It all seemed so promising that May morning. Standing outside the state Capitol, Gov. Tim Walz announced a spending and tax deal that would trigger a satisfactory end to the 2022 regular session of the Minnesota Legislature.
The DFL governor, the GOP Senate majority leader and the DFL House majority leader (who was standing in for a still quarantined speaker of the House) took turns saying nice things about each other and predicting all could pass in time for the scheduled adjournment a week away.
Though work remained on the details in each spending area — something the lawmakers insisted would be done by committee chairs — these types of “global deals” among state government leaders have in recent years triggered the beginning of the end.
That’s what happened in 2019 between Walz, Senate Majority Leader Paul Gazelka and House Speaker Melissa Hortman. That’s what happened in 2021 between the same three. From all appearances, it was set to happen again this year with new Senate Majority Leader Jeremy Miller. There was time and motivation to spend down the state’s surplus in three equal parts: $4 billion for spending, $4 billion for tax cuts and $4 billion to be put on ice to be spent later.
Those numbers cover three years, the final year of the current two-year budget and the entirety of the next two-year budget that won’t be adopted until next spring.
That was three weeks ago. The session ended with a whimper two weeks ago, and the only actual meeting between Walz and the legislative leaders came last Friday. There were few encouraging words and mostly no words at all.
Miller has been mostly unseen and unheard since session ended and that continued Friday. Hortman said nothing as well. Walz appeared outside his office and continued to express optimism with a slight hint of frustration.
“I think we’re still moving,” Walz said, repeating that the committee chairs negotiating final deals are close. If they could close those differences, the bills could be prepared and passed in a short special session.
“The devil is in the details, but it’s a pretty small devil now because we’re mostly agreed where most of that goes,” Walz said. “I know there’s a school of thought out there that says let’s not do anything and run to campaign on this or whatever. That was not expressed in there.”
Earlier in the week, Walz tried to hold Republicans to that deal, suggesting that while they might have “buyer’s remorse,” a deal is a deal.
So what happened?
Politics happened. There was always an element among some Republicans — mostly in the House, where they serve in a mostly powerless minority — that it was better to wait until 2023 when the GOP might have more power, or even total control of state government. GOP-endorsed gubernatorial candidate Scott Jensen made an issue of the surplus by saying none should be spent on anything but tax cuts.
Nailing down the details of the various spending areas also proved more difficult than it had been in the past. In the four major budget areas — education, social services, public safety and transportation — deals weren’t reached.
Yet an expectation by DFLers, including Walz, that the two sides would split the difference on spending wasn’t, apparently, a binding agreement.
Walz, for example, said the Big Three agreed that if a budget area like education was allotted $1 billion, half would be for GOP priorities and half would be for DFL priorities. “All of the $4 billion is not going to be on my priorities. I don’t get to get that,” Walz said. “The House doesn’t get that and the Senate doesn’t get that. That’s why we said we would just split that up.”
That, however, wasn’t what Senate Education Committee Chair Roger Chamberlain, R-Lino Lakes, understood the deal to be. “Contrary to what was conveyed by House conferees at our last meeting, it is not an obligation of the Senate to ‘split the difference’ on all of your proposals,” he wrote to his House counterpart, Rep. Jim Davnie, DFL-Minneapolis. “Under our system of governance, each body attempts to convince the other body; failing that, no change is made.”
Some agreements were reached. A $4 billion tax bill combined the elimination of state taxes on Social Security income, a slight decrease in income tax rates and DFL-favored changes to child care and housing credits. But tax bills tend to be passed only after other agreements are put into effect, even those described as the largest in state history.
Other smaller deals were reached but didn’t come to votes before adjournment. Bigger deals on tougher issues remain elusive, with Walz saying this week will help determine if they can be settled. He’ll meet again with Hortman and Miller Friday.
After reaching a deal with his legislative counterpart, Sen. Mary Kiffmeyer, R-Big Lake, on a state government omnibus bill, Brooklyn Park DFL Rep. Mike Nelson was asked how much personalities play a part in success. “Sometimes you have to disagree without being disagreeable,” Nelson said.
Added Winkler: “Not everyone is as good at driving toward a deal.”
Miller and Hortman have been intervening to help break impasses. But once session ended and the politicians returned to their districts, they appeared to hear what they wanted to hear.
Sen. Zach Duckworth, a Lakeville Republican who attended a ceremony with Walz to mark passage of a veterans bill that escaped the end-of-session stalemate, said he is hearing from constituents worried about increased spending.
“We have some constituents who say, ‘Hey, it’s not a budget year, stop spending money,’’ Duckworth said. “We’d rather see you reduce our taxes and let us keep our hard-earned money, especially in the face of what is likely to be a recession and inflation.”
Duckworth, however, said he thinks there is support for spending on public safety, education and infrastructure via a bonding bill. “Everything else is in the backseat when we’re trying to provide relief for families,” he said.
Walz said he hears something different.
“I think Minnesotans — and I will challenge anyone to go ask them — they think it is insane that we cannot figure out in a budget surplus year … why we can’t put money back in the pockets of Minnesotans, and why we can’t take care of some of those basic things, and why we can’t honor this agreement to go 4-4-4 and get this done,” Walz said.
The measures that did pass during the regular session have reduced the state’s current surplus from $9.25 billion to $7.1 billion. If no more money is spent this year, the surplus for the following two-year budget is projected to be $12 billion, which is down from $16 billion, after money was set aside earlier this year to fix the unemployment system, fund a health insurance premium subsidy program known as reinsurance, give $500 million in bonus checks to frontline pandemic workers and refill the governor’s COVID emergency fund.
Unlike last session, however, no deal doesn’t mean a government shutdown, since state government is in the middle of its most recent two-year, $52 billion budget. But it could deny nursing homes and public schools increased funding, local governments of money for public safety and the state Department of Transportation of cash to match federal dollars from last year’s infrastructure act.
And the tax cuts would not be passed in time to affect 2022 taxes.