New report: Minnesotans on the move to lower tax states
Today, we release our new report, ‘Taxes and Migration Minnesotans on the Move to Lower Tax States‘. These are the key points: 1) Minnesota’s population growth is below average Since…
Legislative leaders and Gov. Walz all but admitted they can’t get the budget done without a real deadline, and apparently the constitutional deadline of May 17th isn’t enough. June 14th is the new deadline because the legislature is triggered to come back on that day because of Gov. Walz’s latest extension of his emergency power.
A quick run-down of the major issues:
Tax increases: Democrats and Walz are still pretending to need them for the budget, even though there is a surplus.
Police accountability agenda: A top priority for Democrats in the House, although it’s hard to see how their package will keep anyone safe. Gov. Walz admitted as much when asked about his specific police reform priorities: “I would leave it to the community, I listen to the Representatives, who have laid out a very clear path.” Walz just wants the talking point — he doesn’t even care what the policies actually accomplish.
School choice: Republicans are pushing two strong school choice proposals, the Education Savings Accounts (ESA) and an expansion of the current education tax credits. ESAs are a heavy lift for Democrats beholden to the teachers’ union, but the tax credit expansion is something Walz could sign into law. If COVID has taught us anything, it’s that Minnesotans are less enthralled with their public education system.
Spending: With so much extra money involved (even without tax increases), negotiating the budget should be relatively easy. There is money available for each side’s spending priorities. Unfortunately, no one is interested in slowing the growth of state government.
Tax cuts: The Senate wants the full tax exemption for PPP loans while Gov. Walz is holding out for tax revenue from loans over $350,000. The House and Governor want to fully exempt taxes for unemployment income, something the Senate can easily agree to in a tax cut deal.
California emissions standards: House Democrats refuse to support a pause in the rule-making process for the controversial California emissions standards, keeping the Environment Finance Conference Committee at an impasse.
Non-issues: Two issues that get a lot more attention than they deserve are marijuana legalization and emergency powers. The much-touted House effort to pass marijuana legalization this week actually needed Republican votes to pass. And the fight over emergency powers is now moot with Gov. Walz lifting the mask mandate.
A no-win situation for Majority Leader Gazelka
It’s no secret Sen. Gazelka is interested in running for governor. He’s the top Republican in the state and has been leading the fight against Tim Walz on a daily basis for the last three years. But it’s hard to run for governor from the Majority Leader’s office. Part of the job is cutting a budget deal with Gov. Walz and Speaker of the House Melissa Hortman. Gazelka cut a budget deal in 2019 and is in the process of negotiating another deal in 2021.
The Majority Leader faces the classic challenge of gubernatorial politics. The first step in the governor’s race is the Republican endorsement. For the endorsement, Gazelka needs to show delegates he’s a tough negotiator fighting against Walz and the Democrats to keep taxes low, cut government spending and achieve great conservative policy victories. If he fails, he is criticized for being a weak negotiator.
As in 2019, the dynamic at the capitol is two against one, with the media helping the Democrats with their narrative. In 2021, Gazelka and Senate Republicans began the session with a pledge not to raise taxes. That pledge is now a pretty low bar considering there is a $2.3 billion surplus, and the federal government just sent an additional $2.8 billion to Minnesota. Will Republican delegates reward Gazelka for not raising taxes? Some will. Others will demand more, and in 2021 that will mean winning a significant policy battle like stopping California emissions standards or passing school choice.
Meanwhile, in order to look good to the broader Minnesota electorate, Gazelka needs to look like he can work with Democrats and get things done. That has become his brand over the last five years as leader. Gazelka is the “adult in the room” who brokers the deal with the House and Governor Walz.
Therein lies the conflict. If he tries to impress delegates to get the nomination, he simultaneously loses votes with the general public for being too conservative and unwilling to cut a deal. A stalemate with the Democrats could lead to a government shutdown, which always turns out poorly for legislative leaders. Ironically, even if he shuts down the government, many conservatives will still be frustrated with his leadership.
Add to that the logistical problem of extra time at the capitol keeping Gazelka from officially entering the governor’s race. Meanwhile his chief opponent Scott Jensen has the field to himself. A true no-win position
This piece originally appeared in our Capitol Watch newsletter. Click here to subscribe and stay up to date on everything happening in St. Paul.