With an eye toward his legacy, Dayton digs in on the budget

Mark Dayton has seen it all before.

In 2011, the Democrat was in the governor’s office and Republicans had majorities in both chambers of the Minnesota Legislature, just like this session. And, just like now, there was a major battle over the state’s two-year budget, on everything from health care to tax cuts. 

But for Dayton, there’s one big difference between 2011 and 2017. Six years ago, he was a new governor trying to craft his first-ever two-year state budget. This time, it’s his last. 

At 70 years old, Dayton is serving his final term as governor. In a little less than two years, he’ll be leaving public service altogether, ending a 40-year career that included a stint as state auditor, one term in the U.S. Senate and two rounds as the state’s chief executive. After winning his the race for governor 2010 — the first Democrat to do so in two decades — Dayton charted out a legacy on issues like early education, clean water and a controversial state-run health insurance exchange.

During that time, he’s also seen power at the Capitol shift between Republicans and Democrats. “Politics is a playground where you don’t get to pick your playmates,” Dayton said recently. “You just deal with whoever shows up.”

Now in the midst of his fourth and final budget negotiations, Dayton has found himself defending much of that legacy — and pushing to bolster key initiatives before he leaves, free from the electoral pressures during his first several budget debates. “It’s the last opportunity to stamp his legacy,” said Steve Sviggum, who spent six years at the Republican speaker of the House.

And like 2011, some Capitol watchers are wondering if Dayton’s last budget will lead to a showdown that won’t be resolved by the time session ends. 

‘No one’s going to be happy’

Looking back, Dayton’s first budget battle was one of the most contentious in recent state history. The state faced a $6 billion deficit when session convened in early 2011. To fill the gap in the budget, Dayton insisted on raising income taxes on the richest Minnesotans, a plan that a new Republican majority in the Legislature pushed back on all session. 

Republicans said the state books could be balanced through budget cuts, which Dayton argued would hurt the state’s most vulnerable citizens. The stalemate stretched past the session’s May deadline to adjourn — and into a government shutdown that lasted for 20 days, the longest in state history.

The final agreement was one both sides detested. It called for withholding $700 million in payments to K-12 schools and selling nearly $700 million in bonds backed by revenue from the state’s tobacco settlement for the rest. “No one’s going to be happy with this,” Dayton said at the time, “which is the essence of a real compromise.” 

The situation changed dramatically two years later, after a sweeping victory by Democrats in the 2012 elections gave the DFL total control of the Legislature. They faced a more than $600 million budget deficit, but even with one-party control at the Capitol, a budget deal was pushed until the final hours of the session. Democrats disagreed over a package of construction projects, known as the bonding bill, and how much to raise in taxes. 

In the end, lawmakers passed a small bonding bill and a tax bill that raised more than $2 billion in new revenue, partially through Dayton’s campaign promise to raise income taxes on the wealthiest 2 percent of Minnesotans. That helped cover the state’s deficit and paid for new spending for property tax relief and education, including all-day kindergarten, a priority for Dayton. The Legislature also agreed to establish a state health insurance exchange, MNsure, as part of the federal Affordable Care Act. 

In 2015, Dayton returned to the Capitol after being re-elected, despite proposing a tax increase in the previous budget. But the legislative realities had shifted yet again. Republicans had claimed control of the House, creating a divided Legislature for the upcoming budget debate.

There was good news for everyone, however: The state was in the black, projecting a $2 billion budget surplus. But a surplus didn’t make negotiations easier. Republicans in the House wanted tax cuts, while Dayton and Senate Democrats wanted more spending on education and a gas-tax increase to pump hundreds of millions into state transportation projects each year for the next decade. They deadlocked until the final weekend of the session, when legislative leaders struck a deal — without Dayton.

The agreement did nothing on transportation or taxes and left most of the surplus unspent. Smaller deals were worked out to increase spending on education, and Republicans dropped a plan to eliminate MinnesotaCare, a state-run health care program for low-income residents. But Dayton vetoed three of the budget bills after lawmakers went home, including the education deal, which he said didn’t increase spending enough. After reaching a deal with legislative leaders to spend more on education, Dayton called lawmakers back for a one-day special session. 

‘Significant freedom’ in final budget

There’s still one week left in the 2017 legislative session, but Dayton’s already issuing vetoes.

In early May, Dayton and Republican leaders met in closed-door negotiations, trying to work out a single, $46 billion state budget plan. With a $1.65 billion surplus, Dayton wants to increase spending on schools across the state as well as on his signature voluntary pre-kindergarten proposal, which he and the Legislature had agreed in 2016 to spend surplus money on. Republicans want to cut more than $1 billion in taxes and to trim state government across the board. 

After five days of negotiations, however, Republicans felt talks were dragging along intentionally, that Dayton was trying to “slow walk” a deal. “The governor gains leverage if he pushes us to the end,” Republican Speaker Kurt Daudt said in announcing a plan with Republican Senate Majority Leader Paul Gazelka to send Dayton their 10 budget bills without a compromise.

Dayton, in turn, promised Republicans he would “veto them all.” In veto letters, he has called the cuts to health and human services “reckless and foolish,” and said the nearly $200 million in cuts to state government programs “take our state in the wrong direction.”

But the disagreements go beyond the numbers. Republicans don’t put money into Dayton’s pre-kindergarten program. In fact, they shift funds currently going to his voluntary pre-kindergarten to school readiness programs instead. Their environment budget rolls back deadlines on a policy to put natural grass buffers between farmland and public waterways to protect them from agricultural runoff, another signature Dayton proposal. And the health and human services budget repeals MNsure, the state exchange Dayton and Democrats set up.

In a press conference, Dayton pushed back on Republican attempts to repeal his buffer law. “If they don’t like it then they don’t like it,” Dayton said. “It’s my job to represent the people of Minnesota, all the people of Minnesota.”

He also promised to veto other bills — a GOP proposal to pre-empt local governments from passing their own labor and wage laws, and a bill to change the governance of the Metropolitan Council — speaking in more absolute terms than he had all session.

“I think the last budget, when a governor is not running for election, probably gives the governor significant freedom to make decisions that he wants as opposed to a product that sells to the Legislature or the public,” Sviggum said.

DFL Minority Leader Melissa Hortman, who has sat in on the budget negotiations, said she hasn’t seen a major change in Dayton’s negotiation style, despite the fact that it’s his last budget. In the past, he pushed for unpopular tax increases ahead of his own re-election, and he’s always been willing to agree to make compromises in order to get a deal.

“We saw that in 2011 when the situation was identical; he agreed to things he didn’t want to,” she said. “He respects the other branches of government’s power, and he respects that the House speaker and the majority leader of the Senate have positions they’ve earned through the voters as well.”

Dayton and Republicans plan to resume budget negotiations on Tuesday, and there’s still time for the two sides to agree to a budget by May 22, the constitutional deadline to adjourn.

Former Republican House Minority Leader Marty Seifert doesn’t see Dayton trying to push Republicans to the final hours of the session to get a better deal, or to try to make them look bad in the 2018 election. “I think he’d like to avoid that, ” he said. “Some people say the 2011 shutdown benefited the Democrats, but there were all sorts of dynamics at play. I don’t think Dayton wants that to be his legacy, having his last budget be a shutdown budget.”