Some questions — and answers — about Minnesota budget deal and what happens next

Will anyone dare mention the word "Vikings" in the state Capitol during this special session?
MinnPost photo by Terry Gydesen
Will anyone dare mention the word “Vikings” in the state Capitol during this special session?

At the conclusion of an interview today on Minnesota Public Radio, Gov. Mark Dayton quoted Yogi Berra to sum up the state of negotiations:

“It ain’t over till it’s over.”

But overall, the governor sounded confident that the deal is done; that he will call a special session as soon as Monday, and that lawmakers will sign off on the Thursday deal that he and GOP leaders reached.

Ah, but there remain so many questions:

• Will state workers be compensated for their time lost? (Dayton wants them to be.)

• How does the tobacco bond arrangement work?  

• Will Minnesota pols ever learn to get along?

• Will there be efforts to throw monkey wrenches — or social policy — into the bills?

• Is there a “rat” lurking behind the bonding bill portion of the settlement, or will those big carp be stopped at the Coon Rapids dam?

• Will anyone dare mention the word “Vikings” in the state Capitol during this special session?

But the biggest question of all is this:

• Are there enough votes in the Legislature to get this deal done and get beer back on the shelves?

The basic answer is that Republicans clearly are going to have to be almost universal in their support, because it appears that few DFLers will sign off on the revenue portion of this deal. Shifting school funds and selling tobacco bonds weren’t exactly what DFLers had in mind for resolving the budget stalemate.

Many DFLers are indicating they will not support the deal.  

But should they?

“I wouldn’t vote for it,” the governor said. “It’s the Republicans’ responsibility.”

Dayton did go on to say that there are other portions of the settlement — the K-12 bill, for example — that he believes DFLers will support.

But that takes us back to the big question: Can the Republican legislative leadership get almost unanimous support for this deal?

Despite all the “not one penny more” talk of the most strident members of the Republican caucus throughout the session, the answer appears to be that in the end, Republicans will follow the leaders.

The first big clue that Republicans will vote thumbs up on the deal came in the form of a press release from Republican Party Chair Tony Sutton Friday morning.

Tony Sutton
Tony Sutton

Sutton was singing the praises of the deal, and Republicans have tended to head in the direction party leaders point.

“In the wake of what has been a highly partisan, campaign-like atmosphere since Gov. Dayton shut down state government on July 1,” Sutton said in a statement, “it might be tempting today for some to declare a partisan victory in negotiations. And while the Republican Party certainly salutes House Speaker Kurt Zellers and Senate Majority Leader Amy Koch for being strong advocates of controlling taxes while showing a willingness to negotiate on budget details, we realize that a budget that slows the exponential growth of government is but one important step toward returning Minnesota to prosperity and growth.

“While the media, the pundits and the people of Minnesota overwhelmingly are characterizing the governor’s decision a victory for Republicans, at the end of the day the real winners are the people of Minnesota.”

In other words, the party is telling GOP pols to vote yes.

Sen. John Marty, DFL-Roseville, predicts that even in the Senate, where the most strident Republican block exists, there will be unanimous Republican support for the deal.

He noted that on virtually every issue this session, the Republicans voted as a 37-0 block on big votes.

“If they step out of line, it’s off with their heads,” said Marty, contemptuously.

Sen. Dave Senjem, R-Rochester, also said he expects that his brothers and sisters will fall in line behind the deal.

There will be grumbling, he predicted, about the school shift, and some will be upset about the loss of some of the policy provisions the GOP had written into budget bills. But the big policy issue for most Republicans — Voter ID — only disappears momentarily, Senjem said.

“We’ll have that on the ballot as an amendment,” he said.

Others, such as Sen. John Howe, R-Red Wing, were predicting universal support among Republicans.

“When your leaders ask for something, you have a huge obligation to support them,” Howe said.

Some other big questions:

• Is there support for the bonding bill?
The governor is claiming that one of his victories in the deal that so many DFLers are bemoaning is the $500 million bonding bill that was a part of his agreement with GOP leaders.

But Rep. Alice Hausman, DFL-St. Paul, fears “she smells a rat” in this portion of the deal. She’s hearing rumblings that there were “no guarantees” from Republican leaders to Dayton that they could deliver the votes in support of a bonding bill.

Rep. Alice Hausman
Rep. Alice Hausman

Remember, bonding bills require super-majorities, meaning 81 votes in the House and 42 in the Senate.  That means Republicans and DFLers need to agree on this portion of the deal — and you know how that’s been working out.  

There was some rapid wheeling and dealing going on at the Capitol today as legislators worked to rebuild a bonding package.

In the end, DFLers who feel so let down over the framework of the budget deal probably will be inclined to support bonding. (The only reason they didn’t support a bonding bill earlier in the session is because they thought it was far too small.)

Ultimately, this is a part of the deal that their union supporters want  because bonding will create jobs in the construction industry.

Bonding also generally gets the support of local chambers of commerce, too, meaning as much as Republicans hate spending money, they don’t want to block a project in their district.

And everyone will likely agree to do the project at the Coon Rapids dam designed to block those flying carp from entering our lakes.

Still, the big question remains unanswered: Will Republican leadership deliver their caucuses?

“It is their obligation,” said Hausman.

• Will something change to end this constant budget angst?
Even after this disastrous session and settlement that pleases no one, there are optimists among legislators.

About a week ago, Sens. Howe and Ann Rest (a Republican and a DFLer, respectively), along with Rep. Melissa Hortman, DFL-Brooklyn Park, met with Dayton to talk about some fundamental changing of the tax structure that presumably would help bring some stability to state government finance.

These three are among growing numbers of legislators and good-government types who believe Minnesota must move away from its reliance on the income tax if it’s ever going to become financially stable.

The  three believe the sales tax — a “consumption tax,” in Howe’s words — is the answer.

Howe would like to see the income tax all but disappear. DFLers believe there always will be a place for a more progressive tax. (Recall that phrase, “tax the rich.”)

But both sides appear to believe that if the sales tax were broadened to include services, the rate could be dropped and the state would be a winner.

Howe, for one, believes this is the sort of reform the governor and Republicans will work on together.

• Are tobacco bonds good for you?
When governor Tim Pawlenty proposed using tobacco money to float bonds to help fix the budget woes of the state, he was danged near laughed out of the Capitol — by Republicans!

The option of using tobacco funds to plug the budget was defeated 132-2 in the Minnesota House, with such people as current House Speaker Kurt Zellers voting against the idea.

Now, it’s going to be a major player. It works like this: As part of the tobacco settlement of 1998, tobacco companies have been paying substantial amounts of money into the state’s general fund. In the next two years, tobacco is supposed to pay Minnesota about $320 million.

The money fluctuates, based on the profitability of the tobacco companies, sales of the products, etc.

Now, that revenue would be used to support the sale of state bonds. But of course, that means we pay back to bondholders more than we receive.

During the depths of the credit crunch, states were having a difficult time selling these bonds. But now state officials say, there is a market for the bonds, which will be relatively low grade, meaning the state will be hit with a relatively high rate of interest.

• Skol, Vikings?
Conversations with a substantial number of legislators makes it seem unlikely that the Viking stadium issue will be brought up in this particular special session.

In fact, most legislators either start gagging or laughing at the notion that anyone would talk “Vikings” at this moment. Why, after all, would legislators already facing the wrath of Minnesotans for their part in shutting down government, want to start tossing money at the owners of the football team?

On a public radio interview Friday morning, Senate Minority Leader Tom Bakk suggested that there may be some talk about the Vikes in the special session; but talk is cheap. There won’t be serious money talk until a special session in the fall.

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.

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Comments (23)

  1. Submitted by Gregory Lang on 07/15/2011 - 06:27 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.

  2. Submitted by will lynott on 07/15/2011 - 07:11 pm.

    The Rs have always blindly followed their leaders. They’ll do it now, too.

  3. Submitted by Jon Kingstad on 07/15/2011 - 07:40 pm.

    While I sense the State is breathing a sigh of relief that the shutdown may be over, it’s not really over until Dayton signs a bill approving the budget. Right now, Dayton’s agreement to a special session might not mean an agreement if Zellers and Koch cannot keep their fanatic martyrs in line. Just so we’re clear who these fanatic martyrs are protecting, I’ll link to a not entirely dated in Newsweek about our Galtian overlords and who thinks they’re really in charge around here:

  4. Submitted by will lynott on 07/15/2011 - 07:43 pm.

    So, Sutton knows defeat when it’s staring him in the face. I wouldn’t have given him credit.

  5. Submitted by Claire Lundgren on 07/15/2011 - 08:42 pm.

    I hope the legislators will not overlook Racino as a way to paliate some of the pain. There is about $250,000,000 with no strings attached there for the taking. It could go a ways in repaying the school debt…or be used for job recruitment and creation… or fund research…or build infrastructure…etc. It won’t solve the whole crisis but it will be a right step forward and at the same time will put some new life into a valuable industry. NO TAXES REQUIRED!

  6. Submitted by Claire Lundgren on 07/15/2011 - 11:28 pm.

    If the Governor wants to repay the state workers he should also pay the Canterbury employees and backside workers. Essentially, they were also laid off by the state. They lost four weeks of racing and weren’t eligible for unemployment. Only, because the animals could not be left alone, they had to continue working without pay.

  7. Submitted by John Ferman on 07/15/2011 - 11:46 pm.

    When the June 29h GOP terms were presented to the Governor, here was a long list of issues on which the agreement was contingent. All the news outlets have mentioned only four of them. My question is what about the others and, of course, the real biggie – the redistricting bill. That is the redistricting plan that would make the Republicans the dominant party for the next decade. That is most dangerous. So there needs to be much more detail that needs to be known.

  8. Submitted by Richard Pecar on 07/16/2011 - 09:38 am.

    The republican’s use of the chopping block approach, combined with further indenturing Minnesota taxpayers with long-term, interesting-bearing bond debt, isn’t the way. At best, it’s like painting over rust. And, after a whole legislative session, these are best ideas the republicans could muster? Where were public hearings, numbers crunching, and dancing with the data, a process we have all grown to expect before any hacking and chopping begins. When did the prioritizing take place? What happened to the idea our legislature is a “deliberative body”.

    What a crummy lesson in civics and government this legislature has taught our kids. Money, money, money.

    As a republican (mostly) since 1964, and a once endorsed republican candidate for the MN house, I have absolutely no idea who the 2011 republicans represent? The Chinese? OPEC? Clearly, they represent a very few folks, those sitting on the largest piles of cash, and no one else. Tell me republicans, under your budget proposal, what are the tax savings for a four person house hold earning $40k? $50k/yr? $60k/yr?…$100k/yr? Or, are you saying, “It would have been worse if you didn’t do anything?”.

    Whazamatter? Cat got your tongue?

    From my perspective, in 2011 Minnesota’s republicans behaved more like terrorists than legislators, and most terrorists expect that their behaviors will bring about their demise. Apparently, the republicans have been so duped by the big money, they do not yet know their political fate.

  9. Submitted by jody rooney on 07/16/2011 - 11:05 am.

    Having been in gaming for a number of years and knowing the financials for gaming I know that the $250 million figure for taxes is not realistic. It will be way less than that.

    I am sorry Ms. Lundgren to disagree with you an exercise rider tells me that you and your husband raise some of the most sensible horses well mannered horses on the track. From your website it is clear the ones that don’t race or whose careers are over you take care in training them to transition to non racing homes. No wonder you are the spokesperson you are what is good about racing and if all owners were like you (and I know other owners) it would be a kinder sport with more consideration for the horse.

  10. Submitted by Richard Schulze on 07/16/2011 - 11:33 am.

    The governor got what was politically possible.
    The GOP went over its $34.4 billion budget and the governor got $35.8 billion.

    Will folks be able to answer the question of how much government do they want to pay for in the 2012 election?

    Only time and special interests (on both sides) will tell.

  11. Submitted by Jeff Beattie on 07/16/2011 - 07:53 pm.

    Commenting on excellent post by #9
    A crummier lesson was taught and learned by the Republicans in 2008 when the eight who crossed party lines to support and override a Pawlenty veto on the badly needed Transportation bonding bill. The roads and bridge infrastructure had been neglected, tragically illustrated by the 35W bridge collapse. A study reported funds did not exist to even inspect the state’s bridges, let alone repair or replace. The bonding bill seemed like one of those times that we had no option; we had to get this done.

    The Minnesota Taxpayers League had successfully driven home the no new taxes pledge and Republicans were fearful of breaking ranks. The renegades who put the people of Minnesota before this dogma voted to over ride the veto. The ax fell quickly with the outcasts stripped of party leadership roles, staff, and the message they would likely not be endorsed for reelection. Most chose not to run. The party lost some strong reasonable voices, sorely missed today.

    The message was taught and learned by future Republican officeholders. For those committed to no new revenue measures, regardless of the circumstance, this control is doubtlessly considered essential. But it does not allow looking at options that make sense. Extending the sales tax to clothes or services and extending sales tax to internet purchases likely had some appeal to Republicans. The shortfall was huge and large cuts had gotten us to within $1.4 billion. Some revenue increases seemed logical to bridge the gap. Instead we passed the baton to future leaders to either resolve or more likely continue this tragic new tradition of letting others contend with our inability to govern and legislate.

    A question to Republican voters: Don’t you feel somewhat disenfranchised by the fact that your elected representatives have their input, roles, and certainly votes predetermined by groups like the Taxpayers League. Their role and input is reduced and with it your voice at the Capital.

  12. Submitted by Wayne Sorge on 07/17/2011 - 01:12 am.

    The Tobacco fund money should never be used for the general budget and Coors Miller Beer is not good enough to give in to subsidizing the rich with the tobacco money and school money and jeopardizing the future just to avoid marginal beer being kept off the shelves.

  13. Submitted by jody rooney on 07/17/2011 - 12:20 pm.

    Long ago in an economics class taught by Ed Cohen he said the poor live off of capital, meaning they let their capital investments deteriorate.

    Not only are the T party people willing to not tax they are also willing to let the state infrastructure deteriorate by wasting our bonding capacity for short term fixes. That will cost us more in interest as our bond rating falls.

    How dumb is that.

  14. Submitted by Raj Maddali on 07/17/2011 - 12:31 pm.

    Casinos make/made hundreds of millions of revenue in this state. What kind of jobs have they created ? Mostly low wage jobs, while the tribes have pocketed much of the moolah.

    If you listed to people like Ms. Rooney, they claim, its so complicated and difficult to bring competition to gaming in Minnesota.

    Ask yourself how beleivable is that ?

    If Dayton is some kind of Horatio Alger, then let him man up and demand some of the hundreds of millions for our state.

    There is a total dishonesty in discussions here when people pretend that this money is not being given away in a total monopoly, while we moan and groan about the “rich” and all the supposed advantages handed out to them

  15. Submitted by Tony George on 07/17/2011 - 01:15 pm.

    The little Republican automaton legislator­s marching in field step to carry out the evil schemes of their billionair­e campaign financiers­, two brothers from Kansas, to take away the money we all paid into Medicare and Social Security and give it to the billionair­e campaign financiers­. It has been a depressing summer.

  16. Submitted by Paul Udstrand on 07/17/2011 - 04:08 pm.

    Why are they calling for another special session in the fall?

  17. Submitted by Richard Schulze on 07/17/2011 - 06:11 pm.

    @ Raj Maddali

    A model based on disposable income, excessive consumption and vanity is not sustainable. Gambling revenue is one of the most unstable forms of revenue to rely upon.

    Look no further than Nevada.
    Nevada has no income tax, financing its services largely from gaming and sales taxes paid mostly by tourists. Gaming revenues are down considerably the past few yrs in Nevada.

    Nevada has America’s highest unemployment rate. In Las Vegas, unemployment has risen more this year even as it has flattened in the rest of the country; it peaked at 15.5% in September. Nevada also has America’s highest foreclosure rate. In Las Vegas more than 70% of homeowners with mortgages owe more to the bank than their houses are worth.

    I would seriously reconsider relying on gaming to solve the states budget shortfall.

  18. Submitted by Claire Lundgren on 07/18/2011 - 12:16 am.

    If gaming is such a risky and losing business, why are the Indians continuing to add machines at their casinos? Mystic lake is currently number 2 in the nation in sheer number of machines. There is only one operation that is larger and I think that is in Pennsyvania but I could be wrong about the location. If it is so bad for the tribes, and it may be for outstate casinos ( but they have no competition from the tracks in the northern sites) why are they willing and actually anxious to spend huge amounts of money to keep their monopoly? Whatever money that goes to the state from Racinos would be more than they get now. It’s favored by 70% of Minnesotans, costs nothing to the state, and it has no strings attached. WHat’s bad about that?

  19. Submitted by Raj Maddali on 07/18/2011 - 12:46 pm.

    @Richard Schulze

    To claim that gambling revenue is unpredictable and therefore the state give up all of it is hard to grasp.

    Mystic Lake and other tribes are raking in the moolah big time. Maybe it goes up a little one year and goes down a little the next. Still, that is hundreds of millions of dollars in revenue.

    Also if your argument is that Nevada is broke because of gambling, then California and New Jersey are probably broke because of their “millionaire” tax.

  20. Submitted by Richard Schulze on 07/18/2011 - 08:12 pm.

    Nevada is experiencing a downturn in revenues as a result of their reliance on gaming to fund the states operations.

    The question is whether there will ever be a complete recovery, or whether something more fundamental has changed, threatening the existence of places that rely directly or indirectly on gambling.

    All the country was hit by the recession and full recovery is not necessarily only a matter of time. It is also important to take the necessary steps and precautionary measures to avoid further holes in the budget.

  21. Submitted by will lynott on 07/18/2011 - 08:20 pm.

    “Not only are the T party people willing to not tax they are also willing to let the state infrastructure deteriorate by wasting our bonding capacity for short term fixes. That will cost us more in interest as our bond rating falls.

    How dumb is that.”

    Apparently, #16, just dumb enough for wingnuts. Although I don’t think they’ve hit bottom yet. Trash the state, so what? At least, as House majority leader Matt Dean has said, “we don’t have to raise taxes [on the rich.]” Never mind those property taxes–they only affect the “other than rich.”

    This will go on as long as we keep electing these imbeciles.

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