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Dayton says his proposed deal is bad for state, but better than indefinite shutdown

As you have no doubt heard by now, Gov. Mark Dayton dropped a medium-sized bombshell at the Humphrey School this a.m., offering a deal that could end the partial state government shutdown.

Gov. Mark Dayton
MinnPost/Terry Gydesen
Gov. Mark Dayton

As Dayton presents it, he is accepting an offer that the top Republican leadership of the Legislature — Speaker Kurt Zellers and Majority Leader Amy Koch — made in writing to him at their last meeting before the shutdown. It involves no tax increase and would enable state spending to reach about $35.4 billion by borrowing about $1.4 billion in two forms — another school “shift” and borrowing against future state receipts from the big tobacco settlement.

He added three conditions to finalizing the deal:

  1. The removal of all non-money policy issues on which Republicans had at earlier stages insisted, including hot-button issues like a ban on stem cell research and additional restrictions on abortion.
  2. The Repubs drop their demand for a 15 percent across-the-board reduction in the state workforce.
  3. Inclusion in the deal of an agreement to pass a bonding bill worth at least $500 million for construction projects.
Audio from Governor Mark Dayton’s address this morning.

If the Repubs agree, Dayton said the Legislature should be able to hold a short special session to ratify the deal.

Basically Dayton still defends his strong belief that taxing the rich to avoid cutting too deeply into state spending is right, but he has given up hope of making any progress on convincing Republicans of that or of getting to them agree to split their differences in order to get a budget deal.

After the Humphrey event, I asked Dayton whether his offer was on a “take-it-or-leave-it” basis. He shrugged but didn’t answer directly, relying on his belief that since he is accepting Koch and Zeller’s former offer, they should take it, although technically the deal was not left on the negotiating table and some Repubs may cavil over details and Dayton’s three conditions. Dayton said he would be “astonished” if the Repubs argue that their former offer is no longer available for him to accept.

His second condition (the 15 percent workforce reduction) is really a restatement of the first condition (remove all policy issues) since the reduction of the workforce is a policy issue not directly tied to the taxing and spending budget. And for both of those conditions, he is relying on public statements that Koch and Zellers made that they had removed all policy issues from their final offer. We’ll see if they feel that way.

Dayton said he expected to meet with Koch and Zellers later today and would soon learn whether the deal could be sealed.

Dayton says the deal is a bad one for Minnesota, but better than accepting an indefinite government shutdown. He seemed relatively satisfied with the total amount of state spending the deal would allow, but objects to borrowing $1.4 billion instead of finding new revenue. He said is more troubled by the “tobacco bonds” idea than by extending and increasing the school shift.

But as his letter to the leaders (which he read aloud at the Humphrey event) states:

“You have emphatically rejected all of my proposals [to raise revenue]. You have repeated that your caucuses will oppose any additional tax revenue from any source, even my proposals which limit the income tax increase to only the richest 2%, or even the richest 0.3% of all Minnesota taxpayers.”

He has heard privately from many Republicans who have ideas for raising revenue, but said they have been unwilling to do so publicly. Now he hopes that over the next few days, some new revenue ideas will be floated to avoid some of the borrowing. He wasn’t specific about what those ideas might be and I doubt he really expects any movement by the Repubs to substitute new revenue for the borrowing.

Dayton gave every appearance of being serene and confident that he was doing the right thing, even though he hates the deal, knows he will be accused of caving in and of rewarding Republican intransigence with concessions, and possibly inviting more intransigence in the future by anti-tax conservatives here or in other states and in Washington.

 During a question-and-answer session with the Humphrey’s Larry Jacobs, Jacobs asked Dayton directly whether his offer amounted “capitulation.” He said no, given the level of intransigence on the other side of the table and the damage that the continuation of the shutdown would cause he was accepting “the only viable option that’s available.”

He made several vague appeals to the electorate to send more progressives to the Legislature ahead of the next biennium. Dayton’s term lasts until 2014 while all members of both houses will face reelection in 2012. But for now, he said, “those are the people that the people of Minnesota sent to the Legislature.”

He implied that Repubs are unconcerned about the human impact that their policies cause. He described them as people for whom “unfortunately it all comes down to a number,” referring to the size of the budget, and too many “people in the Legislature think that the lower the number the better.” Later, he described them as people who believe that “everything government does is bad,” so the less it does, the better.

He said he had never had to deal with people for whom “intransigence is strength and compromise is weakness.”

“Ignorance and arrogance is a very dangerous combination,” Dayton said, comparing the current Republican legislators to the Bush administration during the run-up to the Iraq war. (Dayton was in the U.S. Senate at the time and voted against the Iraq War resolution.)

Jacobs asked Dayton about the Republican view that someone has to draw a line in the sand to force government to live within its means in order to avoid ruining the economy. He replied:

“If everybody were paying their fair share of taxes in Minnesota, and that was the amount of money they generated, I’d be the first to say: ‘That’s our means, and we have to operate within our means during good times and bad.’

“But not everybody is paying their fair share of taxes, as the facts show. And ironically those who are most capable of paying their fair share are not doing so. For Repubs to posit that the price we have to pay to keep businesses in Minnesota is an unfair tax system, and allowing the very wealthiest people in the state — people who are making a million dollars a year, to pay a smaller percentage of their income in taxes than middle income people. I don’t think it’s right.”

A question from the audience: “When will Minnesota leaders learn how to compromise?”

Dayton: “Not yet, but hopefully this lesson will be instructive for all of us.”

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Comments (26)

  1. Submitted by Jon Kingstad on 07/14/2011 - 02:38 pm.

    I agree with the Governor. He’s taken the higher road by compromising on his principles and in my opinion the right thing. My only question is what happens next January, when the State has to go through this again? Aren’t even numbered years the years that bonding issues were traditionally taken up? I cannot believe the fanatics are going to change their minds about taxes.

  2. Submitted by Rachel Kahler on 07/14/2011 - 03:03 pm.

    Fortunately, Gov. Dayton, you have a couple of years to redeem yourself after the legislature’s turnover next year. The last thing I will support in this “compromise” is raping the school systems again and borrowing against the tobacco settlement in payday loan style. I’m disgusted, but I’m prepared to be further disgusted when the Repubs predictably pull the rug out on this deal. I will be (pleasantly is not the word) surprised if they don’t.

  3. Submitted by rolf westgard on 07/14/2011 - 03:05 pm.

    Somebody had to blink, and unfortunately it was Dayton to another Pawlenty type ‘kick the can down the road’ deal. Mediocrity prevails in every corner of our Capitol. Where do we find these people?

  4. Submitted by Alec Timmerman on 07/14/2011 - 03:27 pm.

    Make no mistake about it, the Republicans got their job killing cuts.

    The jobs that a minuscule tax increase would have cost, if any, will pale in comparison to the jobs the budget will destroy.

    The Republicans won’t stand for “possibly job killing tax increases”

    But Republicans are all for job killing spending cuts.

    Minnesota already has the 10th leanest state workforce, and the Republicans want to cut it by 15%. These are your neighbors, families, and friends who will lose their jobs. Why are these jobs just throw away jobs.

    Republicans are the job killers, not to mention throwing 150,000 working Minnesotans off health care makes them people and job killers.

  5. Submitted by Eric Ferguson on 07/14/2011 - 03:30 pm.

    “compromising on his principles”

    Did he really compromise his principles, or was his principle doing what’s best for the state, even if he doesn’t get what he wants?

  6. Submitted by Bill Gleason on 07/14/2011 - 03:35 pm.

    I support the governor’s position.

    Just as it is not possible to bargain with suicidal terrorists, it is not possible to bargain with people who have signed the Grover Norquist pledge. This mentality is what is at the bottom of the no new taxes impasse.

    What Dayton has accomplished is to decrease the amount of damage that will be done to the state by these phoney methods that the GOP has proposed, at the same time saying that he agrees to them but does not agree with them.

    For the GOP to claim victory in this case is silly because they have, in the long run, handed Dayton and the DFL the opportunity in 2012 to go back and do this right. Tax reform and fiscal integrity will be on the table and the legislative majority and the governor will be of the same party.

    Thanks GOP for effectively slitting your own throats.

  7. Submitted by Richard Pecar on 07/14/2011 - 03:46 pm.

    I can’t join the “rationalizers” and stutter along…”er, ah, gee whiz, ahem, well Guv, nice try…we’ll get’m next time…two years, yeah, we can wait”.

    Managing Minnesota isn’t managing a little league ball game, and after losing saying, “nice try kids, we’ll get’m next time”.

    The Guv wimped-out, plain and simple.

  8. Submitted by C.A. Arneson on 07/14/2011 - 03:53 pm.

    Here’s a suggestion for raising funds. Allow all property owners in Minnesota the opportunity to buy the mineral rights to their property. The resulting revenue could either go into the state’s general fund or directly to the county in which the property is located.

  9. Submitted by Lance Groth on 07/14/2011 - 04:12 pm.

    I admire your optimism, Bill (#6), and I hope you’re right. But I’m afraid I see this as capitulation and a grave mistake.

    Dayton can never go to the mat with the repubs again. They will never take him seriously. They’ll figure if he caved on his top priority, he’ll cave on anything. He’s now lame; he just slashed his own achilles tendon.

    Once again, nothing is really solved, the can is just kicked further down the road, and the same issues will still be there in the next budget session.

    Why, oh why, did he do this one day after the Senate budget chair said she would lead the effort to find new revenue sources? Why didn’t he let that play out? Just when there’s a crack of daylight and a path in front of him, he raises the white flag.

    I, for one, am bitterly disappointed. I thought we had a fighter. Instead, he’s just one more dem rolling over to repub bullies.

    Now I wonder, did Obama mean it when he stood up to Cantor, or will he fold too?

    Are there *any* Dems who have the stomach to take a fight to its finish?

    It seems not.

  10. Submitted by Gregory Lang on 07/14/2011 - 04:18 pm.

    Minnesota expects to receive nearly $320 million in tobacco payments in FY 2012-13.

    Gov Dayton proposes “borrowing” $700 million from future tobaccos settlement revenue. If it is a true loan the interest rate will be relatively good but that will add to the potential liability of the state of MN.

    If sold as a future “securitization” with no future liability to MN (a “clean sale”) the rate of return will be fairly low. (think of selling bad debt). The future payments depend on mostly “big tobacco” remaining solvent businesses and people continuing to smoke primarily “big tobacco” brands.

    Maybe, maybe not. Off brand and “bootleg” cig sales are growing as part of market share, abet slowly. The original master settlement had some odd provisions. In one non-settlement (“small”) tobacco could join. If they didn’t they would need to escrow 150% of the payment in case their are any future claims against them. The original tobacco litigation is based on the idea that cig sellers deceived the public about the dangers of smoking. It’s hard to see how new (“small”) tobacco is doing this.

    Of course, if new/small tobacco doesn’t have the settlement surcharge they potentially have a price advantage over “big tobacco”. It is slow but legal challenges are slowly making their way up the court ladder. Basically, the tobacco settlement is not the best future revenue stream.

    If you in the mood to read here is an explanation of tobacco securitization Iwrote two years ago.

  11. Submitted by Alec Timmerman on 07/14/2011 - 04:31 pm.

    Richard, I am very, very disappointed, but my mortgage and family were not threatened by this shut down. When it came to those 20+ thousand families, I bet they didn’t consider it “wimping out”. I wish things were different, but I will not judge so harshly the actions of a man who had these families in mind.

  12. Submitted by Alec Timmerman on 07/14/2011 - 04:34 pm.

    #9 Lance,
    I don’t believe, after this move, that Dayton will have to acquiesce to the ideological terrorists again. He gave up the battle to win the war. MN GOP extremism is now on official record, and they will lose the house and senate. I think in losing this battle we may just win the war.

  13. Submitted by Neal Rovick on 07/14/2011 - 04:40 pm.

    The Republicans will walk away from this deal.

  14. Submitted by Richard Schulze on 07/14/2011 - 04:54 pm.

    Tim Pawlenty is the real winner.

    Both the DFL governor and the GOP have just validated his budgeting principles.

    A pox on both their houses…..

  15. Submitted by Lance Groth on 07/14/2011 - 05:12 pm.

    Alec – I hope you’re right. Maybe I’m just unduly depressed at the unexpected turn of events, but I see another possible outcome. Voters tend to have a short attention span (just look at the blame heaped upon Obama for the economic mess, when the collapse happened in ’08 under Bush), and Americans tend to reward winners and punish losers, so I’m afraid it’s entirely possible that Repubs will come out of the 2012 elections with even bigger numbers in the legislature. They will certainly be seen to be the winners in this, and it may feed into the unfortunate impression some have (incorrectly so in my mind) of Dayton as flakey. It just doesn’t look good to take the state into shutdown, and then turn around and accept the June 30 offer after all. Voters like strong leaders who are sure of themselves.

    Dayton’s problem is that he’s a nice guy. He cares about governing well, and it bothered him to hear about the pain the shutdown was causing. The other side cares only about winning. But the way to beat a bully is to stand up to him, and probably take a bloody nose in the process. Short term pain for long term gain. If you start the fight but then give up when the fight is still even, the bully owns you forever after. I’m afraid Dayton, and Dems by extension, just got owned.

    But I’ll continue to hope the voters are as savvy as you suggest.

  16. Submitted by dan buechler on 07/14/2011 - 05:21 pm.

    Maybe Margaret A-K was right you can’t campaign on raising taxes she seemed unwilling to raise the word. She also seemed adverse to making those who were well off 125K+ even pitch in a little bit.

  17. Submitted by Jon Kingstad on 07/14/2011 - 05:23 pm.

    @#5 Eric: I think the Governor did what he believed was best for the state and while he compromised or backed off what he believed was the best means to that end, he did so to achieve a temporary goal which was alleviate the suffering created by Republican inflexibility and fanaticism. I’m thinking while this deal, if accepted by the Republicans, postpones the shutdown for another eight months, we should be back at this place again a year from now but with elections much closer than they are now.

  18. Submitted by chuck holtman on 07/14/2011 - 05:36 pm.

    I could understand the Governor’s conceding, in that the Republican position is ideological, is not concerned about impacts on people and therefore offers no reason for the Republican caucus to move an inch. However, I could understand this only if capitulation is part of a strategy to force the Republican caucus to own its position and to heighten the choice for next year’s voters. At this point, how the Republicans will “govern” has been made clear. Ordinary Minnesotans will have one more chance to decide which way they want to go, and we’ll get the government we deserve. But I have absolutely no confidence that this capitulation rests on any such strategy. Instead, by conspiring to raid school dollars and engage in other accounting chicanery, the Governor’s position seems intended to descend from the high ground, blur differences and ensure shared ownership of the Republican “vision.”

  19. Submitted by Tony George on 07/14/2011 - 06:06 pm.

    I would suggest no state money for the Minnesota Vikings unless there is a very large surtax on all Minnesotans who make over $200,000 a year. As long as the rich in both the state and country are totally under-taxed, the United States will be hurting severely. The bad economy is completely the result of the dismal failure of the George W. Bush tax cuts. This is no time for Koch-addled Republican legislators.

  20. Submitted by Joseph Skar on 07/14/2011 - 06:55 pm.

    I hope everyone enjoys TPaw’s third third term as much as I do. But seriously don’t you D’s ever get sick of failing. Did you really believe that you were going to get a rate increase passed without legislative majorities. If the President couldn’t do it with majorities in congress how in the world do expect Mark Dayton to do it. Personal opinion but MAK would have been a way way better choice, money can’t buy you love but it will get you elected.

  21. Submitted by Dennis Tester on 07/14/2011 - 07:00 pm.

    I want to see the actual figures and what percentage increase it represents. I also want to see why Dayton absolutely had to have that extra $1.4 billion shifted from other purposes and exactly how it will be used.

    He could have had this deal two weeks ago and he put thousands of people out of work for nothing.

  22. Submitted by rolf westgard on 07/14/2011 - 07:06 pm.

    I, too, hope that your are right, Bill(#6).

  23. Submitted by Dennis Ringstad on 07/14/2011 - 07:41 pm.

    The only constituency that matters in our country is the uber-rich. State employees suffer not knowing if they will be able to make their mortgage while the rich fund Tea Party representatives to eliminate state, federal and private middle-class jobs.

  24. Submitted by Claire Lundgren on 07/14/2011 - 10:21 pm.

    I’m hoping the Governor and Legislators will take a good look and pass a Racino as a means to take some of the stress off the budget. It’s a quarter of a billion dollars ($250,000,000) that is there for no investment or concessions on the part of the state. Pretty good return! The only thing that threatens this solution, favored by 70% of Minnesotans, is how much the legislators want to protect a monopoly a couple miles to the south. Can the state afford to lose a viable industry that pays fees and taxes in favor of a business that pays no taxes and was never promised a monopoly, just no taxes.

  25. Submitted by Ken Tschumper on 07/14/2011 - 11:53 pm.

    Some of the comments here are a little confused.

    This is the budget for this biennium. Only minor budget issues will be taken up next year before the election, unless there is a big change from the budget projections.

    As a former DFL legislator, I have to say I think this deal is a disastor for Dems. Dayton has really put them in a bad situation. If you are a current DFL legislator, and you vote against the deal, the Repubs will accuse you of voting to continue the shutdown in the 2012 election. If you vote for it you reaffirm the Repubs budget priorities. If you are a Dem who wants to challenge a Repub incumbent you have to run against the GOP and the Governor as well. Dayton now owns this budget.

    I think Groover Norquist is the big winner here.

    It didn’t have to be this way. All the polling I saw showed Dayton winning and the GOP losing the support of the public. If you were listening to the news the last few days. you could hear all kinds of Repubs starting to crack. The Repub leadership had to keep all 108 members together. All Dayton had to do is wait.

  26. Submitted by Jon Kingstad on 07/15/2011 - 11:09 am.

    @25 Ken: As one of the confused, thank you for your clarification. I don’t think voting against the deal prevents the Dem. legislator from pointing out why. This shutdown has driven home the point that the “tax and spend liberal” bumper-sticker slogan by the Republicans is beginning to wear thin as people see that not raising taxes, especially on the wealthy who have benefitted from the federal tax cuts, refuse to pay their fair share for state services. Republicans who run on any “no new taxes” in the next election are going to have to some ‘splainin’, as people see their property taxes go up despite the rhetoric.

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