The 2011 legislative session bore witness to a few instances of disagreement between business advocacy groups and the Republicans who control the Legislature over issues such as health care exchanges, local government aid (LGA) funding and transit funding.
But as the Republicans and DFL Gov. Mark Dayton persist in a stalemate that could result in a government shutdown, Minnesota Chamber of Commerce President David Olson said he’s not getting pushback from his members on the Legislature’s central budget choice: to hold the line on tax increases. Olson said the mood among the businesses that belong to the chamber is affected by the lingering effects of the recession and the subsequent tepid recovery.
“The folks we represent still believe we should spend the money we have,” Olson said. “Which means you’re going to spend somewhere around $34 billion.”
In reacting to the abiding impasse on taxes and spending that forestalled any budget deal as the session came to a close last Monday, Charlie Weaver, executive director of the Minnesota Business Partnership, likewise said his group remains opposed to tax increases.
“We support the view of the legislative majorities that general tax increases should not be part of any ultimate agreement, since they would only serve to make Minnesota less competitive in the global economy,” Weaver said.
With business opposed to Dayton’s call for $1.8 billion in tax increases on the wealthy, one of the key questions to be answered on the way to reaching agreement will be how wedded the business community is to the wide-ranging cuts Republicans have proposed.
The theme of staunch fiscal conservatism that pervaded Gov. Tim Pawlenty’s administration (and now the Republican-controlled Legislature) famously put business at odds with Pawlenty in the 2008 debate on the transportation funding bill. Olson and House Speaker Margaret Anderson Kelliher compromised on a 5-cent per gallon increase to the gas tax, a decrease from the 10-cent hike DFLers had initially supported. Businesses’ blessing gave enough Republicans political cover to support a controversial override of Pawlenty’s veto.
The sorts of financing that could win the votes to pass a budget with Dayton’s approval are as yet unknown. Also remaining to be seen: whether legislators will deem any and all new revenue to be the same as the “general tax increases” to which Weaver objected.
Weaver said he does not expect either side to capitulate but nonetheless believes the Legislature and the governor will reach a negotiated deal. That could involve convincing Republicans to accept some kind of nontax revenue as part of an agreement.
“Could additional revenue be part of a solution?” he said. “Sure. But we sure don’t think it’s necessary.”
This year’s budget issues have sometimes pitted local business groups against statewide ones, potentially complicating the business community’s support for the GOP’s $34 billion budget.
The Minnesota Chamber of Commerce was stung during the legislative session when some local chambers of greater Minnesota called for LGA to be spared from the chopping block. Olson notes, though, that the dissenting chambers register in the single digits. The St. Paul and Minneapolis chambers have also forged their own path by decrying cuts to metro-area transit funding in the transportation budget bill.
“We’re not going to agree on everything,” Olson conceded. “But [on] the big stuff, so far, there’s pretty good agreement. Now we’ll see [what happens] as time wears on and the Legislature starts beating each other up.”
One unknown at this point involves businesses’ reaction to a government shutdown.
“If you’re a logger and the DNR shuts down, then you can’t cut wood,” Olson noted. “But for a lot of other people, they say if you’ve got to do a special session to get it right, let’s do a special session.”
With the regular session adjourned, the potential to pass legislation on nonbudget priorities before next year is in question.
At a gathering on Wednesday, chamber lobbyists discussed the highs and lows of the session.
The chamber applauded passage early in the session of a law to allow alternative pathways to teacher licensure. The new law allows recent college graduates and mid-career professionals to teach without attaining an education degree.
Later in the session, the chamber set its sights on a couple of key policy provisions in the Republicans’ K-12 budget bill.
The chamber and the Business Partnership supported education policy reform proposals to create a new means of evaluating teacher performance. The conference report proposed a system that would base 50 percent of a teacher’s performance rating on student test scores and 50 percent on locally defined criteria.
The measure proved to be controversial because the bill made teacher evaluations the basis for deciding whether teacher contracts are renewed every five years. The evaluations would also be used to judge who stays and goes in layoffs.
Those proposals were rejected by Dayton in his veto of the K-12 education budget bill.
Weaver of the Minnesota Business Partnership called the K-12 bill “a terrific piece of legislation. The essence is we still have a horrific achievement gap between black kids and white kids. A lot of reforms [in the bill] would get at the achievement gap.”
Chamber education policy manager Cecilia Retelle said the group also supported so-called qualified economic offer (QEO) legislation that would limit collective bargaining prerogatives. The QEO proposal, which was included in the vetoed budget bill, would limit the size of raises teachers can bargain for to the percentage increase reflected in the student funding formula.
Republicans rebuffed the business community’s call for the state to create a system for health care exchanges.
Lisa Bodine, the chamber’s manager of health care policy, said she still holds out hope for legislation establishing the exchanges, which are an important part of the national health care reform legislation.
“It still has considerable work to be done,” Bodine said. “We are hopeful that toward the end of the budget negotiations, some sort of legislation for a Minnesota-designed health care exchange will be part of that.”
The chamber was pleased to see its presession priority of setting 150-day goals for the state Department of Natural Resources and Pollution Control Agency to notify businesses about environmental permits. Lawmakers made environmental permit streamlining legislation the first bill to be introduced, and Dayton signed an executive order instituting speedier timetables for permits.
The legislation signed by Dayton includes several provisions supported by the chamber, such as allowing environmental permit appeals to start in the state court of appeals rather than at the lower court level.
The chamber’s bid to lift the moratorium on construction of new nuclear power plants was halted when a massive earthquake and tsunami off the coast of Japan wrought havoc in nuclear facilities there, said energy policy manager Bride Seifert.
“Needless to say, sometimes there’s divine intervention, and we had to take a break on that,” Seifert said.
The chamber also tried to lift significant barriers to creating new coal-powered electricity generation. Legislators passed a bill with an exemption for 99 megawatts from a coal and natural gas plant in North Dakota, which Seifert regarded as a minor step.
The chamber vehemently opposed Dayton’s proposed income tax increase on the state’s wealthiest earners. But there were other tax proposals by Dayton of concern to the chamber, including the elimination of tax benefits for so-called foreign operating corporations and of the foreign royalty deduction.
“Those proposals, we think, would have a significant negative impact on… international business in Minnesota,” said Tom Hesse, the chamber’s vice president for government affairs. “We like to think of ourselves as a center for international business.”
The chamber supported some provisions in the tax bill that passed the House and Senate. In particular the bill, which Dayton vetoed, phased out the statewide tax on business property by 2025. The bill also included a sales-only apportionment of the corporate income tax that would benefit companies with property and payroll in the state.
“Where does all of this go in the next couple of months?” Hesse said. “Who knows? If I had to guess, I would guess that some of the tax reductions that are in the House and Senate bill will fall off the table. But I don’t think there are enough votes in the House and Senate to pass anything close to the governor’s tax proposals. Certainly not a fourth bracket [that would be] one of the highest in the country.”