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Planning and Fiscal Policy negotiations: A ‘be careful what you wish for’ strategy from DFL leaders?

Last night the Legislative Commission on Planning and Fiscal Policy met for an hour-plus before ending in stalemate yet again shortly after midnight. But the session seemed to point to an evolving DFL legislative strategy in the wake of Gov. Tim Pawlenty‘s weekend veto of a $1 billion package of tax increases.

The principals in the meeting–commission chair and House Speaker Margaret Anderson Kelliher (DFL-Minneapolis) (pictured), Senate Majority Leader Larry Pogemiller (DFL-Minneapolis), and Management and Budget Commissioner Tom Hanson–managed to agree on only one point: Absent a major education cost shift and a source of new revenues, there’s roughly a $3 billion gap between the Legislature’s spending targets (some of which have been criticized by the governor’s office for being too low) and the state’s general fund resources.

That gap breaks down this way:

  • Nearly $1 billion in sources of new revenue. Pawlenty proposed selling about $1.8 billion in future state revenues through appropriation bonds that would raise nearly $1 billion now, a solution legislative leaders have rejected; the House and Senate passed an equal amount in new tax hikes, which the governor vetoed.
  • Another $500 million that reflects the difference between the House’s original $1.5 billion new taxes target and the $1 billion package that both chambers passed.
  • Both the governor’s office and the House proposed major cost shifts in the education budget–$1.3 billion in Pawlenty’s case, $1.7 billion in the House–to forestall cuts in that area, but the Senate is holding tight in rejecting shifts.

Despite the continuing differences between House and Senate on cost shifts, it appears that leaders of both chambers are moving toward an end-stage strategy that would involve holding the line on measures designed to raise one-time moneys, such as the proposed shifts and appropriation bonds–even if that ultimately means sending the governor spending bills with much deeper cuts in all areas, most critically human services and education, and gambling that Pawlenty would not want to face the blowback from signing off on damaging and unpopular cuts.

"If you’re saying the governor might veto [the health and human services bill that’s currently on his desk]," Kelliher said to Hanson at one point, "certainly there is an opportunity for much deeper cuts in health and human services."

Prior to the meeting, Kelliher had already said [previous item] that the $500 million difference between the House’s original tax omnibus and the $1 billion the Legislature eventually passed would be made up entirely of cuts. And in last night’s meeting, she seemed to intimate that the House still might move to the Senate’s position in rejecting cost shifts–pointing out that some education interests had reportedly told Rep. Mindy Greiling (DFL-Roseville) that they would prefer up-front cuts to a shift.

Kelliher also seemingly upped the ante on the
attempted override of the tax bill that’s expected to come late this

"So is the shift on the table or not?" Hanson had asked Kelliher earlier. "Because if the shift’s not on the table, you’re looking potentially at a $3 billion tax increase if you don’t do the shift."

"Commissioner," replied Kelliher, "you said it’s a tax increase. I don’t know what it is. I’m certainly open to the governor’s ideas here."

"Madame Speaker," said Hanson, "you have closed up your other [conference bill spending] targets. The only target that would be open is somehow in the tax area."

"Look, Commissioner," Kelliher answered, "I want to be clear. We don’t plan on sending an additional revenue-raising bill to the governor here, in my mind. We sent that bill… That was it. Members might have another look at that bill at the end of the week. That’s it. So we have a long way to go here, Commissioner."

The commission also discussed, and seemed to dismiss, Pawlenty’s counter-offer from earlier in the day on his appropriation bond proposal. Pawlenty’s revised pitch included a) cutting the size of the appropriation bond package in half, b) accepting the Senate DFL position on running with no state budget reserve in place, and C) accepting the $1.7 billion House shift.

Two Republicans, Reps. Tom Emmer (Delano) and Randy Demmer (Hayfield), broached the subject of electronic pulltab machines–which, by some estimates, could raise upwards of $1 billion–as a potential compromise source of revenue. But Kelliher and Pogemiller expressed no interest, and Hanson said Pawlenty "doesn’t want to go there."

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