Budget agreement could hinge on policy, bonding measures

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With less than a month to go before the Legislature is constitutionally required to adjourn, the GOP-controlled House and Senate find themselves fundamentally at odds with DFL Gov. Mark Dayton on the role of new tax revenues in fixing the state’s $5 billion deficit. Dayton is pushing for about $2.5 billion in tax increases to help close the budget deficit, while Republicans are continuing to espouse an all-cuts budget.

But as most Capitol watchers note, the impending closed-door budget battles won’t be entirely about money. With both parties drawing deep lines in the sand, some nonfinancial moving parts of the legislative session are likely to figure in the final budget agreement as deal sweeteners for both sides.

Provisions ranging from bonding to photo identification, sources say, could become the linchpins in a final deal. “Each side holds certain cards,” former DFL House Speaker-turned-lobbyist Bob Vanasek said. “When you understand that, then you can start to work out a solution.”

Bonding bill: Before the 2011 session even began, Dayton indicated his desire to use a bonding bill as a way to spur a stagnant economy. Within the first month of session, he followed up with a pitch for a $1 billion bonding package, which he hoped would be filled with an equal portion of projects of his choosing and submissions from the Legislature. However, Dayton’s call for a bonding bill has fallen on deaf ears in the ranks of GOP leaders, who have said they prefer to deal with bonding next year.

But by some legislative Republicans’ thinking, throwing Dayton a bonding package could help forge a deal at the end of the session. House Capital Investment Chairman Larry Howes is crafting a bonding bill behind the scenes as a potential chip in end-of-session negotiations; he believes Dayton is more likely to get a bonding bill from the Legislature than tax increases. GOP legislators have proposed a large number of individual bonding projects in their districts, and House Speaker Kurt Zellers has not ruled out bonding for spring flooding relief.

But there are some who think the governor would be unwise to bite at a bonding bill if Republicans throw it his way. Vanasek said it’s too late in the year to get any serious construction work going. Dayton, he said, should wait until early next session to pass a bonding bill and hold out for other chips on the bargaining table.

Education policy: Dayton turned heads on both sides of the aisle when he extended his hand to Republicans by signing their alternative teacher licensure bill early in the session, despite his admission that the final package didn’t include all of the provisions he wanted. Republicans still have a long wish list of education policy reforms (ranging from teacher evaluations to seniority rules) that they would like to see signed into law this year, and some observers think Dayton’s willingness to sign the licensing measure shows he is open to pursuing more policy reforms as part of a global budget solution.

While Dayton has vowed to not enter into negotiations on budget bills that contain policy provisions, some legislators think he will change his tune in the final days of the session. GOP House Education Finance Chairman Pat Garofalo said Dayton and GOP legislators agree on quite a few ideas in the education realm. “We are actually a lot closer than people realize, more so than other areas of the budget,” he said. “Gov. Dayton has been really great to work with on education reform.”

Medicaid waivers: Dayton and GOP legislators have spent a significant amount of time this session butting heads over the federal health care law. Dayton jumped into office with a ceremonious signing of a Medicaid expansion made possible under the terms of the new federal law. Republicans, who campaigned heavily on repealing so-called “Obamacare,” have gone after the federal law in their omnibus budget bills.

The House and Senate each rely on achieving significant savings – roughly $750 million and $600 million, respectively – by receiving a federal waiver on Medicaid requirements. But Dayton officials at the Minnesota Department of Human Services say the waivers will likely not be granted in time to create significant savings in the next biennium.

Former House GOP operative Gregg Peppin thinks Republicans will ultimately lean Dayton’s way on the issue, and give in on their pursuit of opting out of the federal program. “There could be a possible recognition on the part of the GOP majorities to accept those dollars,” Peppin said. “It’s federal money that is out there. House Republicans, at least, could be willing to take a look at federal money as part of a larger global agreement.”

Dayton’s cabinet: It’s been almost four months since the session started, and only one member of DFL Gov. Mark Dayton’s now-complete Cabinet – noncontroversial Veterans Affairs Commissioner Larry Shellito – has been approved by the GOP-controlled Senate.

There is no prescribed timetable for Senate approval of executive branch commissioners. Some commissioners have served their entire tenure in an administration without getting the upper chamber’s stamp of approval. The demands of a critical budgeting session make it difficult to spend a lot of time vetting appointments, but many observers think the GOP Senate is keeping its powder dry for more strategic reasons. As the session draws closer to the adjournment date, GOP leaders may use some appointments as leverage in the looming budget showdown. “Every governor wants to have his Cabinet confirmed,” longtime GOP lobbyist John Knapp said. “If it does become part of the deal making, it will be very subtle.”

Dayton’s roster of commissioners isn’t short on names that could be targeted. Former DFL state Sen. Ellen Anderson, who just left the chamber in March to take over the reins at the Public Utilities Commission, is frequently cited as an appointee who could face a tough confirmation. Republicans also have grumbled about the late start of Revenue Commissioner Myron Frans, and lobbyists and Capitol watchers say Pollution Control Agency head Paul Aasen and Department of Public Health Commissioner Ed Ehlinger have  records that could make them targets.

Photo ID at the polls: The GOP’s most heavily touted policy initiative of 2011 would require that voters present a photo ID at the ballot box as a condition of voting. Dayton has spoken critically of Republicans’ long-sought proposal, reiterating at a news conference on Tuesday that the bill is a “solution in search of a problem.” But it may have been significant that Dayton refused to discount it completely.

Why? The bill reflects one of the GOP’s central goals, and it could prove a tantalizing attraction in final budget negotiations. Garofalo also points out that by cutting a deal on photo ID, Dayton could avoid a scenario in which the issue is put before voters as a constitutional amendment in 2012. The author of the photo identification bill, Mary Kiffmeyer, has said she would bypass Dayton and seek a constitutional amendment to pass the bill in the event of a gubernatorial veto, and GOP Rep. Steve Drazkowski introduced a resolution this week to put the issue on the 2012 ballot.

“I think that you’re going to see the governor become more willing to look at photo ID,” Garofalo said. “I think even if people are opposed it, if we pass photo ID in statute, it will at least give Democrats a chance to change it at some point. If Dayton vetoes it, we will go the constitutional amendment route. And if it’s a constitutional amendment, they don’t have any hope of repealing that.”