Session likely to pick up steam

The Minnesota Legislature and governor usually get about 20 weeks to pass a budget.

Some observers of the 2015 session predict the split legislative majorities and Gov. Mark Dayton will need just about every minute of that time, and expect mid-May to be a flurry of for marathon floor sessions and vital late-night meetings to reach agreement. With a divided government, further complicated by intraparty power struggles, seasoned Capitol veterans see the session ending with hours — or minutes  — to spare before the May 18 deadline for adjournment.

And those are the optimists.

The more cynical view says 2015 is too similar to 2011, when Dayton and a new crop of conservative legislators refused to blink, resulting in a government shutdown. Of course, the obvious difference between that year and the present is that Democrats also control the Senate. That fact should lend itself to a slightly more orderly process, with Senate Majority Leader Tom Bakk playing mediator between the governor and House Speaker Kurt Daudt’s new Republican majority.

But those three leaders are also facing different calculus for their respective political futures. The House and Senate are both up for re-election in 2016, meaning both chambers want a budget that serves their campaigns; the governor, meanwhile, is unlikely to run for any office ever again, and will instead be focused on carving out his legacy.

One thing where everyone agrees: The slow, deliberate pace of work seen prior to the Easter/Passover break will eventually give way to a torrent of action.

“This could be a session that breaks pretty late, in terms of intensity,” said Michael Brodkorb, a blogger and former GOP Senate staffer. “It’s been surprisingly sleepy, so far, but there’s still plenty of time for it to get wild.”

How and when the deal gets done will likely depend on three spending topics, taxes, education and health and human services.

Taxes

No one told Rep. Greg Davids, R-Preston, that he had the week off, so instead he spent his break from the Capitol working on a tax bill. The senior Republican caucus member and veteran leader of the House Taxes Committee still plans to hold more hearings, and probably will not roll out his tax plan until the fourth week in April, but is getting an early start on the bill’s outline.

“I don’t have it set yet,” Davids said. “We have some more work to do. I’ve been spending my whole break on it, and there are a lot of [bills] we still haven’t heard yet.”

For Davids, a good tax bill would contain a number of DFL-sponsored proposals, as he seeks to gain Democratic votes in a House floor vote. He has a lot of room to work with. House Republicans set a $2 billion target for tax cuts out of this budget. That figure is roughly equal to the entire budget surplus, and dramatically higher than that proposed by the governor, who has targeted about $100 million for a child care credit for working families.

In the Senate, Democrats are planning for $460 million in tax reductions. Some of that would go toward property tax relief, but the DFL also wants to end the “June accelerator” of tax payments for businesses, which the DFL announcement referred to as “accounting gimmicks.” Davids described ending the June accelerator as “probably good tax policy,” but did not volunteer its status in his own tax bill.

Gary Carlson, a lobbyist for the League of Minnesota Cities, said ending the June accelerator shift and adding $250 million to the budget reserve, another Senate priority, are meant to guard the state against a future economic downturn. That might be fiscally sound, but might not translate to a political talking point.

“It’s a little bit of a surprise to me, that the Senate has a goal of trying to squirrel away money,” Carlson said. “That means they may not have all the resources available people are competing for.”

As for the House, few expect their $2 billion tax target to last much longer than a floor vote. That way, observers say, Republican members, especially vulnerable freshmen, can tell constituents they had voted for large tax cuts, while still eventually agreeing to a budget deal that doesn’t eliminate vital services.

“I think [Republicans] will let go of the tax cut, because they’ve got some funding things they’re not going to meet,” said one source. “They have to throw some fish back, and that tax cut is primarily for their base.”

Education and HHS

As always, the bulk of the next budget will go toward state allocations to teach its children and care for its sick, especially the growing population of elderly Minnesotans. The initial budget offerings from Dayton and the majority caucuses reveal vast disagreements on how to do those things, and how much they should cost.

Dayton’s budget is decidedly tilted toward education spending, especially for early childhood education, where the governor has pitched a universal pre-kindergarten program at a cost of $234 million. (That number balloons to $586 million in the 2017-19 “tails” budget.)

The Senate budget proposal adds $350 million to base-level spending on education, and the DFL caucus has named training and “workforce development” programs as a top priority. House Republicans are also willing to spend on education, one of few areas that would receive a boost over the base budget in their budget targets.

Sen. Branden Petersen, R-Andover, said members of the Senate DFL caucus had told him they generally like early childhood education, but are concerned about failing to provide more money for basic school functions.

“If you just dump a whole bunch of money for 4-year olds in preschool, and early childhood scholarships, and free breakfast … that doesn’t do anything to supplement existing operations,” Petersen said.

Petersen guessed the Legislature might agree to add between $300 million and $350 million to the education budget, with almost all of it dedicated toward the base formula, and a smaller piece earmarked for early education scholarships, which have broader support than the “purely partisan” universal pre-K idea.

The biggest single difference for committee targets comes in health and human services, where House Republicans want to cut about $1 billion from base spending. The caucus expects some of those savings to come from a more rigorous examination of eligibility determination for public services programs, and have pointed to a similar proposal by Illinois Gov. Bruce Rauner, whose budget relies on savings by eliminating fraud and waste.

But even Rauner’s budget estimates only about $75 million through eligibility measures, observes United Food and Commercial Workers (UFCW) union lobbyist Bernie Hesse, well short of the “several hundred million” Minnesota Republicans would need.

If Rep. Matt Dean, R-Dellwood, does not add more money to the human services budget, Hesse predicted Sen. Tony Lourey, DFL-Kerrick, the Democratic leader on HHS budgeting, would “eat Dean for lunch” in a conference committee showdown.

The Republican target also looks low to Jim Abeler. Abeler, now a lobbyist, was the last GOP legislator to carry an HHS omnibus bill, and said “no one” he has spoken to expects the Republicans to cut services in light of the larger budget picture.

“It’s hard to do that when there’s a big surplus,” Abeler said. “But [Dean] is going to do what the caucus decided. I don’t envy him that.”

Legislators and lobbyists highlighted two sources where the GOP caucus could find additional money to at least restore the health budget to the current base. First, most suggested the final tax-cut number might be around half of what the Republicans have proposed, adding about $1 billion in revenue. And the GOP’s budget plan also left $320 million unspent, which former House minority leader Marty Seifert said could be used to “salve over where there might be some sensitive points.”

Seifert, who now lobbies for the Coalition for Greater Minnesota Cities, said Daudt’s strategy of starting with low budget targets was “very shrewd.” That way, the GOP could stake its position, then push its numbers up slightly as part of a final deal. Seifert said Republican veterans would be aware of the typical trajectory in budgeting, especially when interest groups come calling.

“Budget targets never go backwards,” Seifert said. “They always go up.”