Budget Bills, Tax Plans, Guns, and Gay Marriage Big Part of Session’s Final Weeks
With six weeks to go in the session, Minnesota legislators now have nearly all the financial pieces before them—Governor Mark Dayton’s full $37.9 billion budget and his $750 million bonding proposal, as well as nearly all the DFL’s omnibus budget bills.
Now, they have to assemble them into a workable whole that will fund state programs and projects for the biennium that starts in July.
Lawmakers also are juggling several controversial policy measures—such as gun control and gay marriage—that they put forward before the budget deliberations pushed them aside.
A lot still hangs in the balance. Will the Senate take over where Dayton left off and broaden the sales tax base? Will House Democrats be able to pass a background-check provision to limit gun sales? Will the crumbling state Capitol get the massive public investment it needs?
To date, the session’s biggest accomplishment has been creation of a Minnesota health insurance exchange, a key component in implementing the federal Affordable Care Act.
Here’s a progress report on legislators’ other work and a look at where thing stand on some of the session’s biggest and most controversial bills:
Budget and Taxes
By all indications, income tax hikes appear a certainty for Minnesota’s wealthiest residents as part of the state’s next two-year budget. What will come of the numerous other tax increases and changes Democrats are considering is less clear.
Dayton’s budget calls for a fourth-tier $1.1 billion income-tax hike on the top 2 percent of earners in the state, which makes up much of his overall $1.8 billion in new tax revenue. The House and Senate, which haven’t specifically outlined their tax proposals, are aiming to raise $2.4 billion and $2 billion, respectively.
DFL leaders in both bodies have said their plans will include income tax increases to erase the state’s $627 million projected budget deficit and make key investments in state programs. Senate Majority Leader Tom Bakk said the Senate has been discussing different scenarios not limited to just the top 2 percent of Minnesotans.
The House also will likely go above the governor and the Senate with a temporary surcharge aimed at paying back roughly $800 million the state borrowed from Minnesota’s school system.
Aside from income taxes, Democrats are considering several other ways to raise revenue, ranging from cigarette tax hikes to a Senate proposal last Thursday to broaden the sales tax to some services and clothing.
A Senate tax reform committee recommended lowering the sales tax rate from 6.875 percent to 6 percent and broadening what’s covered to include such consumer services as haircuts, tattoos and car repairs.
Senate Taxes Committee Chairman Rod Skoe supports the sales tax change, which would raise more than $140 million for the state. He said the overall tax reform report, which also includes ending loopholes for corporations, a tax for sports suites and memorabilia and a 94-cent cigarette tax, would face “few amendments.”
The governor, however, isn’t interested in the sales tax plan, and House Speaker Paul Thissen also gave it a lukewarm response.
“My sense is it’s unlikely that a sales tax is going to be a part of the House bill that’s going to be released early next week,” Thissen said on Friday.
The Senate’s tax bill is due out next week.
The fate of any bonding bill, however, rests fully with the minority Republican caucuses.
Borrowing bills require 60 percent of a chamber to pass: 81 votes in the House and 41 in the Senate. That means nine Republican representatives and two GOP senators would have to join every Democrat in supporting a bonding bill to make it happen.
The House measure is moving along rapidly and is slated to appear before the key Ways and Means Committee on Tuesday.
Representative Alice Hausman, the bill’s chief author, said she wrote a statewide bill that spans every type of bonding project in order to earn widespread legislative support.
“The criticism they have is it’s too big,” Hausman said of bonding opponents. “Well, you can’t write a bill for every sector of public infrastructure, from higher ed to transportation to public safety and corrections, and for the entire state, and still have a bill that ends up small.”
One major project—refurbishing the state Capitol—has attracted bipartisan support.
Last week, Republicans in the House bonding committee attempted to amend the legislation to delete everything but the $109 million Capitol project. Democrats, however, defeated the move, but it shows where Republicans are coming from.
The House Republican caucus began discussions about bonding legislation last week. Minority Leader Kurt Daudt told reporters that Republican members are wary of supporting a bill this year because bonding legislation usually is handled in the year following passage of the state budget.
Dayton doesn’t want to tie proposed DFL-backed tax hikes to bonding negotiations–a move that Daudt acknowledges would give Republicans substantial bargaining power.
It also clouds a bonding bill’s future.
“Will we take a position against bonding? I don’t think so,” Daudt said, “but we think it needs to happen at the appropriate time, and we feel the appropriate time is next year.”
What should have been a landmark year for transportation-oriented Democrats and transit advocates has turned out to be a major disappointment so far.
The House and Senate were ready to announce transportation proposals early last week that would have included a hike in the metro-area counties sales tax used to fund transit—which Dayton outlined in his budget—and a statewide gas tax increase.
But they quickly withdrew the plans once the governor reaffirmed his opposition to a gas tax increase. The new Senate plan removed both tax proposals—in the name of equity between the metro and greater Minnesota—and the proposed investment in roads, bridges and transit that would have come with them.
Advocates expressed nearly universal disdain with the stripped-down bill when it appeared in Senator Scott Dibble’s committee last week.
“The committee clearly is uncomfortable with the bill,” Dibble said shortly after shelving the proposal to work on it more. “Folks were looking forward to making significant investments in our transportation system so that we could really bolster the state’s economy.”
The House plan, which came out on Thursday, is similar to the Senate’s. But it includes two mechanisms for outstate counties to raise revenue: an optional $10 wheelage tax per vehicle and a referendum-free, half-cent local-option sales tax similar to the quarter-cent tax currently in place in the metro area.
Representative Frank Hornstein, chairman of the House Transportation Finance Committee, said he and Dibble would be working with the governor to find a compromise.
The opportunities for outstate revenue in Hornstein’s proposal—coupled with a reconsidered metro-area hike—could mean transportation investment will be back on the table soon, wrinkle-free.
“I wouldn’t rule it out if some things can be worked out over the next few weeks,” Hornstein said.
Mayo Destination Medical Center
Mayo Clinic’s massive build-out in Rochester — contingent on $585 million in state funding — doesn’t lack high-profile backers or people willing to put in the work.
But it does lack a clear funding mechanism.
Senate lawmakers decided on Friday to drop what they called a premature funding compromise to examine other options a day after Republican leaders came out in favor of the proposal.
But Republicans want the Mayo plan to move as an independent piece of legislation, rather than as part of the House and Senate tax bills, which will include revenue increases they find unpalatable.
Representative Anne Lenczewski, chairwoman of the House Taxes Committee, said on Thursday that the proposal wouldn’t go anywhere in the House if it isn’t included in the omnibus tax bill, and her counterpart, Skoe, agreed.
“The train that’s leaving the station is the omnibus tax bill,” he said.
Health and Human Services
Health and Human Services will be the only budget sector to receive a significant cut if DFL legislative leaders have their way.
Dayton proposed a $145 million increase in funding for HHS in his budget proposal, but both the House and the Senate have proposed $150 million reductions, making HHS the only sector other than transportation to receive a cut under the Democrats’ budgets in both chambers.
Representative Tom Huntley, chairman of the House Health and Human Services Finance Committee, was angry when leadership issued the budget target in March. “I’m a little bit more relaxed than I was three weeks ago, put it that way,” he said late last week.
Huntley’s HHS bill caps HMO reserves and includes an increased hospital surcharge to slow state spending for health care, which is the largest-growing budget sector.
It also includes new investments in mental health and wages for long-term care workers. The House and Senate would both spend roughly $11.2 billion on HHS over the next two years, while Dayton is looking to spend $11.5 billion.
“In general, and this is just Tom Huntley talking, but governor’s really weigh in when you get to the conference committee,” he said. “I hope [Dayton] weighs in and says, ‘You’re going to have to change the targets.’ ”
Democrats agree that they want 2013 dubbed the “Education Session,” and they’ve offered the money to prove it.
Dayton has proposed $344 million in new funding for the state’s schools. The Senate, though, has proposed $356 million in additional state aid and the House wants to pump an additional $550 million into the system while also paying back the roughly $800 million school shift with a dedicated tax.
Even though the money is there, the rest of the education provisions are all over the map — with a few key exceptions.
DFL leaders have allocated money for early-childhood education and all-day kindergarten, so Minnesota’s youngest learners will likely come out of the session as big winners.
It’s also clear the general education funding formula will rise this year. The Senate and the governor are at the low end, with $100 million and $118 million proposed, respectively, while the House is advocating a much steeper $315 million increase.
House and Senate leaders, who outlined their bills this week, have put a big emphasis on improving Minnesota’s education system statewide, rather than focusing on small pockets here and there.
And then the proposals begin to diverge.
The Senate is proposing $150 million of property tax relief in its education plan, but that provision is missing from the House and the governor’s proposals.
Dayton put $125 million toward ending the shortfall in the special education cross-subsidy, which has been plaguing school districts for years. That issue, though, is largely ignored in the other proposals, except for a $9 million boost under the Senate’s numbers.
House lawmakers—both DFL and Republican—are the only ones concerned about an accelerated repayment of the school shift. Dayton and the Senate are content to leave it up to existing state law, which gives priority to repaying the shift with any surplus state funds.
Lawmakers’ willingness to deal on these issues has a lot to do with how funding is prioritized in other budget sectors.
If the House moves toward the Senate Higher Education target, for example, it will theoretically have less to spend on E-12, which means the huge formula increase might shift toward the governor and the Senate targets.
If the Senate gives up property tax relief, more money could be pumped into the cross-subsidy, and so on.
Lawmakers crafting the state’s higher education budget are happy to have significant new money to invest for the first time in years, but there’s a $100 million difference in the budget targets between the two chambers.
The Senate has proposed investing $250 million in higher ed, while the House target is $150 million.
Representative Gene Pelowski, a Winona DFLer who chairs the House Higher Education Committee, said his chamber is “in a very good position coming in low.” He stressed that the University of Minnesota and the Minnesota State Colleges and Universities system need to be held more accountable for the state aid they already get.
“They’re used to almost no legislative oversight,” Pelowski said. “Well, those days are over. We’re now going to have legislative oversight. You’re going to have to tell us what you did with the money, and you’re going to have to prove it.”
Senator Terri Bonoff, the lead on higher ed in the Senate, said her targets—which match up closely with Dayton’s proposed investments—should be used.
“Together, it would be an extraordinary bill,” Bonoff said. “Use my targets and both of our language.”
Gun legislation faces perhaps the most uncertain future of any of the controversial policy issues that DFL lawmakers have brought forward this year.
House Republicans are confident they can defeat any measure that includes expanding the background checks required to purchase firearms – the focus of of current gun-control proposals.
GOP representatives, with the help of rural Democrats, were already successful in limiting the proposed background checks to firearms purchased at gun shows after a series of contentious House committee sessions proved anti-gun advocates lacked the necessary support for a broad package of reforms.
A series of procedural moves kept the proposal alive in the lower chamber.
“Nothing on background expansion will pass the House even if it’s gun-show only,” Representative Tony Cornish, a leading pro-gun Republican, says with certainty.
But the lead House Democrat working on gun-control efforts, Representative Michael Paymar, is more hopeful, saying that the plan, which is still alive in the Senate, could move forward.
Paymar said if he can get a gun package into conference committee with the Senate, he’d like to re-add universal background check provisions and bring the full measure up for a vote in the House.
“My bill is stripped down, but it was the only way to keep the discussion and the debate alive, and if we can get to conference, who knows?” Paymar said.
Senator Ron Latz, who is leading the gun-control effort in the Senate, said he’s confident that a package that includes universal background checks will be able to pass his chamber.
“I want to have that debate,” Paymar said. “I want legislators in the House and the Senate to take a vote on universal background checks. I think Minnesotans expect it.”
Two years of work by gay marriage advocates could come to floor votes in coming weeks as lawmakers decide whether to legalize same-sex marriage in Minnesota.
By all accounts, such a vote would be very tight and largely along party lines, with most Democrats supporting the measure and most Republicans opposing it.
The DFL legislative leadership has said it wouldn’t bring same-sex marriage bills up for a full vote until significant progress on the state budget has been made.
Senator Dibble and Representative Karen Clarke, the Minneapolis lawmakers who sponsored the legislation, have been tight-lipped on whether they have enough votes to successfully pass the measure.
Two key demographics control the fate of gay marriage legalization here: rural Democrats and Republican defectors. So far, a few rural Democrats in the Senate have indicated through a procedural vote that they might not support the legislation if it comes up for a full tally, and one high-profile Republican senator has come out in favor of the measure.
Proposed legislation that would legalize civil unions, which gay-marriage advocates have opposed, also could confuse the issue. A group of House Republicans — who say they would vote against legislation legalizing gay marriage—introduced a civil union bill in early April as a compromise measure.
That bill doesn’t appear to have gained any traction.
Representatives of the Democratic, Green, Independence and Libertarian parties publicly called on lawmakers last week to support gay marriage, and a group of Minnesota business leaders sent a letter to Dayton and the legislative leaders stating business leaders’ support for the measure.
But same-sex marriage opponents also have been hard at work against the measure, following last year’s unsuccessful campaign for a constitutional amendment that would have defined marriage as between one man and one woman.