Budget negotiations show no outward sign of progress

Nearly six months after DFL Gov. Mark Dayton and the Republican-controlled 87th Minnesota Legislature were sworn into office and set to work concocting the 2012-13 biennial budget, the state has crept inexorably toward a government shutdown whose scale and consequences remained unclear in important respects even after a Wednesday order from Ramsey County District Court Judge Kathleen Gearin.

The order, which was released shortly before this issue of Capitol Report went to press, appeared to represent a victory for the Dayton administration, at least in legalistic terms: The court’s conclusions of law agreed in most respects with the legal case argued by Dayton administration special counsel David Lillehaug.

But practically speaking, the political underpinnings of Dayton’s proposed shutdown terms appeared to be weakened by Gearin’s order that both local government aid payments and state K-12 education payments should proceed on time. Dayton’s plan had not proposed to  designate the people in charge of making those disbursements “core” personnel to be retained in a shutdown. Many observers thought the Dayton proposal reflected an effort to put maximum political pressure for a deal on Republican lawmakers.

Talks continue

Dayton and GOP leaders insist that the daily budget meetings they commenced last Friday have been productive. (Cordial, even: On one occasion, laughter could be heard through the doors of the meeting room.) But the so-called “cone of silence” around those talks has only added to the ambiguity surrounding the status of negotiations. Most observers believe the progress has been incremental at best, involving the fine-tuning of cuts and spending levels on a number of budget bills, without any public hint of progress on the $1.8 billion in new revenue that Dayton wants in order to mitigate the most severe cuts.

Outside those meetings, the Capitol has been swirling with activity in preparation for the shuttering of most of Minnesota state government on Friday. Just hours before they headed into budget negotiations on Monday, GOP leaders stood in front of the picturesque Stillwater Lift Bridge to argue that a range of critical state services should be funded even in the absence of a budget deal. They called on the governor, as they have done repeatedly, to summon them back for a special session to pass “lights-on” legislation while they continue working.

“This is a symbol of what’s going on all across the state,” GOP House Majority Leader Matt Dean said, motioning to the bridge. “People are saying, ‘What’s going to happen?’” Later that evening, accusations were flying in news releases and on Twitter from Senate Communications head Michael Brodkorb that several of Dayton’s administrators were sending political messages to public employees via email. That same day, GOP leaders Amy Koch and Kurt Zellers sent their own email to thousands in the state’s public workforce.

“You can be sure about one thing: Our budget keeps state agencies open on July 1 and state employees will continue getting paychecks beyond June 30,” the letter read. State employee unions said the letter was political and inappropriate, even though Dayton sent a similar letter to state workers last week.

In the days immediately following last Thursday’s Ramsey County hearing, Gearin’s silence made it harder for negotiators on both sides to assess the potential impact of their positions. “That fact is certainly making it a little hotter in that [negotiating] room — not knowing what, if anything, will be getting money,” one GOP observer noted. “I think most of them thought they would know that by now.”

“The reality is starting to strike home, and it will increase each hour as this goes forward,” said former DFL Senate Majority Leader Dean Johnson. “[The 2005 shutdown] is essentially a Sunday school picnic compared to what we have today.”

Motion, but no action

There has been little movement on the central question of revenue since the waning days of the session in May. A week before the Legislature adjourned, Dayton made a pre-emptive move to come nearly halfway in talks with GOP leaders, offering to scale back his tax hike proposal from nearly $3.5 billion to $1.8 billion.

The move was not met with open arms. Dozens of members of the House and Senate Republican caucuses filed into a small news conference room in the Capitol just hours later to insist that there would be no tax increases and that the $34 billion budget they had passed was enough.

“Half of a bad idea is still a bad idea,” Deputy Senate Majority Leader Geoff Michel said at the time. “There are few things we aren’t willing to work with the governor on, and it starts and ends with tax increases.”

The tone from both parties indicated an unlikely finish by May 23. Before the clock even ran out on the session, the GOP majorities had announced a fly-around the next day to urge the governor to sign their budget bills. Dayton left the Capitol to return to the governor’s mansion midway through the final evening.

Dayton vetoed the budget bills the following week. After weeks of sporadic post-session meetings, the GOP offered to match Dayton’s levels of funding for public safety, the judicial system and education — or, as they billed it in a news release, “cops, kids and courts.” But it was understood that those increases would have to be balanced by more cuts elsewhere in the budget. They trumpeted the move as bringing the two sides into substantial agreement on nearly 50 percent of the budget; the Dayton administration responded that shuffling around dollars within the Republican budget did not represent a meaningful compromise.

In the wake of pressure from poor polling results and scathing editorials across the state, the GOP majorities made another concession two weeks ago, giving up their proposed $200 million in proposed tax cuts and offering to use the proceeds to increase spending in a number of areas, including the environment budget and local government aids and credits. In a strange move, the offer was a limited one — set to expire if the governor didn’t jump on the opportunity. But Dayton countered that the concessions did not touch on the fundamental sticking point of global spending targets for the upcoming biennium.

’A series of missteps’

In mid-June, the offices of the attorney general and the governor filed separate — and broadly discrepant — petitions regarding the terms and scope of a shutdown. Attorney General Lori Swanson’s petition argued for a shutdown along the lines of 2005, which would place a special master in charge of administering spending on an expansive range of state services. Dayton’s brief noted the Minnesota Constitution’s prohibition of state spending that has not been ratified by the Legislature, and argued that only a limited amount of critical spending could be undertaken and that those decisions belonged to the governor.

Against the backdrop of the court’s silence, the two sides continued negotiating — in secret. “We’ve agreed to a ‘cone of silence’ because it is conducive to our working things out,” Dayton said Monday. “We’ve done it the other way where everything is in the public arena, and we are at an impasse.” Zellers added: “Nothing will be leaked or misinterpreted that way.”

Despite claims of progress from both sides, by this week there were few observers who saw any way around a shutdown on Friday. “I just don’t know how the governor and the Legislature are going to reach an agreement quickly,” lobbyist Rich Forschler said. “They’re just very dug-in on their positions. They can talk all they want about cuts; that stuff would get resolved pretty quickly if they decided how much revenue they are going to raise.”

One DFL lobbyist calls the session and the budget debate just “a series of missteps from both sides…. I think we all knew in January that we would be here in June, if not July.”

In recalling the 2005 partial government shutdown, Johnson said he had to go to his caucus in the final days and tell the members to pick their battles. “I went back to my caucus and said these are the issues on the table, and we have to pick one and one only that we are going to advance. We chose to go back to the governor and say we want to continue Minnesota Care, and the LGA issue was set aside. Within about three hours in the middle of the night, the governor agreed and said let’s move forward and let’s get it done. Personally, I would say in my 28 years at the Capitol, the government shutdown was the least proud moment of my political career.”

“I’m not optimistic at all,” he said of the current impasse. “I say that because I listen to the political rhetoric of both sides and it’s the language of, ‘I’m not going to budge.’”