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House GOP proposal sets up showdown with Dayton over budget

The budget proposed by the GOP leadership of the House is a far cry from the one DFL Gov. Mark Dayton has proposed. 

In outlining their proposed $39.9 billion state budget for the next two years, Minnesota House Republicans answered one obvious question Tuesday: How do you cut taxes by $2 billion while increasing spending on things like education, long-term care and public safety — when you only have a surplus of $1.87 billion?

Answer: By nixing programs enacted by recent DFL Legislatures, cutting down on some “political” expenses like reimbursements for legislators, and going after people receiving Medical Assistance who make too much money to be eligible for the program.

The budget proposed by the GOP leadership of the House is a far cry from the one DFL Gov. Mark Dayton has proposed, and it sets up a mid-session showdown over the numbers.

Dayton created his proposal off of a different “base” budget number than Republicans. Officials in Minnesota Management and Budget, the state’s budgeting agency, say the costs of all current state programs will go up from about $39.3 billion in the 2014-2015 fiscal year to $41.1 billion for the next two years (a number that is not adjusted for inflation).

Overall spending, 2016–17: Projected, GOP and Governor’s proposals
The GOP proposed state spending at $39.949 billion for the 2016–17, a level lower than the projected budget with no changes to current law and Gov. Mark Dayton's budget proposal.
Source: Minnesota Management and Budget and Minnesota GOP

Dayton used the latter projection as the baseline for his budget, and proposed to spend nearly every penny of the $1.87 billion surplus on things like childcare tax credits, pre-kindergarten education and college tuition freezes.

Republicans in control of the lower chamber, however, used the last two-year budget as the baseline to create their proposal. Republican Speaker of the House Kurt Daudt went as far as to say the budget size is a “fictitious” number, because spending increases were built in through programs passed by an all-DFL controlled government over the last two years.

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Yes, the state’s constitution requires that lawmakers leave session with a balanced budget, Daudt said, but it also prevents one Legislature from binding the actions of the next. In other words, there’s no reason spending increases passed during the last legislative session have to continue. “This seems to be one of the things that’s very confusing [to Minnesotans] about what we do here,” Daudt told reporters. “Democrats didn’t do our homework for us; we can’t just all go home.”

All of which means there’s a nearly $3 billion gap between the Republicans' budget and that of the governor. “[That] just shows you how much of an enormous increase in spending Gov. Dayton is proposing,” said Rep. Jim Knoblach, R-St. Cloud, the chair of the House Ways and Means Committee. (To make things even more complicated, the Democrats in control of the state Senate will release the outlines of their budget proposal on Friday.)

Not surprisingly, Democrats like House Minority Leader Paul Thissen are firing back, calling Republicans' numbers bogus. “With a $2 billion surplus,” Thissen said, “it is unacceptable that Republicans would cut Minnesota workers and our most vulnerable by $1 billion.”

Crunching the numbers in the Republican budget has been complicated, largely because the big reveal was light on details: most spending, tax cuts and budget cuts will have to be figured out in the committee process over the next few weeks.

While Daudt said it’s unlikely tax cuts will come in the form of rebate checks, as lawmakers did in the late 1990s, he isn’t sure exactly how they will target the $2 billion in tax relief. Some will go to businesses, he said, and most members look favorably on eliminating taxes on social security income, but the rest of the details will have to be worked out in the Tax Committee.

2016–17 spending by category: Projected, GOP and Governor’s proposals
The GOP’s smaller 2016–17 budget is achieved primarily with a significant cut to the Health and Human Services budget.

*The number reported for the GOP budget is for "E-12 Education", the current name of the House committee, while the numbers for the projection and the governor’s budget are taken from the "K-12 Education" line in the February forecast, so the numbers might not be exactly comparable.

Source: Minnesota Management and Budget and Minnesota GOP

On the spending side, Republicans have a long list of things they say need more funding:

  • They want to put $100 million more into higher education, but it’s unclear how that money would be spent
  • Republicans want to spend an extra $200 million on pre-K-to-high school education
  • They want to give $160 million to nursing homes and other workers who care for the elderly and disabled
  • Property tax relief programs and aid that goes directly to cities and counties will also go up, though the total amounts will be determined in committees  
  • Public safety would get a $100 million funding boost
  • The state’s so-called rainy day fund would get $100 million under the GOP budget plan

The GOP’s budget plan also didn’t include a recently announced Road and Bridge Act of 2015 that they say will pump $7 billion into roads and bridges over the next decade.

Still, some DFL legislators on the Ways and Means Committee expressed concern that Republicans math doesn’t add up, particularly in the area of health and human services. “I just don’t know if you are going to find all the cuts you need there,” said Rep. Tina Liebling, DFL-Rochester.

In creating their budget from scratch, Republicans have done something else that’s fairly unprecedented: They left $319 million in “yet-to-be-allocated funds” in their targets. That money could go into a budget reserve or be spent on other priorities, but it could serve as a cushion if they have a hard time finding $1 billion in cuts.

“We are leaving an unprecedented amount of money on the bottom line, which we can carry over into the next year or we can use it in the next 30 days once we firm some things up,” Knoblach said. “This gives us some additional flexibility if we need it.”

How to spend $43 billion
One area where everyone agrees: the state is expected to have $42.996 billion to spend in 2016–17 (after subtracting mandatory budget reserves). But the GOP and the governor get there in distinct ways: the governor's proposal focuses almost entirely on increased program spending across a number of administrative departments, with a small tax cut aimed at child care and school supply purchases. The GOP proposal cuts spending by state departments and creates a $2 billion tax cut, $612 million one-time spending on roads (part of their larger transportation funding proposal), $100 million increase in budget reserves, and leaves $319 million to be determined.

*The deficiency bill is $15 million in emergency spending for 2015 on the Minnesota Zoo, the St. Peter Security Hospital, Ebola preparedness and other areas. It was agreed to as part of the compromise on commissioner pay raises.

Source: Minnesota Management and Budget and Minnesota GOP