Capitol Watch: Skepticism remains for budget deal
As you know by now, Gov. Tim Walz and three of the four legislative leaders announced at a press conference Thursday morning that an agreement was reached on the overall spending numbers for the state budget. At this point, there are very few details, but here is what we know heading into the last day of session tomorrow.
Structural imbalance remains
The size and scope of the state budget is not going to change very much. Gov. Walz is claiming 90% of the deficit for the 2028-29 biennium will be gone, but that is accomplished using leftover cash from the last biennium. From a structural perspective, the next budget will still spend $2.2 billion more than it takes in.
Not out of the woods yet on tax increases
The budget deal includes at least one tax increase on marijuana sales. It also includes a small tax cut for the upcoming Paid Family Leave program. It looks like they are moving a lot of money around in the Health and Human Services area and it’s not clear yet how everything will be paid for. We are keeping our eyes on several moving parts, including reinsurance, the Health Care Access Fund, a new fee on insurance companies, and the sick tax. The relationship between these budget items lead to creative budgeting (let’s shift those costs into the next biennium) and creative marketing (that’s not a tax increase). As the kids say, it’s “sus.”
They will not finish on time tomorrow
There will be a special session called in the next few days or even weeks to finalize the budget. Several omnibus spending bills will cross the finish line on time, but the Human Services spending bill will require a special session and a deal among the leaders to deliver enough votes for passage. Walz will also have to agree in order to call the legislators back to St. Paul.
Liberal Democrats upset over health care for illegals
Senate Republicans could be in the driver’s seat after liberal Democratic legislators lost their minds over the elimination of free health care for illegal immigrants. Gov. Walz, DFL Senate Leader Erin Murphy and DFL House Leader Melissa Hortman all agreed to end free health care for adult illegal immigrants. Walz followed the lead of his political mentor, Gavin Newsom of California, who recently ended funding for illegal immigrant health care. Every state that tried this ran into huge enrollment numbers and unsustainable costs.
When the deal was announced Thursday, a large group of DFL legislators staged a very loud protest in the governor’s reception area that could be heard by the leaders and press during their press conference. One of the chants from legislators was “Don’t kill immigrants!”
Since Democrats control the Senate, Majority Leader Murphy is expected to deliver the votes to pass the budget once she signs an agreement with the governor and other leaders. It is clear from this protest that many DFL senators are not going to vote for certain parts of this budget deal. Republican Senate Leader Mark Johnson did not sign the budget agreement on behalf of his caucus but now will be asked to convince some of his members to vote for the deal. He will certainly ask for changes to deliver those votes. That gives him a great opportunity to demand less spending, elimination of the proposed tax increases, and budget shifts or even policy reforms. Johnson’s original budget statement mentioned cutting waste, fraud and red tape as well as helping small businesses. He might have an opportunity to deliver on those priorities.
Non-public school aid remains in budget
As Catrin Wigfall explains here, Walz backed down on his effort to defund non-public schools. This was a cynical budget ploy to cause non-public schools and Republican legislators to expend energy defending something that’s been in the state budget for over 50 years. It worked. Instead of pushing for real school choice, education reformers were on defense for the entire session.
Unemployment for seasonal school workers gets temporary funding
One of the costliest mandates foisted on school districts during the 2023 session was allowing seasonal employees to collect unemployment during the summer. This benefit is being phased out but will be paid for one more year using a surprising funding source. The money will come from the Northern Lights Express rail boondoggle, a 2023 nominee for American Experiment’s Golden Turkey award. While it’s smart to kill this wasteful project, using the savings to cover unemployment for school workers is a bizarre way to legislate.
Bottom line: it’s not over
The leaders came together and made a deal but it’s not clear it has the votes to pass. Many of the details need to be figured out and the tax and spend picture is not clear. Tax increases are still a very real possibility, so if you haven’t sent an email to your legislators yet, we make it easy here.
Capitol Watch will likely publish a mid-week update as things change in St. Paul.