The State Capitol is currently overflowing with legislative agendas, and those agendas contain a wide range of contrasting ideas. Let’s examine those “to do” lists and the obstacles they face.
First, consider the House Republicans, newly the majority party in that chamber. Their first five bills reflect the party’s desire to promote fiscally modest initiatives. The House GOP’s agenda includes creating tax credits for mining, lumber and high-tech businesses, ending the termination of public school teachers by seniority, providing loan forgiveness to promote more long-term care employees, adding $750 million for transportation over four years gained through efficiency savings and introducing reforms to promote greater transparency of MNsure, the state’s health insurance exchange.
The Democrat-dominated Senate has a contrasting set of priorities as announced by Majority Leader Tom Bakk, DFL-Cook. Their top six bills included disaster relief for last summer’s floods (signed into law this week), free tuition for community college students, loan forgiveness for medical professionals who agree to practice in rural Minnesota, stronger child protection, state grants for student on-the-job training, and universal all-day preschool for 4-year-olds.
The two items in the Senate agenda most likely to raise House GOP hackles are new state entitlements of community college tuition and universal pre-kindergarten. The short and long term budget impact of these initiatives is unclear, but they will boost state education spending considerably over time.
Republican House Speaker Kurt Daudt, R-Crown, has indicated that the Senate Democrats’ agenda contains some ideas that his GOP House caucus will like. But at this point, it’s hard to see vast room for agreement between two such greatly differing sets of proposals.
Beyond their top six proposals, Senate Democrats also have released their plan for addressing the state’s deteriorating transportation system. This is a costly plan and in vast contrast to what the House GOP has proposed.
As announced by Sen. Scott Dibble, DFL-Minneapolis, the plan would raise $796 million for transportation in 2016 alone, more than the House GOP has proposed to spend over four years. The plan calls for a 6.5 percent sales tax on gasoline at the wholesale level, transportation-related fee increases, and a 1 percent metro area sales tax increase for transit projects and $567 million in general obligation bonds.
Gov. Mark Dayton has also weighed in with his agenda. He’s recommended higher taxes and fees to raise about $6 billion in transportation revenue over 10 years and echoes the Democratic Senate transportation plan in proposing a 6.5 percent wholesale gas tax. His budget plan calls for spending an additional $600 million overall, with $372 million more for education and $160 million more for human services. Dayton and the Senate Democrats are much more closely aligned in their fiscal agendas than either are with the House GOP.
So what is likely to come of all this? It’s very hard to say. Consider how Minnesota’s state government currently spends its money. The two budgetary “whales in the bathtub” are K-12 education, consuming 42 percent of 2015 state spending and health care, taking another 23 percent of state funds. That’s two-thirds of total spending between these two areas.
Spending in both areas has mushroomed over the past 25 years. Health care as a proportion of state spending doubled since 1990 and K-12 rose by one-quarter, from 32 to 42 percent.
The long-term prognosis for both areas of spending? Both are certain to increase as proportions of the state budget. Health care will continue to increase as the state’s population ages and demand for state medical assistance increases in coming decades.
K-12 is truly a sacred cow of state spending. Tom Hanson, Gov. Tim Pawlenty’s former budget commissioner, told the St. Paul Pioneer Press that “You can’t cut K-12 spending, and no one ever did, no matter what the level of funding was.”
Current state budget director Margaret Kelly also told the St. Paul paper she sees upward spending in both policy areas: “There are policy decisions that could change the trend line, but absent any policy decisions, K-12 and health care will continue to grow.”
This puts the GOP legislators in a difficult situation. Their fellow partisans want government growth curtailed, yet they face a strong rivals in the Senate and governor’s office and a transportation system in need of additional funds.
So the GOP legislators face a tide of upward spending trends and a group of other power holders determined to continue those upward trends.
How does this get worked out? Bakk in a recent interview indicated the ultimate deal will give the House GOP, Senate Democrats and Dayton each something of what they want. Add that up and that requires the GOP House to accept considerable increases in some areas of state spending.
The key players to watch as this drama unfolds are Daudt and Bakk. Daudt has issued a stream of friendly remarks suggesting future compromises. Will his caucus, which includes many hard-line fiscal conservatives, support that approach? The relationship of the speaker to his partisan followers in the House is crucial to 2015’s fiscal outcomes.
Bakk has to play middle man between a conservative GOP House and Dayton, who has been increasingly recalcitrant in his public remarks regarding his GOP foes. Bakk will have to find a middle way to an ultimate fiscal compromise — a stern test of his leadership.
At this point, it’s hard to envision the shape of any possible bipartisan compromise regarding the budget and transportation funding. Add to that the fact that inflation alone will consume most of the projected $1 billion surplus, and a bevy of difficult fiscal decisions loom in St. Paul.
All this makes the course of the 2015 state legislative session unpredictable. Fasten your seat belt — we may be in for another bumpy ride at the State Capitol.
Steven Schier is Congdon Professor of Political Science at Carleton College in Northfield, Minnesota.