Capitol Watch: Walz and legislative leaders fail again
The 2021 regular legislative session ended Monday with a loose agreement between Gov. Tim Walz and the House and Senate over how much they would spend in each of the main budget areas. But they failed to decide any of the contentious policy issues, meaning negotiations will drag on into June.
As we wrote last week, with so much extra money involved, negotiating the budget turned out to be relatively easy. When faced with opposing spending priorities from the House and Senate, the leaders “compromised’ by funding both. American Experiment will have to double the budget for our Golden Turkey Awards once we comb through all of this new spending.
The actual signed agreement can be viewed below. Notice the budget target numbers in the spreadsheet actually represent the amount of new spending in each area, not total spending. For example, the “target” for K-12 education is listed as $525 million for 21-23. That means $525 million be added to the $20 billion we already spend in that area.
Reporting targets as new spending frames the whole discussion in a manner that favors the big spenders at the Capitol. It essentially stipulates that all current spending in a category is righteous and good and should not be examined. The only argument is over how much more we will spend. A small detail that has much larger ramifications.
Conservative wins PPP loans and unemployment insurance payments will not be taxed at the state level. Democrats agreed to drop their $350,000 ceiling for PPP loan tax forgiveness. Although it isn’t a permanent tax cut, it will take less money out of the economy so it’s a win for conservatives.
Gov. Walz and House Democrats finally dropped their tax increase proposal that included a new 5th tier on the income tax. A victory, but a small victory considering how much revenue the state has at the moment. Democrats were never serious about these tax increases and Republicans should not spike any “no new taxes” footballs in 2021.
The budget agreement incorporates most of the federal money, even though Walz could have ignored the legislature and spent it on his own. Walz does retain control over $500 million of the federal money and he already announced some of it will fund his summer school program and prop up the Minnesota Zoo again.
With no deal on police reform, House Democrats lost some leverage to force Senate Republicans into agreeing to police reforms that go too far and fail to make Minnesota a safer place to live. Despite the negativity from Democrats and the media, most Minnesotans support the police and do not support making their jobs harder. Just seven months ago, Republicans retained their majority in the Senate on a platform that strongly opposed defunding the police. They should not fear a stalemate on police reform, especially considering how weak the DFL proposals are in this area.
Liberal wins Walz and the Democrats convinced Senate Republicans to agree to massive new state spending and received no policy reforms in the deal. As it stands today, the spending is all decided but the policy reforms are left to negotiate, leaving Republicans very little leverage to accomplish anything meaningful like school choice or blocking California emission standards.
Democrats once again delivered for their best supporters in the teachers’ union with 2 percent increases in the per pupil formula for each of the next two years. That money will go directly to teacher salaries and nothing will change in Minnesota’s education system that currently has the largest achievement gaps in the country. It will be very difficult to convince former union member Tim Walz to accept school choice now that he already has an agreement on K-12 spending.
One final interesting note: $1.2 billion of the federal money is unaccounted for and left on the bottom line to spend in future sessions. That’s a temporary victory for conservatives because the money wasn’t spent, but we might be disappointed next year if it gets spent the wrong way.
The legislature will likely be called back to St. Paul to deal with Walz’s next “emergency” powers declaration on June 14th, so that will become the next deadline for negotiations. Capitol Watch will keep our eye on any new developments and provide analysis throughout the next 35 days as we head towards the budget deadline of July 1, 2021.
This piece originally appeared in our Capitol Watch newsletter. Click here to receive the weekly Capitol Watch newsletter.