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Gov. Tim Walz met in person this week with Senate Majority Leader Paul Gazelka and Speaker of the House Melissa Hortman, marking the beginning of the final budget negotiations for the 2021 session. The Governor laid out what he believes to be the main issues facing the leaders:
“There should be a grand agreement around keeping Minnesota’s finances the best in the country as we have, we did it last time with the budget. Get the budget done. Do some things that need to be necessary around moving forward with public safety. And the resetting to the new place we’re at in the pandemic, that keeps folks safe but also folks want to get back to, as we’ve seen, doing the things that make life so enjoyable.”
— Gov. Tim Walz April 30, 2021
Give Walz credit for articulating his idea of a “grand agreement.” The sooner the leaders agree on a list of big issues involved in the negotiation, the sooner they can provide direction to the legislature to get it done. Here are the big issues that could be part of a grand agreement.
Obviously, passing a two-year budget that funds state government is the main job of the 2021 session. Walz says he wants to “get the budget done” and “keep Minnesota’s finances the best in the country.” It should be relatively easy to agree on a budget with so much revenue available. Budget planners predicted a $1.6 billion surplus for the next two years and revenues for the first two months came in 20% above that projection. We also have an historically healthy budget reserve of $2.3 billion.
Unfortunately for taxpayers, no one is talking about spending less money, not even Senate Republicans.
Minnesota is also about to receive $2.5 billion from the federal government, our share of the American Rescue Plan. That money and the guidelines on how to spend it won’t appear until after the session, giving Walz tremendous power.
At the moment, Walz and House Democrats are holding onto income tax increases, creating a new top tier of 11.15% (House) and 10.85% (Governor). Obviously given our revenue situation, tax increases of any kind are completely unnecessary, but Democrats will expect concessions from Republicans before letting them go. Play stupid games, win stupid prizes.
On the tax cut side, both the House and Senate have versions of tax exemptions for revenue from PPP loans. The Senate fully conforms with the feds, eliminating all taxes on the pandemic-inspired loans. The House caps tax relief on the first $350,000 of your loan.
Now that the pandemic is winding down (due to vaccinations, not state mitigation efforts), Walz is finally talking about ending emergency powers. One big remaining issue is how to end the eviction moratorium. House Democrats want a one-year phase out, Senate Republicans think six months is enough. Easy to see a compromise there.
Republicans would be wise to let emergency powers end organically rather than hold it up as a demand in the negotiations. The issue has lost its value now that vaccinations are ubiquitous, and cases and deaths are slowing. Walz successfully milked emergency powers for all it was worth. He’ll have to explain to Minnesotans next year if it was worth a lost year of school for kids and nation-leading nursing home deaths for seniors.
Police accountability phase two
Just as they were last summer, Senate Republicans are under some pressure to agree to another round of law enforcement accountability. Majority Leader Gazelka promised to address the topic in the Public Safety Conference Committee, and meetings are scheduled every day this week. Sen. Limmer has been a hard sell on police reform, challenging Democrats to show their proposals will do more than “sound good” or “feel good” and actually make the state safer.
Chairman Rep. Carlos Mariani (DFL-St. Paul) will be representing the House and their police reform package:
It’s hard to call this list substantive reform, but you can see room for compromise on a package coming out of this conference committee.
Walz did not mention education in his grand agreement but it will be a big part of the negotiation.
On the funding side, it’s déjà vu all over again with Democrats attempting to “fully fund” education while accusing Republicans of cutting money for schools. The Democrats are trying to ignore the $1.2 billion going directly to schools from the American Rescue Plan. That money should be acknowledged as revenue the schools will receive to help smooth over the funding lost as a result of their distance learning fiasco.
On the policy side, the case for school choice has never been stronger after a year of distance learning, and the Senate has two provisions that should be part of the final negotiation.
A rally for these education priorities is planned for next Saturday, May 8th at the Governor’s Residence in St. Paul.
Election reform is another important issue this year and the Senate will debate a bill Monday to put a photo ID requirement for voting into state law. Our Thinking Minnesota poll showed 69% support for photo ID in Minnesota this February.
This piece originally appeared in our Capitol Watch newsletter. Click here to receive the weekly Capitol Watch newsletter.
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