The 2019 session of the Minnesota Legislature was one of high expectations. And low expectations.
New Gov. Tim Walz and House DFLers raised them, hoping to carry momentum from the 2018 election with an ambitious agenda that included gun safety measures, paid family and medical leave, a public option for health insurance, driver’s licenses for undocumented immigrants, and more state support for education.
On the other side of the Capitol building, Senate Majority Leader Paul Gazelka lowered them. In a state with a divided Legislature — with the DFL in control of the House and the GOP in control of the Senate — neither party was going to be able to get much of what was on their wish lists, he said from the start. Instead, the Nisswa Republican recommended the Legislature and Walz concentrate on the one must-do item: a balanced state budget.
That goal was always going to be tough. Despite a state surplus that began at $1.5 billion before falling to $1 billion in February, the process of crafting a budget faced similarly divergent expectations. The first offers were $2 billion apart — $47.7 billion for the Senate and $49.8 billion for the House — with the House using a variety of tax increases to pay for its version.
In an interview Tuesday, Walz recalled that the Senate GOP initially wasn’t even going to hold hearings on his budget, though he eventually persuaded them to do so, even if the proceedings were perfunctory. “I was going to be the first governor in Minnesota history that the Senate would not even hear my tax bill, my budget, at all,” he said.
Republicans had an over-their-dead-bodies approach to tax hikes, but they were loudest in opposition to a gas tax and to the renewal of the 2 percent medical provider tax, which GOP members often dubbed “the sick tax.” A sunset of that tax, which is used to pay for subsidized health insurance and other health programs, was one of the GOP’s “gets” from the 2011 state government shutdown, and something they were reluctant to give up.
But without tax increases — or the continuation of the medical provider tax — it was hard to find the math that would fund a budget both sides would accept. “I’d like the Senate Republican caucus to put together their health and human services spreadsheet minus $1.4 billion and take a good look at what that looks like,” said state Human Services Commissioner Tony Lourey early in the session.
Turns out, they did put together such a spreadsheet — and didn’t much care for what it looked like. In fact, without revenue from the provider tax, Senate GOP budget writers had to use a surplus in the Health Care Access Fund and still were taking nicks out of programs to meet their goals.
All of which meant that first budget proposal was a starting point, though DFL leaders couldn’t be sure. “If they can’t compromise at all, it is not clear how we end this session,” said House Majority Leader Ryan Winkler, DFL-Golden Valley.
Disagreements beyond the budget
While both bodies were adopting their budget bills, House DFL leaders and DFL constituency groups continued to push hard for their policy agenda. Gun safety rallies ran into paid family leave rallies. Immigrant license hearings bumped into save-the-provider-tax demonstrations. Walz, as well as his wife, Gwen, pointed to the results of the 2018 election to make the case not only that the voters were with them — but they would punish any politician who stood in their way.
And they bristled at suggestions that the political reality of a divided Legislature should rein in their ambitions. It wasn’t the DFL’s role to only push issues that the GOP supports, they said. Walz himself only got more adamant as the session progressed, saving his most passionate speech for the regular session’s final weekend.
“You know there are competing ideas about what Minnesota should look like,” he told a rally organized by Education Minnesota, the state’s teachers union, in the Capitol rotunda. “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. We’ve got three dozen people that need to hear our voices roar. You’ve got two days to roar. Let’s do it!”
It was just a bit more than 24 hours later that Walz stood with Gazelka and Hortman to announce a budget deal.
It is hard to see how the session could have ended as amicably as it did without Senate Republicans giving in on the provider tax. The revenue from the tax allowed for inflationary increases in existing programs as well as 2 percent annual hikes in state school aid. Gazelka called it one of his biggest concessions, along with giving up on a GOP plan to create a new opportunity scholarship tax credit to help lower-income children attend private schools.
In return, the Senate GOP was able to block a gas tax increase and win an income tax cut for middle-class income earners, the first in two decades. And by reducing the provider tax from 2 percent to 1.8 percent, Gazelka said it reduces the amount of money available for the DFL anticipated push for a version of Medicare for All (or at least Medicaid for More).
Gazelka also won a temporary victory in the state’s response to what had been an unstable health insurance market for individuals and small businesses. Known as reinsurance, the program helps insurers cover the cost of high-use premium holders and allows them to keep overall rates lower.
“Considering that we were so divided and the House more progressive than I’ve ever seen them, the process wasn’t perfect, but we got it done,” Gazelka said of the session.
But he conceded that he was looking for ways to make the concession on the provider tax look more palatable to the GOP. “It’s 10 percent less, I could maybe argue that, but the point is those were things I had to swallow,” Gazelka said.
House Speaker Melissa Hortman agreed that the provider tax concession by Gazelka was big. “We were in a situation … where we were at risk of losing health care for 1.1 million Minnesotans,” Hortman said Saturday morning. “It was an incredible feat to get Republicans in the Minnesota Senate to agree. They were really tough negotiations, really hard-fought negotiations to get to that point.”
But the GOP wasn’t the only side to give up a lot.
“A lot of stuff ended up getting cut out by either side, just saying ‘I’m not going to do that,’” Gazelka said Tuesday. “Everything else, if we get it fine, if we don’t that’s OK. But what we do have to do is pass a two-year budget.”
Gazelka said said he expects the DFL’s policy agenda to resurface when the Legislature reconvenes Feb. 11, and he could have been characterizing the political stakes of the entire session when he said, “Really it’ll be about next election,” even if he was speaking about a state-run health insurance system. In other words: If his party doesn’t keep control of the Senate in 2020, the DFL will be able to implement many of the policy proposals it lost out on this year.
Walz agreed that the provider tax concession was key in the budget talks. And though the GOP may have considered it the “Holy Grail” of its government shutdown wins from 2011, Walz said he was sure they would have to give in since it was so necessary to maintain the health programs the state prides itself on. The loss of the revenue from the tax also would have had negative consequences on the overall state budget as dollars were moved around to accommodate for the loss of that money. “It was big. There’s no doubt about it,” Walz said Tuesday. “It shaped the negotiations because of the oversized importance of it.
“I think they knew they would have to compromise for both of those things, but I think ideologically it was hard. It was a tough fight. I think maybe I did not realize the depth of some of their members’ aversion to the provider tax and how much of a fight it was going to be for them to put up the votes.”
And what did the DFL get out of the deal? Walz and House Speaker Melissa Hortman avoided an ugly battle that might have included a government shutdown. They saved the provider tax and health care for 1.2 million Minnesotans it helps pay for. And they did it without agreeing to a new sunset date that many expected. They also won increases in education and higher education funding, though not as high as first proposed. And they gained a new state law against wage theft.
Walz also touted increases in local government aid and county program aid to pre-recession levels and investments in rural broadband.
Prior to the session, House Majority Leader Winkler used an Olympics analogy for a prediction of what the DFL would like to get done. A bronze medal, he said, would be stopping permanent GOP tax cuts; increasing schools funding; and addressing the sunsetting of the provider tax.
Silver would be all that plus obtaining a new revenue source for transportation, such as a gas tax hike, plus paid family and medical leave. Gold would mean they also succeeded in passing legislation on gun safety, driver’s licenses for immigrants and the decriminalization of marijuana.
By that scale, the DFL won bronze and had to come from behind late in the race to get it. If there is any consolation, 2020 is not just an election year, but an Olympics year.
There is a political downside to raising expectations and not meeting them, something best summed up by this postmortem from Education Minnesota President Denise Specht: “This is a lukewarm outcome to a legislative session that had a lot of potential for Minnesota students.”
After hearing Specht’s statement read back to him, Walz said he was reminded of the advice he was given after winning the office.“The hardest part is disappointing your friends,” he said. “I’m not afraid of setting expectations high though. I have to set that bar.”
“The activists, their job is to continue to push, and I make no bones about it that there are areas I’m deeply disappointed on,” he continued, citing his clean energy proposals and gun safety as two. “We have to bring that back again, we have to come back at it.”
After adjourning the one-day special session on Saturday, Hortman said much the same. “It’s also important to note the progressive agenda we will continue to work on next year, the bills that didn’t make it across the finish line this session but will be alive and well in 2020.”
An eye on 2020
During his campaign for governor, Walz ran not only on issues but on a style of governance. Because he was a Democratic congressman from a rural swing district, he could speak across party lines, he said. While that opened him to criticism from left-leaning activists in the primary, and may have cost him the DFL endorsement, it didn’t end up hurting him.
“During the primary and convention season there was skepticism about me from that base that I would be too willing to give on things they wanted. I was making the case that I could make it work, that I could make government work, that we didn’t shut down.”
It also helped to be following DFL Gov. Mark Dayton, whose politics were similar but but had a more combative negotiating style, especially with then-House Speaker Kurt Daudt. Both Walz and Gazelka said a midsession agreement to first study and then dump a botched in-house system to manage the vehicle licensing system known as MNLARS taught them a different way of negotiating across party lines.
Despite the bipartisan goodwill gained from the deal Walz, Gazelka and Hortman crafted on the budget — as well as the way they brokered agreements on many details within the budget and tax bills — none of the leaders is about to give up on partisan politics.
Gazelka said he will make the point that only a GOP Senate stood in the way of government-run health care.
And Walz said he is eager to campaign for DFL candidates. “I will go out and make my case,” he said of the 2020 election, when all Minnesota House and Senate seats will be on the ballot.
“There should have been every expectation that the Republican Senate was going to get some of what was on their agenda,” Walz said of this year’s legislative session. “But I am not shy to say that sending some senators here that will move Minnesota to a clean energy future makes sense. I’d like to have some senators here that make the case on gun violence. I’d like to have some senators here that really want to tackle transportation.
“So, yeah, I’m gonna go out and work hard to make that happen.”