Capitol Watch: The good, the bad and the ugly

The dust is finally settling on the 2021 state budget and the spenders won again. Any chance of lowering taxes and cutting spending was lost when all three entities (House, Senate, Governor) presented budget proposals in January that grew state government. The only question left was how much growth. To be fair to Senate Republicans, it is tough to negotiate a fiscally conservative budget when there is so much money available and the public isn’t crying for tax cuts. And to be fair to Senate Republican leaders like Majority Leader Paul Gazelka, it’s tough to put out a fiscally conservative budget when members of your own caucus want to spend more money. The Senate has a Republican majority, not a conservative majority.

But enough with the excuses.

All you really need to know about the 2021 budget is that it commits the state and its taxpayers to billions more in spending, not just in the next two years, but forever. Every new dollar in spending becomes part of the base budget, creating a new starting point for the 2023 process. This year, there is enough money for everyone’s “priorities.” Dire predictions about an economic freefall due to the pandemic never materialized and Congress sent billions to the states in relief. At some point in the future, revenues will slow down, and the state will be in deficit. Who will be in charge when this happens?

More importantly, will Minnesotans care about taxing and spending? The 2022 election is shaping up as a discussion of how the state (and Tim Walz) handled the pandemic and the increase in crime and lawlessness stemming from last summer’s riots. If the economy continues to improve, voters may not be as focused on Minnesota’s competitiveness as they should be when they head to the polls.

With apologies to Sergio Leone, here is the good, the bad, and the ugly from the 2021 budget:

The Good

  • We didn’t raise taxes. On the one hand, not raising taxes in this environment isn’t really much of an accomplishment. On the other hand, Gov. Walz and House Democrats both proposed new tax increases, so they would have become law if Senate Republicans didn’t object.
  • There were tax cuts, sort of. The legislature decided not to tax PPP loans for business or unemployment benefits for individuals which is a victory for taxpayers. But no tax rates were actually lowered, something Republicans managed to accomplish in each of the last two budgets. Not cutting tax rates will make Minnesota less competitive compared to other states like Arizona, which approved a $1.9 billion income tax cut last week.
  • Perhaps the biggest victory for conservatives was securing in law a two-year pause on the implementation of social studies standards (a huge win for American Experiment and our supporters). Language from the House creating ethnic studies as an academic discipline, which would force Critical Race Theory into Minnesota schools was also defeated. Perhaps legislators in both parties are paying attention to the meetings American Experiment is hosting around the state where hundreds are turning out to learn how to stop CRT from getting a foothold in their local schools.
  • The police “reform” agenda was watered down to a few items that will not get in the way of police doing their job during this historic increase in crime and lawlessness. The latest Thinking Minnesota poll showed no public support for legislation not supported by law enforcement. Minnesotans trust law enforcement, not politicians to keep them safe. 
  • The legislature finally voted to end the emergency powers Gov. Walz invoked at the beginning of the pandemic. Walz tried to beat them to the punch with a late-night announcement, but Democrats and Republicans actually joined together to end this abuse of executive power. It’s a shallow victory now that the pandemic is over and every power over our lives has been removed already, but a victory nonetheless.

The Bad

  • While several other states expanded school choice this year after a lost year of education, Minnesota once again failed to stand up for minority parents and their children in failing schools. School choice probably died the night union teacher Tim Walz won the 2018 election, but it still hurts to see Democrats turn their back on Black moms asking for more choice.
  • They spent a lot more money on K-12 schools. Republicans brag that it is “no strings attached” because it is on the per student formula, allowing local schools to have discretion in spending. But this is naïve – the teacher’s union will demand every new dollar be spent on teacher salaries, pushing school boards (that they helped elect) to agree to contracts they can’t afford. That will be inevitably followed by cuts to important programs like middle school Spanish, which naturally will lead to calls for more state spending. And the cycle repeats. Every. Two. Years.
  • Senate Republicans took a hard stand against California emission standards, only to give in at the last minute and allow the Environment bill to pass without a moratorium on rule making. As we wrote about here, getting this stopped will be very difficult now unless conservatives win the Governor, House and Senate in 2022.
  • The Jobs and Economic Development bill includes $80 million in grants and forgivable loans to help rebuild Minneapolis businesses. Half of the money must be offered to Greater Minnesota first, but that means at least $40 million to rebuild businesses in Minneapolis without any changes in policy that might prevent rioters from burning down the city again.

The Ugly

  • The Human Services funding bill includes a one-time payment of $435 for welfare recipients, because people receiving a welfare check every month were somehow adversely affected by the pandemic. That is ugly logic and an ugly provision, especially considering Minnesota is already number three in the nation in welfare spending.
  • $6.2 million was set aside in the Tax Bill to start planning a “land bridge” over a one mile stretch of Highway 94 from Lexington Ave to the State Capitol. You need your imagination for this one: we’re going to put a roof over the highway strong enough to hold houses, businesses and apartment buildings, all in an effort to reconnect a neighborhood split apart in the 1950s when the highway was built. This project will end up costing billions and instantly becomes the front runner for the next Golden Turkey Award.
  • The Missing and Murdered Indigenous Women’s task force was created with support from both parties to create recommendations on the very real problem of native women being murdered or going missing at higher rates than other Minnesota women. As predicted, their number one recommendation was to create a permanent bureaucracy to work on this problem. The result will be an annual report telling the legislature how bad things are and asking for more funding.

Ultimately, Minnesotans got the budget they voted for back in 2018 when they elected Tim Walz as governor. They affirmed this choice in 2020 when they kept Democrats in charge of the Minnesota House. Elections have consequences.

This piece originally appeared in our Capitol Watch newsletter. Click here to receive the weekly Capitol Watch newsletter.