Spring fever has settled in on the Minnesota state Capitol.
Lawmakers have logged long hours in committee rooms and on the House and Senate floors, hoping to adjourn before the Constitution’s May 19 deadline. But those dreams are on hold, since DFL-dominated House-Senate conference committees made little progress last weekend.
In a pointed letter to legislative leaders this week, DFL Gov. Mark Dayton staked out substantial differences with legislators on the big three remaining to-dos: Bonding, tax cuts and spending.
A major complication: all three are somehow tied into the roughly $600 million remaining in the state’s $1.2 billion budget surplus. The size of each pie slice depends on whom you ask.
Counting cash, votes on bonding
Traditionally, bonding — construction-project borrowing — is separate from spending decisions and tax cuts. Not this year.
DFL leaders are chafing under a $1 billion biennial bonding cap negotiated in 2013 with senior Republicans. There’s $850 million left for 2014, and House Capital Investment Chair Alice Hausman believes a few million more would get the deal done.
“A little flexibly would help, just a little,” the St. Paul DFLer said. “Could we add $10 million more to $850 million in bonding?”
Hausman — who saw her bonding bill fall five House votes short last year — is apprehensive. She’s been holding meetings, counting votes and swapping in and out projects for a scheduled Monday floor vote.
Because borrowing requires 60 percent support, Hausman needs eight GOP votes to pass the bonding bill; Senate counterpart LeRoy Stumpf needs two.
However, on Monday, a group of rank-and-file legislative Republicans — without their caucus leaders — said they have no plans to break the $1 billion cap. They also asserted their unhappiness with the current bonding proposals, criticizing projects like the Minneapolis Sculpture Garden and fixing ski slopes in northern Minnesota.
They called for more investments in roads and bridges and crumbling infrastructure, as well as the full $70 million needed to finish the Lewis and Clark water pipeline in Luverne. Democrats have proposed spending between $13 and $20 million on that project this year.
“We clearly have different priorities,” Rep. Matt Dean, the Republican lead on capital investment, said. “There’s been no commitment from us or leadership on votes for the bonding bill.”
To get around the bonding cap, DFLers have agreed to spend $200 million from the surplus for bonding-type projects. But that would take money away from some combination of spending and tax cuts.
Dayton said this week he’d rather not use cash in the bonding process at all, although he has agreed to use that source for the $126 million remaining to restore the state Capitol. “I continue to believe that the use of cash in a bonding bill contradicts its very purpose and that cash should not be used for major capital investments,” he wrote in his letter.
The governor has reserved his sternest assessments for the Legislature’s spending proposals.
Calling for fiscal restraint at the session’s start, Dayton proposed spending just $168 million from the surplus. He subsequently agreed to bring that up to $263 million, but lawmakers want to spend somewhere closer to $300 million. “Your spending target, totaling an additional $313 million, is excessive, in my judgment,” Dayton wrote.
That target — plus $102 million in tax cuts — leaves little wiggle room to put additional funds in the state’s budget reserves, Dayton added. He’d like to see another $100 million in that rainy day fund.
House Ways and Means Chairman Lyndon Carlson said spending goals were “lot closer than I think we were given credit for in the letter.” House-Senate spending negotiations were part of the weekend stall.
Legislators and Dayton have agreed on one major spending item for the year: about $83 million to give long-term care providers a 5 percent rate increase this year. But the House and Senate mostly break apart from there, with the House interested in broadband for rural Minnesota and adding to the state’s education formula, while the Senate seeks early childhood education grants.
“I think the House has been really clear that we think it’s important to use some of the surplus to invest in Minnesota, especially in areas like education, potholes and broadband,” House Majority Leader Erin Murphy said.
Carlson said another major sticking point is how much spending should be allowed in “tails” — committed spending in future years, such as the 2016-2017 biennium. Legislators have tried to clamp down on tails after years of budget deficits.
“There’s three parts of the equation, the governor and the House and Senate, and in the end we will have a blending of the three of them,” Carlson noted.
Agreement on taxes
Taxes is one area where legislators have — after many hours in hearings — found some common ground.
In a deal wrapped late Wednesday night, House and Senate conference committee members agreed to spend $103 million on everything from property tax cuts to extending sales tax exemptions to local goverments operating in joint agreements.
Roughly $17 million of those property tax cuts would go to farmers by enhancing the market credit for homested farms, $12 million to homeowners in one-time refunds this fall and another $12 million to a boost the renters’ credit refund.
The deal didn’t, however, include a priority from Dayton to extend income tax child care credits to more families.
Revenue Commissioner Myron Frans said the credit would would have cost state about $30 million a year and expanded it to those making $70,000 a year, or $94,000 a year for families with two children.
House and Senate tax chairs haven’t inked the deal yet, with plans to do so on Monday, but House Taxes Chairwonman Ann Lenczewski says she expects it to hold. Republicans support the proposal and Dayton has said he plans to sign the bill even without the child care credit.
According to Stumpf, a wishful adjournment date — this Friday, May 9 — looks out of reach. “I think everybody realized that from day to day you don’t accomplish as much as you like,” he said. “It’s slow-moving.”
Despite the all differences that remain to be worked out, some lawmakers note that there’s still hope for getting out at least a little early: No votes can be taken on May 19, the biennium’s last day. Perhaps they’ll get an extra weekend back home.