The politically divided Minnesota Legislature has a week to resolve three important questions: what to do with a multi-billion budget surplus, how to improve public safety and how much to borrow for infrastructure improvements.
Or they couldn’t do any of that.
It’s not a budget year, so the state’s current spending plan doesn’t have to change. The biennial budget of over $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 recoveries continue to exceed expectations.
There is a consensus on Capitol Hill to give some of that surplus back to taxpayers and spend some of it in supplementary budgets to meet the state’s greatest needs. Non-budget years are also typically when lawmakers focus on long-term borrowing to repair and build state infrastructure.
But lawmakers’ agreement stops 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 is also an election year. In fact, party loyalists spend much of the spring anointing their favorite candidates for the November election. Republicans held their state convention this weekend and Democrats will meet on Friday.
Much of what will or will not be done in the final week of the session will depend on whether politicians are willing to campaign on their recent achievements.
Here’s a closer look at the issues that seem to have the best chance of compromise:
CHANGES TO PUBLIC SECURITY
Improving policing has been a top priority for members of the Minnesota Democratic-Farmer-Labour Party following the deaths of George Floyd, Daunte Wright and other black men at the hands of police.
Rising crime rates during the coronavirus pandemic have also 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 made up of House and Senate lawmakers has spent much of the past week trying to negotiate a bill that could be approved in both houses.
There is agreement on additional funding for the justice system, including public defenders and court staff. Both sides want to spend more on recruiting and retaining police, but in different ways.
There is also some consensus to help law enforcement purchase body cameras.
To deal with rising crime rates, Republicans want to create new penalties for things like organized retail theft and carjacking. They also proposed tougher penalties for possession of fentanyl and certain violent crimes.
Democrats say they want to focus their efforts on addressing the root causes of crime, including interventions with at-risk youth. They focused on crime prevention funding for community groups and non-profit organizations 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 this does not facilitate the search for an agreement between three very different plans.
Republicans say Minnesotans are “overtaxed” and want to cut the first-tier tax rate to 2.8% from 5.35%. It would cost $2.8 billion next year and cut tax revenue by about $2 billion a year.
The GOP-led Senate also wants to eliminate state income taxes on Social Security, which would cost more than $500 million a year.
The DFL say the Republicans’ plans would largely benefit the wealthy. Instead, they are offering a more modest reduction in Social Security contributions and a host of credits to help low- and middle-income residents.
Tax breaks for childcare, education spending and rent are at the center of the House DFL plan, which would cost $1.6 billion next year and around $800 million a year.
Walz’s proposal also includes credits and deductions for children and tuition. The main goal of the governor’s plan is more than $2 billion in cash back “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 decline by about $130 million a year going forward.
Years when lawmakers don’t have a budget due are usually focused on reaching a long-term borrowing deal to repair and build public infrastructure. In 2020, the so-called bail 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 wish list for infrastructure projects.
Democrats have expressed support for a big bond bill, but Republicans say they want it to be more modest and focused on maintenance rather than new projects. In typical bond years, bills averaged about $775 million.
It takes a super majority in both houses to pass a capital investment bill, so whatever comes together needs strong bipartisan support. Neither chamber has made much progress so far, but infrastructure bills are often part of larger spending deals.
Republican lawmakers say they are focused on lowering taxes and improving public safety while Democrats want a larger supplemental budget to address many of the challenges that have emerged during or been exacerbated by the pandemic.
Taxes, public safety and capital projects seem to be where lawmakers are most likely to compromise, but there are plenty of other opportunities for a deal.
Education: The DFLs want to increase public school spending by more than $1 billion with a focus on mental health supports, special education funding and help for English learners. Republicans note that schools received more than $1 billion in new funding last year and they want to focus on improving students’ reading skills.
Health and social services: Both the House and Senate have proposals to raise caregiver pay to address a severe shortage of workers in long-term care. A collective of long-term care advocates say the industry could collapse without financial help from the Legislative Assembly.
Alcohol and gambling: These two elements are debated every year and there is rarely a compromise – until there is a breakthrough. This year there is pressure to relax the rules on craft brewers and small distillers as well as to legalize sports betting.
The hope remains that lawmakers could reach an agreement because this legislative session has already seen many compromises.
In late March, lawmakers just beat a federal deadline to extend the state reinsurance program by five years. The $700 million deal funds the program, which helps insurers pay for their sickest patients, for the next three years.
Democrats don’t like reinsurance because they see it as a gift to wealthy corporations. But they joined Republicans in expanding the program because without it, health insurance rates in the individual market would likely see significant increases.
Legislative leaders also approved a more than $2.7 billion deal to replenish the state’s unemployment trust fund and reward frontline workers with $500 million in ‘hero’s pay’. . He reverses an unpopular corporate tax hike and workers are expected to see $750 checks sent out this summer.
These agreements leave nearly $7 billion in budgetary reserves that lawmakers could devote to a combination of tax cuts and additional spending. If they fail to reach an agreement before the end of the legislative session on May 23, it will be up to the next legislature to decide how to spend this money.