It had the makings of a great tale, or a not-so-great joke: The governor, the speaker of the House and the Senate majority leader get into a boat … with just one week left to go in the legislative session … and no budget deal in hand.
But while the fishing on Lake Vermillion for the governor’s opener on Saturday was good — Gov. Mark Dayton, Senate Majority Leader Tom Bakk and Republican House Speaker Kurt Daudt pulled in 35 walleye in three hours — the same can’t be said for their budget negotiations.
“Everybody asked if we were going to solve the state’s budget while we were out there,” Daudt said after returning to shore. “The fishing was too good, we didn’t get it solved. We’ve got a little work yet to do.”
That might be understating things, since there are some pretty big roadblocks still in their way, and on more than just the state’s budget. The three leaders must reconcile wildly different priorities and philosophies for operating government, much of it centered on how to spend a nearly $2 billion budget surplus.
With just one week left before the Legislature is set to adjourn, here are the pieces Capitol leaders say will need to be part of any deal:
In one fell swoop last week, Daudt cut in half a $2 billion tax relief package Republicans have been pushing for months. He was chatting with reporters after a meeting of the Capitol Preservation Commission Wednesday afternoon when he was asked where Republicans might fall on tax cuts in budget negotiations. “Somewhere in the middle, I think,” Daudt said. He quickly clarified: That would mean somewhere between $1 and $1.3 billion in tax cuts, and that final number will be tied in to a number of other major budget negotiations.
Still, tax cuts are one of the major sticking points in negotiations. It’s clear Republicans will have a hard time walking away from the session without some form of tax relief, but Democrats have spent all session railing on the repercussions of Budgets Past, when billions of dollars of tax cuts in the late 1990s led to a decade of deficits in the 2000s.
Last week showed some movement on the issue. Democrats have been critical of Republicans’ plan to phase out the statewide business property tax and lower estate taxes, but Dayton said he could possibly find agreement in a two-year income tax break in the GOP bill and some smaller form of social security income tax cuts. Senators passed a much smaller, $268 million tax bill last week that puts more money into Local Government Aid, reduces business property taxes and aims relief at businesses that hire veterans.
Personally, Daudt said he likes a provision in the Republican tax package that would phase out the state’s entire tax on Social Security income, and his caucus favors a provision that would exempt retirement income for veterans.
Health and human services
When Republicans initially announced their plan to trim $1 billion from the state’s health and human services budget, many assumed it was just a way to help pay for their ambitious $2 billion tax cut package and spending on other projects like transportation and long-term care. But as the clock winds down, it’s become clear those health care spending cuts are an important priority for Republicans, even as their tax bill shrinks. Their plan would phase out MinnesotaCare, a subsidized health care program for low-income working Minnesotans, and put more of those people on to the state’s health insurance exchange, MNsure.
“We don’t really think it’s responsible knowing that the funding source for [MinnesotaCare] is basically sunsetting in 2019 and there’s no plan to continue that,” Daudt said after a Thursday morning breakfast meeting with Dayton. “Now is the time, if we are not eliminating that program, to start transitioning folks to combine the two, if you will, and we think that makes more sense over time. We don’t want to wait two years and pretend this day of reckoning isn’t coming, when the provider tax is phased out. We want to deal with that now.”
Daudt said that still means complete elimination of MinnesotaCare is on the table for Republicans, even though Senate Democrats and Dayton have said it’s not. They are both proposing to increase spending on health and human services this session by roughly $340 million. “[Health and human services spending], when we’ve had divided government, has always been a challenge,” Bakk said.
Long-term, dedicated transportation funding is one of the big negotiating items that all three parties say is a priority this session, but no one can imagine a possible middle ground. Republicans are proposing to put some money from the surplus and shift other existing revenues into the general fund to put $7 billion more into roads and bridges over the next decade. Democrats want to raise fees and sales taxes in the metro, while also upping the state’s gas tax, which would put $11 billion over 10 years into roads, bridges and transit.
Republicans feel emboldened in their plan after a forced recent House floor vote on raising the gas tax, which failed unanimously. “Not even a single Democrat stepped up to vote for that,” Daudt said. “We know why, because Minnesotans are really strongly against that plan.”
Democrats say they voted against the move because they refused take the GOP bait on the issue, but that a transportation package is still a top priority for Bakk, who has threatened to not pass any tax bill if there can be no deal on transportation. He has put one option on the table: A dollar-for-dollar deal on transportation and taxes, offering Republicans $1 dollars in tax relief for every $1 they raise in the gas tax.
No one has jumped on to that plan yet, but it’s clear the gas tax has a tough road ahead, and any deal might get tied directly to a taxes compromise.
If you look exclusively at legislative action, one of Dayton’s top priorities — pre-kindergarten education for 4 year olds across the state — has looked dead in the water for some time. Neither the House nor the Senate funded his proposal in their budget bills, and there’s been considerable debate in the education community about whether his proposal is targeted enough to close the state’s persistent minority achievement gap. But Bakk has been consistently reminding Capitol watchers of one thing all session: Governors often get what governors want. Especially when that governor isn’t worrying about re-election. “I want to see universal pre-K,” said Dayton. “We’ve seen enormous success with universal kindergarten, and I think every child in Minnesota deserves that opportunity.” A better question might be not if the governor is going to get his pre-K proposal, but how expansive it will be.
Water quality protections
Dayton has spent the last two weeks holding press conferences about the state’s deteriorating water quality and trying to put pressure on Republicans and agriculture groups to make a deal on his plan to put some kind of runoff buffers around the state’s waterways. Time is running short, but the governor has made it clear he wants something to be done in order to be satisfied this session. He has also floated the idea of funding a water quality director out of his office, starting in July. “I’m going to insist we talk some steps,” Dayton said. “It’s not going to be all in one year, and it’s going to be an ongoing process, but we need to pay attention to this.”
Care for the elderly is one of the few areas Republicans have consistently said they want to spend new money this year, and they are sticking with that position in the final negotiations. Daudt said Republicans want to fully fund a campaign to give a 5 percent pay boost to long-term care workers, as well as change the way nursing homes are reimbursed. “We’ve put a big priority on the way we reimburse our nursing homes,” Daudt said. “We want to make sure we get that taken care of.”
It’s one of the least-discussed provisions tucked into the budget bills, but pumping some money into the state’s budget reserve to buffer from future deficits is important for Bakk. The Senate puts $250 million into that fund over the next two years, while Republicans put $100 million into the reserves. Dayton puts no money into the rainy-day fund. Bakk highlighted the reserve money in the Senate’s budget rollout press conference, and he made it clear it will be important for the upper chamber going into negotiations.
Don’t forget bonding
It’s easy to write off a plan from Dayton to pass an $850 million bonding bill, but construction packages are often the unexpected glue that holds a final compromise together. Take 2011, when a $500 million bonding bill became an essential piece to ending a 21-day government shutdown. Lawmakers of all stripes love to tout dollars for projects in their districts, and there are plenty of things that could use funding on the quick, including increased costs for renovations to the state Capitol. Dayton said he still wants to see a bonding bill passed this year, and appetites have been slowly growing for one among rank-and-file legislators.