Mark Dayton is reaching the last six months of a political career that’s spanned most of his adult life, most recently including two terms as Minnesota’s governor. But don’t expect him to start getting nostalgic about it.

“The stakes are very immediate,” Dayton, a Democrat, said in a recent interview with MinnPost about his eighth and final legislative session as governor. “People are asking about my legacy,” he added. “Your legacy lasts as long as it takes the next person to get the keys to the office.”

Dayton isn’t seeking re-election this fall after a dramatic eight years as governor that included a multibillion-dollar budget deficit, a historic 21-day government shutdown, a two-year battle over gay marriage and plenty of negotiations over taxes, education and other issues in between.

Each session was marked by its own distinct challenges — not to mention political makeups of the Legislature — and Dayton said this year is no different, even if it’s his last.

“This is my last chance to accomplish some of these things, but it’s really about the here and now,” he said. “It’s really about this session, and it’s about what in this session is going to be the best outcome for people.”

Taxes on the table for debate, again

The “here and now” for Dayton includes something he and lawmakers weren’t expecting to deal with this year: taxes.

Last spring Dayton and state lawmakers agreed to a budget that included a $650 million package of tax cuts as part of the deal. But the passage of the federal tax bill late last year sparked a surprising round two of the tax debate at the state level, and Dayton and lawmakers are trying to figure out how much state tax law should line up with the new federal law.

That process, known as federal tax conformity, sounds easier than it is. Simply conforming state law with all of the changes made at the federal level would make doing taxes easier for Minnesotans next year, but it would also increase taxes on hundreds of thousands of individuals and families because of changes in standard deductions and exemptions at the federal level.

“Before, there was nothing that we had to do [this session] or there would be serious consequences for the state, but now with the tax bill that’s not the case,” Dayton said. “Doing nothing has harmful consequences.”

Dayton has already pitched his plan on how to deal with the issue, which includes delinking part of the state and federal tax code, while also not conforming with some of the new federal tax cuts for businesses. In particular, Dayton wants Minnesota to move away from using “federal taxable income,” a number calculated at the federal level that serves as the base of how Minnesota calculates its taxes. Minnesota is one of only six states that still uses the number as a starting point, making it more vulnerable when the federal government makes changes to the tax code. 

After separating the state from the federal taxable income system, Dayton wants to tweak Minnesota’s own deductions and exemptions, including a proposed tax credit for individuals who make less than $140,000 a year. His administration said his proposal would provide an average tax cut of $117 for almost 2 million taxpayers, and a cut of $160 for 329,000 people. 

“We really have to go through and slice it carefully in terms of what you conform to and what you do not,” he said. Otherwise income taxes go up, “which I don’t think anyone wants.”

It also comes with a cost: More than $400 million in the next two-year state budget. To pay for some of that, Dayton also wants wants to increase taxes on foreign income brought into the state, reinstate an automatic inflator on business property taxes (which was lifted in the tax bill last year) and undo tax cuts on some tobacco products, among other things. He’s also proposing to continue a tax on health care providers that was supposed to sunset in 2019. 

Those ideas are already getting significant pushback from the Republican-controlled Legislature and business groups, who say Minnesota taxes are already high enough. It will be one of the final conflicts Dayton faces with the Republican-controlled Legislature.

Dayton is no stranger to complicated debates over taxes. On the campaign trail and in his first term in office, he proposed raising income taxes on the state’s wealthiest residents. He ultimately signed an an income tax increase in 2013, with the help of a DFL-controlled Legislature, but he’s had tension with Republicans and business groups over the move ever since.

He’s not expecting that issue to come up this year, but he’s still expecting plenty of conflict. “It’s always highly charged.” 

Bonding, water quality and more

But that debate hasn’t picked up in earnest, and “crunch time hasn’t arrived yet,” Dayton said.

That will come later in the session as lawmakers push up against a deadline to adjourn by May 21. Other than taxes, lawmakers want to pass a package of construction projects known as the bonding bill, spend a $329 million budget surplus, and pass a slew of policy proposals, like bills to curb the opioid epidemic in the state, stop abuses in elder care facilities and increase safety in schools.

Dayton said he isn’t fixated on his legacy yet, but one of his top priorities this year is to lock in about $50 million in funding for pre-kindergarten programs he pushed for as governor, which he said 59 school districts are using to offer programs to about 4,000 students. He pushed last year to pass state-funded pre-K for 4-year-olds across Minnesota, but he couldn’t find agreement with legislators. Dayton said he’d at least like to make sure that funding isn’t eliminated as soon as he’s gone. 

“I want to see early childhood education extended so that’s secure and school districts will know they have the money,” he said.

Dayton also wants to pass a proposed $1.5 billion bonding bill that puts a lot of money into water quality, another one of his top priorities over the years. And while some of his clean water bills faced pushback — like buffers between farmland and waterways — he expects the proposals in his bonding bill to get bipartisan support. That’s because they tackle degrading water quality systems in cities and towns that have no other means to fix them.

“A lot of these communities have to do something and simply can’t do much of anything if they don’t have some financial help,” he said.

He also expects to get some support on his call for repairs to college campuses, but he left out hundreds of millions of dollars in proposed local bonding projects, and he didn’t include any transportation projects in his bill, usually a top priority for Republicans. With all of those projects on the table, Dayton said he’s worried Republicans won’t go over a self-imposed bonding cap of $1 billion this session.

“I’ve got $1.5 billion and I left out a whole batch of local government projects,” he said. “It won’t be all that anybody wants — that’s a reality.” 

MNLARS deal a ‘pivotal’ moment

Since day one, Dayton said he feared this session will be “contentious and partisan,” mostly because it’s also an election year. He’s not on the ballot, but all 134 members of the Minnesota House are, and the race to replace him will certainly make mention of his time in the governor’s office, with Republicans trying to tie the DFL nominee to his administration.

There have been partisan fights already. Lawmakers went through a weeks-long battle over emergency funding for MNLARS, the state’s licensing and registration renewal system that has been plagued with technical problems since it rolled out last summer.

Dayton asked lawmakers for $10 million in emergency funding to fix the system, but Republicans pushed back, asking for more accountability with the money. They also tried to get Dayton to find the funding in his own state agency budgets, which he opposed. Legislators ultimately sent him a bill with funding and some new accountability measures, and Dayton signed it. “It was somewhat charged, but it’s bad situation and they have a right to be interventionist,” he said.

And even though it took some time, Dayton thinks it’s a good omen for the rest of the session.

“I think MNLARs was a pivotal moment where they were going to send me something I could sign or send me something I would have to veto and make more political hay out of that,” he said. “They didn’t, to their credit. I think that’s a good start.”