Call me naïve, but I couldn’t help hope that a forum held Monday on Minnesota’s $5 billion budget gap would show some sign of movement toward resolution — some softening of the rigid partisan divide on taxing and spending.
After all, we’re less than six weeks away from the official end of this legislative session. Time for less posturing and more action, I thought, as top Republican legislators — Senate Majority Leader Amy Koch and House Speaker Kurt Zellers — sat down at a table with commissioners who serve as the DFL governor’s chief fiscal advisors — Myron Frans of the Revenue Department and Jim Schowalter of Minnesota Management and Budget.
Steve Sviggum didn’t boost my hope, though, as he began moderating the forum at the University of Minnesota’s Hubert H. Humphrey School of Public Affairs. The U of M regent and former Minnesota House speaker pointed out that Gov. Mark Dayton and GOP legislative leaders actually have moved in recent weeks to widen the gap between them, not close it.
Dayton, for example, has proposed some $3 billion in tax increases on top earners. They are rejected by the Republicans controlling the Legislature.
For their part, Republicans propose spending cuts that are denounced by DFLers. For example, the Republicans would eliminate more than $600 million in aid to cities and counties, something the DFLers insist would drive up property taxes.
Add it all together and the two sides are more like $10 billion apart, Sviggum said, not the mere $5 billion gap defined by finance experts.
Patches of common ground
Still, I wasn’t the only one looking for movement. An audience member sent a question to the podium asking whether there is any common ground on bringing more tax revenue into state coffers.
“There is common ground about the system being gamed,” Frans, the Revenue Commissioner, answered.
The complexity of the tax system has created “a lot of opportunity,” to take advantage of loopholes, he said.
I thought I saw Koch and Zellers nod their heads.
As an example, Frans described the recent New York Times story saying that General Electric reported $5.1 billion in profits from U.S. operations in 2010 and paid no federal taxes but instead claimed a $3.2 billion tax benefit.
The legal loopholes that let GE off the tax hook are similar to provisions scattered throughout Minnesota’s tax code, Frans said.
“We can agree, let’s try to make the system more fair,” he said.
With reform of the tax system, Republicans might even find room for more of the tax cuts they champion.
“If you do the right kind of base broadening, you can lower the tax rate,” Frans said.
Koch said she agreed with at least some of the commissioner’s comments on the need for tax reform.
Hope rises!
But she added that with just a little over five weeks left in this session “we don’t know if we can have that discussion in this budget cycle.”
Hope falls.
Pressing hard
Sviggum pressed hard on the panel to reveal some common ground. He instructed Frans and Koch, seated side-by-side at the table, to look each other in the eye and state what they want and what they were willing to give up. Schowalter and Zellers were to do the same.
“I want some revenue,” Frans told Koch. The state’s budget problems can’t be solved “realistically and fairly,” he said unless the Republicans give some ground on their refusal to raise more money.
What would he give up? “Maybe we don’t need as much revenue as we think we do.”
Frans outlined common ground, too. He said the Dayton administration is on board with the general Republican move for streamlining government, for “smarter, wiser and better,” approaches to serving Minnesota citizens.
“We can do better,” he said. “We will do better. … I will work with you on that.”
Negotiate now
Then it was Koch’s turn. She didn’t really respond to Frans’ revenue request, although she had made it clear earlier in the forum that many Republicans consider it to be it is a nonstarter for negotiations.
What Koch said she wanted is “to start negotiations and discussions now.”
Conference committees are in place to start reconciling the different versions of the many House and Senate bills that speak to the budget’s bottom line.
And some of those bills are very close to the position of the Dayton administration — for example, on funding for public safety and the judiciary — Koch said.
Both sides are close on the amount of funding for K-12 education, too, she said. But they differ on the way the money should be spent, with Dayton stressing early-childhood education and all-day kindergarten while the Republicans emphasize literacy.
“Let’s all come together now,” she said. “Let’s not wait until May.”
It was a timely call for action. And she did identify some significant islands of agreement, but she sailed past the vast territory where the two sides differ.
Finish Act Two!
Schowalter gave even less ground when it was his turn to face Zellers.
“This is a three-act play,” he said.
In the first act of the budget drama, the governor lays out his budget. The script of the second act calls for the Legislature’s full budget proposal. Finally, in tense Act Three, the two sides must come together.
“We are starting to talk about the third act, and I don’t think we have finished the second act,” Schowalter scolded.
DFLers and state fiscal analysts allege that at least $1 billion of the savings claimed in Republican bills are overstated.
Sen. Richard Cohen, DFL-St. Paul, put it this way in an opinion piece published by the Star Tribune on Monday: “The current Republican budget plan in the Senate is banking on almost $1 billion in mythical ‘savings’ and ‘reform’ that is simply based on invented money. The House plan uses even more fictional money in resolving the budget deficit of $5 billion.”
As an example, he said Republicans propose to save $46.2 million by changing the way the state buys goods and services. But state fiscal analysts say that change would save only $400,000.
Republicans have disputed the professional state analysts, and brought in their own outside consultants to come up with the numbers they are using to claim they have produced the bills necessary to balance the budget.
Schowalter is not convinced. He said at the forum that there is “at least a billion we need to nail down,” before the Legislature’s budget — Act Two of the process — truly is finished.
Dueling analysts
Finally, it was Zellers’ turn. He didn’t sound conciliatory. “We do want to bring consultants from the real world,” he told Schowalter.
He challenged Schowalter to join him in locking the state analysts in a room with the GOP’s outside consultants until they can agree on the budget impact of the various bills.
Still, Zellers did raise hope again. He said common ground already has been established with two “landmark pieces of legislation.”
In a move that disappointed many of his supporters, Dayton agreed to a GOP bill that would streamline the permitting process for businesses seeking to expand or build new operations in Minnesota. In the second deal Zellers lauded, Dayton compromised with the GOP on alternative teacher licensing.
Zellers said Dayton’s movements on those issues are seen as “a giant step of good faith” that the two sides can negotiate on some major points.
Meeting the deadline
On one point, the two sides did agree.
Sviggum asked whether the session could finish with a budget by May 23, the constitutional deadline for the Legislature’s adjournment. If the budget isn’t produced by then, Dayton would need to call a special session in order to avoid a government shutdown after June 30, when the current fiscal year ends.
All four said yes, they could meet the May 23rd deadline.
Maybe. But one day very soon we’ll have to see a lot more real movement than we saw on Monday.
Sharon Schmickle covers international affairs, science, the economy and other topics.
