Can a state Legislature have too much money to spend? Minnesota’s is about to find out, starting Monday when the 2022 regular session convenes.
The $7.75 billion surplus — collected and projected revenue in excess of the approved budget — is in record-setting territory. And coming in the middle of that two-year $52 billion budget means it’s all available to spend on one-time expenditures, new programs or tax cuts.
Of course, lawmakers could save some to spend next year in another supplemental budget or in the two-year budget that will be adopted, hopefully, in the spring of 2023. But the state already has a record-setting rainy day savings account and more than a billion dollars in unspent federal American Rescue Plan money.
How big is the surplus? Mark Haveman, the executive director of the business-leaning Minnesota Center for Fiscal Excellence wrote that the last surplus anywhere near this size came in 1999 when it made up 15.6 percent of projected biennial spending. This year’s equals 14.9 percent of projected spending and if the ARP money is included, it reaches 17 percent.
And the last five odd-year November forecasts have produced surpluses ranging from $880 million to $1.65 billion.
So, yeah, there is money to spend and there are members of both parties willing to spend it or give it back or both.
Gov. Tim Walz would not only spend almost all of this budget’s surplus, he also would spend almost all of next budget’s surplus. The House majority DFL has compiled a list of wants and needs that likely exceeds both. And the Senate majority GOP, also light with the details, has promised a significant ongoing tax cut along with some new spending.
Then again, Minnesota’s government remains politically divided. And it is an election year in which all five statewide elected offices and all 201 seats in the Legislature are on the ballot. Both of those factors can make agreement take a backseat to politics.
Still, they’re all there for nearly four months — sometimes on video conferencing, sometimes in person, sometimes a hybrid of both. What will they just talk about and what will they talk about and then accomplish?
Tap the surplus/cut taxes
Based on the agendas released by Walz and the legislative caucuses, everyone has ideas for spending the surplus. Because he is required to submit a supplemental budget to the Legislature, Walz’s plans are the most specific. He has proposed spending $7.58 billion on a long list of program enhancements in health care, public safety, climate change and housing.
Walz does not have tax cuts in his plan but would send $700 million back to taxpayers in the form of what he calls “Walz Checks.”
House DFL leaders have a similarly ambitious agenda of new and expanded programs including a $1 billion climate action plan and a new paid family and medical leave benefit that, while eventually funded with a payroll tax, would be front-loaded with $1.6 billion in surplus money.
The Senate GOP wants to spend some of the surplus on public safety grants to recruit and retain police officers but has said it will come in with sizable permanent tax cuts for all taxpayers with an additional emphasis on low and middle income residents.
Money for public safety
There are sharp differences between the House DFL, Senate GOP and Walz’s plans for addressing crime in Minnesota this year, but legislators and the governor have all said they support increased spending on public safety in some fashion.
Crime has become a hot topic at the Legislature amid a wave of carjackings, assaults and homicides and is certain to be a focus in elections. While election-year politics and ideological divides over how to respond to crime might lead to gridlock on the issue, legislators already have found at least modest common ground. That includes efforts to recruit and retain officers.
“We are going to work closely with anyone who will work with us to provide more funding for more police officers and hold violent criminals accountable,” said Senate Majority Leader Jeremy Miller, R-Winona.
Even-numbered years are traditionally called “bonding sessions” since the bigger operating budget is job one in odd-numbered years. But Minnesota Legislatures changed that over the past decade or two when big bonding bills came in even years and small bonding bills came in odd years.
Annual bonding bills — so named because they pay for construction projects by selling state bonds — haven’t been as common lately and none was passed last year. That is partly or mostly because selling bonds requires a 60 percent majority vote of the House and Senate, giving lawmakers of the minority party some clout for a change.
In hopes that the House DFL and GOP caucuses can reach agreement, people are making bonding proposals. Walz is asking for $2.7 billion, the House DFL may come in that large or larger and the Senate GOP has signaled borrowing roughly half of what Walz proposed.
Greasing the path is the state’s $6 million to $7 million share — at least — of the federal infrastructure law.
Unemployment Insurance relief
During the first months of the COVID pandemic, Minnesota’s unemployment rate ballooned as businesses like restaurants, bars, theater and stores were closed by executive order. The state had some money in its unemployment insurance reserve fund but that was quickly tapped and it started borrowing from the federal government .
Now, existing state law requires increases in premiums paid by employers to both repay the $1 billion federal debt and begin refilling the unemployment insurance trust fund to the required level of $1.7 billion. Business groups have convinced both Walz and legislative Republicans to use the surplus pay for both, thereby negating proposed rate increases that will become due in April. The House DFL, however, isn’t there yet. Some think such a move is akin to a business tax cut while others acknowledge that the state response to COVID contributed to joblessness but aren’t ready to cover the entire debt with state funds.
It almost seems cruel to put this on the possible agreement list. For seven months frontline workers have been told by state politicians that they would be getting checks as a thank you for going to work during the pandemic. Unlike office workers — and legislators for that matter — nurses, health aides, grocery store clerks, meat processing workers and so many others had to work in person. And in the early days, no one was sure how the virus spread and it didn’t much matter because few had adequate personal protective equipment.
Such bonuses were even one of four allowable uses of federal funds under the American Rescue Plan and lawmakers set aside $250 million of it for checks with a fitting target date for agreement on the details of Labor Day.
It didn’t happen, with Republicans wanting only health care workers and first responders to get checks and DFLers wanting a broader list. Now, both Walz and DFLers are proposing $1 billion to pay for bigger checks to more people while the Senate GOP is sticking with $250 million for its narrower group of workers.
So why might it still happen? Isn’t this the same impasse as before? Won’t workers have the ball pulled away again, now two years since they went to work to help everyone survive the pandemic? Yes. But it remains boggling that politicians can’t agree to give away money, somebody’s else’s money at that.
The silver lining to this pending failure is that the House and Senate members have just two weeks to put this one behind them. State law requires new post-census state legislative and congressional maps to be completed by February 15. The Minnesota Supreme Court appointed a five-judge panel to do the work in the Legislature can’t and that panel is prepared to post maps sometime on the 15th.
If nothing else, the proposed constitutional amendment offered by former Supreme Court Justice Alan Page and Minneapolis Federal Reserve President Neel Kashkari is a political science study. Making public education “the paramount duty” of the state and a right could be used to force lawmakers — either by pressure or court order — to fund schools and require that they perform well for all students.
But it has led to liberals siding with conservatives in support and liberals siding with conservatives in opposition. One of those opponents — House Speaker Melissa Hortman — can keep it from coming to a vote and she said last week that she agrees with conservative Senate Education Committee Chair Roger Chamberlain, R-Lino Lakes. At the same event, after criticizing the state’s teachers union for resisting reform, House Minority Leader Kurt Daudt then mostly agreed with the union’s opposition to the amendment.
Walz compared his proposal for rebate checks up to $350 to “Jessie Checks” sent out by former Gov. Jesse Ventura. But Ventura didn’t put the title on the checks, others did. And Senate Republicans immediately trashed the idea as election year gimmickry with taxpayer money.
What about Walz’s DFL allies in the House? Hortman said Jesse Checks “ turned out to be an administratively complex and expensive way to deliver economic assistance to middle class families. I think the better way is through the tax code.”
Republicans again will propose requiring voters to show an ID card at the polls. It was their issue last year and has already been introduced in a slightly different form this year. DFLers will continue to oppose it by first pointing to the 2012 election in which voters rejected the idea by defeating a proposed constitutional amendment.
Booze, bud and betting
There is no agreement on additional changes to liquor law sought by small beer, wine and spirits makers. There is also no chance of success for recreational marijuana in the face of Senate GOP opposition. And while there was some momentum behind legalized sports betting after the House Commerce Committee chair endorsed it, leaders said this week it was unlikely to pass.
MinnPost staff writer Walker Orenstein contributed to this report.