with House and Senate leaders, Gov. Tim Pawlenty should start meeting with legislative leaders now. Given the speed of this year’s legislative process, this approach might help to avoid what is likely a sign of summer, the DFL leadership threatening a government shutdown.
Phil Krinkie is a former Republican state representative from Lino Lakes and the president of the Taxpayers League of Minnesota. The eight-term lawmaker chaired the House Tax Committee and two other House panels. This article originally appeared in the St. Paul Legal Ledger Capitol Report.