The last week of the 2015 session ends one week from today. The three key leaders, Governor Dayton, Senate Majority Leader Tom Bakk, and House Speaker Kurt Daudt, met over the weekend to continue negotiations on the budget, but as of this morning they don’t have a deal to announce.
Whether or not the Legislature and Governor have a budget deal for the next two fiscal years, Minnesota’s Constitution requires the legislature to adjourn on the first Monday after the third Saturday in May, which is May 18.
While leadership remains miles apart in overall spending and on some policy issues, most people believe they will cut a deal and be done on the 18th – if not for good politics in being done on time, then for logistical reasons: the State Department of Administration is shutting down the Capitol on May 19. Moving trucks will be lined up outside the Capitol on May 19 to clear everyone and everything out of the building to continue with the Capitol restoration schedule. View MREA’s side-by-side of the issues.
Where are the significant differences between the parties in budget negotiations?
Taxes
The House GOP wants to ‘give it back.’ Their plan would cut over $2 billion in taxes while the Senate has a more modest plan of $465 million in tax cuts. The GOP sees an ongoing surplus and wants the dollars given back to the taxpayers. The DFL sees the surplus as relief from a decade of rolling deficits and doesn’t want to undermine the state’s general fund into the future with big tax cuts.
E-12 Budget & Policy
The Governor wants to spend $695 million on E-12 programs. Half of his target would go toward a universal four-year-old preschool expansion across the state. His formal proposal would add ‘1&1’ to the formula, but the Governor has public stated recently that he’s willing to go higher on the formula in light of potential budget cuts to classrooms across the state.
The Senate plan spends $365 million on a mix of 1&1 on the formula and $65 million in expanding school readiness programs targeted at low-income three- and four-year-olds across the state. The House GOP plan only spends $157 and has just over .5&.5 on the formula.
It appears the hang up for GOP members on spending more in E-12 is resistance to the Governor’s universal preschool plan. They don’t want to spend that much money on preschool, and they don’t want it to be a school-based program. They believe other community providers should be able to access state preschool funds. Finding a compromise position on preschool expansion may be the key to unlocking a higher target for E-12 and more money on the formula.
Transportation
The House GOP plan would dedicate existing general fund revenues toward a multi-year, $7 billion transportation plan. Proponents argue that general fund taxes like auto part sales and auto rental sales should be dedicated to transportation. Opponents argue that the state needs flexibility in the general fund to take care of education, health, and other services and therefore they shouldn’t be dedicating general fund revenues for specific purposes.
The Senate plan would raise the gas tax to fund a multi-year, $11 billion transportation plan. Proponents argue that gas taxes are constitutionally dedicated to transportation so this is a secure revenue steam in need of a boost for transportation needs. Opponents argue now is not the time to raise gas taxes and that low gas prices have contributed to the recent economic uptick we’re experiencing.
There’s some speculation that the level of tax cuts may correspond to the level of transportation funding derived from the gas tax. We’ll see if these competing agendas merge in the final days of session. Keep in mind, the state does not need a tax or transportation investment bill to pass to continue with current state operations. These are nice, but not necessary issues to solve to keep state government open on July 1.
Health & Human Services
Maybe more than taxes and transportation, the gulf between the House GOP and DFLers on Health & Human Services (HHS) is so wide in policy and funding it’s hard to see how they will resolve this budget area. Yet they must resolve it to avoid a government shutdown on July 1. The House GOP would end MinnesotaCare, a health insurance program for low-income people, and shift them onto the MNsure. The DFL is adamantly opposed to this move. The House GOP bill would reduce HHS spending by over $1 billion while the Senate DFL and Governor would add over $340 million to this budget area.