Minnesota’s politically-divided Legislature has a week to work out three important issues: What to do with a budget surplus worth billions, how to improve public safety and how much to borrow for infrastructure improvements.
Or they could do none of those things.
This is not a budget year so the state’s current spending plan doesn’t have to change. The biennial budget of more than $50 billion expires at the end of June 2023.
Lawmakers began their legislative session in late January with a record $9.25 billion budget surplus and $1.2 billion in unspent federal coronavirus aid. Tax collections continue to trend higher than expectations.
There’s consensus at the Capitol to give some of that surplus back to taxpayers and spend some of it on a supplemental budget to address the state’s biggest needs. Non-budget years also are typically when lawmakers focus on long-term borrowing to repair and build state infrastructure.
But lawmakers’ agreement ends at the broader points. There are big differences in the specifics of Democratic Gov. Tim Walz, the GOP-led Senate and the DFL-controlled House legislative plans.
It’s also an election year. In fact, the party faithful spend much of the spring anointing their preferred candidates for the November election. Republicans held their state convention this weekend and Democrats will convene Friday.
A lot of what gets done, or doesn’t, in the last week of the session will depend on how badly politicians want to campaign on their recent accomplishments.
Here’s a closer look at the issues that appear to have the best chance at compromise:
PUBLIC SAFETY CHANGES
Improving policing has been a top priority for Minnesota Democratic-Farmer-Labor Party members in the aftermath of the deaths of George Floyd, Daunte Wright and other Black men at the hands of police.
Rising crime rates during the coronavirus pandemic also have made public safety a key issue for Republicans.
The DFL and GOP have a lot of competing viewpoints, but there’s also a decent amount of common ground. A conference committee of House and Senate lawmakers spent much of the last week trying to negotiate a bill that could win approval in both chambers.
There’s agreement over added funding for the judicial system, including public defenders and court staff. Both parties want to spend more on recruiting and retaining police, but in different ways.
There’s also some consensus on helping law enforcement purchase body cameras.
To address rising crime rates, Republicans want to create new penalties for things like organized retail theft and carjacking. They’ve also proposed stiffer penalties for fentanyl possession and certain violent crimes.
Democrats say they want to focus efforts on addressing the root causes of crime including interventions with at-risk youth. They’ve focused on crime prevention funding for community groups and nonprofits in communities that face the highest crime rates.
Cutting taxes in an election year seems like a no-brainer, especially with a record budget surplus. But that doesn’t make finding agreement between three vastly different plans any easier.
Republicans say Minnesotans are “overtaxed” and they want to cut the first tax tier rate to 2.8 percent, from 5.35 percent. Doing so would cost $2.8 billion next year and would decrease tax revenues by about $2 billion annually.
The GOP-led Senate also wants to eliminate state income taxes on Social Security, which would cost more than $500 million annually.
DFLers say Republicans’ plans would largely benefit the wealthy. Instead, they are proposing a more modest reduction in Social Security taxes and a host of credits to help lower- and middle-income residents.
Tax breaks for child care, education expenses and rent are at the center of the House DFL plan, which would cost $1.6 billion next year and about $800 million annually.
Walz’s proposal also includes credits and deductions for children and school costs. The main focus of the governor’s plan is more than $2 billion worth of rebate “Walz checks” worth $500 for individuals and $1,000 for couples.
The governor’s tax proposal would cost about $2.2 billion next year and revenue would drop by about $130 million a year going forward.
The years when lawmakers don’t have a budget due are typically focused on cutting a deal for long-term borrowing to repair and build state infrastructure. In 2020, the so-called bonding bill was worth a record $1.9 billion.
State agencies requested $4.2 billion worth of projects this year and cities, townships and other groups added another $1.2 billion to that list. Walz has a $2.7 billion wishlist for infrastructure projects.
Democrats have expressed support for a large bonding bill, but Republicans say they want it to be more modest and focused on upkeep rather than new projects. In typical bonding years, the bills have averaged about $775 million.
It takes a super majority in both chambers to pass a capital investment bill, so whatever comes together needs strong bipartisan support. So far, neither chamber has made much progress, but infrastructure bills are often part of larger deals about spending.
Republican lawmakers say they’re focused on cutting taxes and improving public safety while Democrats want a broader supplemental budget to address many of the challenges that emerged during or were exacerbated by the pandemic.
Taxes, public safety and capital projects seem like the most likely places lawmakers will compromise, but there are plenty of other opportunities for a deal.
Education: DFLers want to increase spending on public schools by more than $1 billion with a focus on mental health supports, special-education funding and aid for English learners. Republicans note schools got more than $1 billion in new funding last year and they want to focus on improving students’ reading proficiency.
Health and Human Services: Both the House and Senate have proposals to boost caregivers’ pay to address a dire shortage of workers in long-term care. A collaborative of long-term care advocates say the industry could collapse without financial help from the Legislature.
Alcohol and gambling: These two are debated annually and there’s rarely a compromise — until there’s a breakthrough. This year, there’s a push to loosen rules on craft brewers and small distillers as well as to legalize sports betting.
Hope remains that lawmakers could reach a deal because this legislative session has already seen a good amount of compromises.
In late March, lawmakers just beat a federal deadline to extend the state’s reinsurance program for another five years. The $700 million deal funds the program, which helps insurers pay for their sickest patients, for the next three years.
Democrats dislike reinsurance because they see it as a give away to rich companies. But they joined with Republicans to extend the program because without it, health insurance rates on the individual market would likely see significant increases.
Legislative leaders also approved a deal of more than $2.7 billion to replenish the state’s unemployment trust fund and reward frontline workers with $500 million worth of “hero pay.” It reverses an unpopular tax hike on businesses and workers should see $750 checks sent out this summer.
Those agreements leave nearly $7 billion in budget reserves lawmakers could put toward a mix of tax cuts and supplemental spending. If they can’t come to agreement before the legislative session ends May 23, it will be up to the next Legislature to decide how to spend that money.
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