Special session looms as budget impasse continues at the Legislature

The 2019 session of the Minnesota Legislature began with a lot of new faces and a little bit of optimism.

And one big division.

A new governor and the leaders of the nation’s only split Legislature — with DFLers in control of the House and the GOP in control of the Senate — thought they all could agree on some items and be persuasive on some others.

As the session entered its final weekend, however, it was pretty clear they couldn’t. Each hour that passes without a deal makes it more difficult to go through the technical, ministerial tasks needed to consider and adopt legislation to be completed in time — and increase the possibility that a special session will be necessary.

Saturday was more of the same. Talks broke up early in the morning without a deal and were rejoined late in the day. Sunday might look the same. But two calendar dates loom. The first is May 20: the constitutional end of the regular session. If work on a budget isn’t completed by then, only the governor can convene a special session. The second important date is June 30: the end of the state’s fiscal year and the current two-year operating budget. After that, no functions of state government are authorized to spend money without some stopgap act of lawmakers or court intervention.

While details of negotiations are still unknown, the basics of the disagreements are familiar — and have been for weeks if not from Day One of the 2019 session. Gov. Tim Walz and the House DFL majority came in with an ambitious agenda to increase taxes — primarily on business and corporations — to fund increased spending on education and health care.

To make the DFL budgets balance, though, two additional taxes would also be needed: a gas tax hike and the extension of a 2 percent tax on medical providers and procedures. Those assessments are more regressive than the income tax, as a recent state Department of Revenue examination showed.

Senate Republicans are now — and really have been for years — a no-new-tax caucus. They have been holding firm on the sunset on the provider tax. They have said no to any gas tax or other transportation tax increases. And their own tax bill — which brings the state into conformity with the 2017 federal tax reform law — raises money and gives much of it back. And, unlike the DFL, the Senate does not take advantage of federal permission to go after taxes on profits recorded in tax havens outside the United States.

Those two approaches to government have left the two sides far apart by nearly any measure: by total dollars spent; by philosophy;  and by how each reads the politics of the state. Both think their candidates will be rewarded by voters for sticking with their approach.

Is there a way out?

Concessions would be difficult 

One of two changes of heart would need to happen for a deal to come together, both of which are less likely in the short term but increasingly likely if a July shutdown is to be avoided.

The Senate GOP will have to agree to some increases in taxes, or at least an extension of the sunsetting provider tax. Or: Walz and the DFL will have to give up on much of its agenda and let the GOP use different pots of money to give some new funding to education and enough to keep current health care and social services programs going until more comprehensive deals can be struck later. Those pots might include the $1 billion projected surplus; the increased tax collections; and pieces of the state’s reserves and rainy day account.

Both parties can then hope to have a better hand to play after the 2020 election, when every House and Senate seat is on the ballot.

The problem is that all of those concessions are politically difficult. Walz and DFL House candidates made promises to boost schools funding, keep the provider tax in place to pay for health care and insurance programs as well as social services. They also said they would increase spending on both roads and transit.

But the GOP has made pledges to keep taxes capped and even decrease the tax burden. The caucus believes that current revenues, which have grown since the last budget was adopted in 2017, ought to be enough to pay for what the state needs, and it’s hard to see how Senate Majority Leader Paul Gazelka would get the 34 votes in his caucus that would be needed to pass tax hikes.

Senate Minority Leader Tom Bakk is something of an educated outsider this session. So far, the votes of his DFL caucus have not been needed and Bakk, like House Minority Leader Kurt Daudt, has not been included in the closed-door negotiating sessions with Walz. That is the invitation-only domain of Gazelka and House Speaker Melissa Hortman.

The Senate DFL, therefore, would be willing to offer up some votes to help pass a budget that includes some new revenue, and more to the liking of Walz. But Bakk has not been yet been asked for such assistance.

Gaming the blame game?

The three negotiators agreed on one thing last week: that they would refrain from showy press briefings that marked the early talks with public offers, counteroffers and critiques of the other’s offers and counteroffers. Radio silence has reigned since Tuesday, and the vacuum has been filled with rumors and speculation.

The only real break from the “we’re still talking” platitudes came Thursday, when Senate Republicans convened the Finance Committee to hear, debate and pass a resolution that would maintain state funding at slightly more than current levels should no budget be adopted by July 1. That is the date that state government would have to shut down if a budget deal isn’t reached.

DFLers on the committee objected to the resolution, arguing that it is premature and that it would ease the pressure on lawmakers to reach a permanent deal. But Republicans seemed to realize the political advantage of having passed a measure that would keep prisons staffed, state troopers on the road, campgrounds open and — should it go that long — public schools open. If the House doesn’t follow suit, would the DFL carry the blame? The GOP thinks it would.

In past shutdowns, the courts have allowed most of the funding for state agencies and functions to continue. In 2011, for example, state courts okayed the funding of about 80 percent of state government. That 20-day shutdown, the longest in state history, did result in the temporary layoff of about 19,000 state employees.

But since the Ramsey County District Court ruled that essential functions could be maintained, another case reached the state Supreme Court, that came to a different conclusion. That case, 90th Minnesota State Senate v. Gov. Mark Dayton, was filed after Dayton vetoed the appropriation for the Legislature to function as part of a political struggle between the DFL governor and a Republican House and Senate.

In an opinion written by Chief Justice Lorie Gildea, the court found that Dayton’s veto was constitutionally valid. But the court also opined on whether the court could simply order that funding for the legislative branch be released regardless of the veto.

“The Governor acknowledges that the Judiciary does not have the power to appropriate, but contends that we nonetheless have the implied power, under Article I of the Minnesota Constitution, to authorize funding for the Legislature to vindicate the constitutional rights of Minnesota’s citizens. We disagree,” Gildea wrote for the court majority.

“The language of Article XI, Section 1 of the Minnesota Constitution is unambiguous …. In the face of this unambiguous language, we have declined to order funding, even in circumstances where constitutional rights are at stake.”

That section of the ruling was largely overlooked as most attention was paid to the court’s upholding of the veto. But as the Legislature and Walz continue to disagree and a shutdown becomes more real, the Senate GOP wanted to highlight Gildea’s statements — just in case anyone in the capital thinks the courts will hold down most of the pain and suffering from such a shutdown.

Bakk termed it throwing in the towel and said it shouldn’t be viewed as a stopgap measure in case budget talks breakdown. He said it could be the final budget if the House were to go along, something that’s highly unlikely. “Maybe this was the plan all along,” Bakk said.

Bakk called the continuing resolution a stunt. Some Republicans objected to that characterization, but they didn’t help their case much when immediately after adopting it, most members of the GOP caucus stood on the steps of the Capitol holding signs depicting various aspects of state government and — with TV cameras rolling — shouted, “Keep Minnesota Open.”

‘Two days to roar’

While that debate was going on, Walz made a brief but combative (there were at least two “damns” and one “hell”) appearance at a rotunda rally sponsored by Education Minnesota, the state’s teachers union, saying at one point that he didn’t recall hearing voters ask him to “negotiate away our future to give tax breaks to millionaires.”

“You know there are competing ideas about what Minnesota should look like,” he said of budget talks. “I’m here to tell you I’m hearing a lot of great ideas from some folks that fit better in Mississippi and Alabama than they do in Minnesota.”

After thanking the teachers for attending and supporting his budget, he made reference to the Senate Republicans: “We’ve got three dozen people that need to hear our voices roar. You’ve got two days to roar. Let’s do it!”