Day 1 of legislative session: Budget surplus fight begins

Minnesota legislators swept into St. Paul for the new legislative session on Tuesday and quickly were consumed with how to spend a nearly $1 billion surplus during a high-stakes election year.

DFL Gov. Mark Dayton called the windfall a giant, tantalizing "sirloin steak" that he said has unfortunately sucked attention away from other session priorities.

Already, Democratic legislators and allies — those who will be counted on to help DFLers hold the House and Dayton win a second term — are lining up with their wish lists.

Dayton, recuperating from hip surgery at the governor's residence, convened a conference call with reporters to lay out his agenda: $600 ­million for middle-class tax breaks and roughly $3.5 million to ensure that low-income students are not denied a hot lunch.

Republicans happily seized on the notion of tax cuts. "Minnesota families haven't seen the same kind of surplus in their wallets as the state has," said House Minority Leader Kurt Daudt, R-Crown. "Let's send this money back to Minnesotans."

Within an hour of gaveling in the session, House DFLers were rapidly digging into proposed tax breaks for parents of adopted children, married couples and those who lose their home to foreclosure or a short sale.

Lobbyists and residents packed into a hot committee room where the powerful House Taxes Committee methodically began sifting through two dozen such tax relief bills, including the repeal of the ­business taxes DFLers had passed last year.

Among those who testified were Aaron and Kristy ­Norman of Rochester, accompanied by their newly adopted daughter, Haddie. Aaron Norman said that his employer, Mayo Clinic, paid half of their $20,000 in adoption fees. Without a change in the tax law, they must pay about $700 in income taxes on Mayo Clinic's share.

"Many families like ours who have adopted, enthusiastically sacrifice their savings accounts, borrow money from family members, hold garage sales … in order to make adoptions work," he said. "We simply ask that the state not consider adoption reimbursement moneys as a source of revenue."

Legislators are racing to finish a tax package before the Normans and other Minnesotans finish filing their tax returns. They also want to avoid having the new warehousing tax kick in later this spring.

Digging into Target

On a day typically reserved for ceremony, legislators also dug into an issue rattling consumers across the country: The massive data breach at Target and other major retailers.

Rep. Dan Schoen, DFL-St. Paul Park, proposed a bill that would require businesses to notify customers within 48 hours of a data breach, provide a year of credit monitoring and a $100 gift card.

Schoen lauded Target for "doing the right thing" in the wake of a recent data breach that made national news. But, he said, "those vulnerabilities need to be shored up."

Republicans questioned whether the bill was necessary and were particularly critical of the $100 gift card, which could cost companies millions of ­dollars. "I look at something like this as being very damaging to a company having issues," said Rep. Tama Theis, R-St. Cloud.

Minimum wage debate

Determined to tackle an issue that slipped through their grasp last year, DFLers on Tuesday started turning up the pressure to boost the state's minimum wage, aided by a boisterous rally of advocates seeking a new $9.50 minimum by 2015.

By midafternoon, the Capitol's halls thundered with chants of "Raise the wage! Raise the wage!" as legislative leaders and state commissioners lined up in the rotunda to show support for the minimum wage hike.

House Speaker Paul Thissen, DFL-Minneapolis, told the crowd that the $9.50 an hour would be one of his caucus' top legislative priorities this session. Sen. Tom Bakk, DFL-Cook, a carpenter by trade, showed the crowd his union card. Bakk, however, has been more skeptical about the $9.50 amount, saying it might need to be phased in beyond 2015.

The raucous event kicked off with music from hip hop artist Brother Ali and closed with a performance by the Midnite Express drum group.

Dayton said he doesn't expect complete unanimity, even with DFLers in control of the House and the Senate.

"We have some honest differences of views" on what will be better for Minnesota, he said.

Republicans trying to win the governor's office and control of the House in the next election relished watching Democrats wrestle with the pressure brought by the surplus. Democratic leaders who control the House have a keen eye on the upcoming election, where even a mild surge by GOP candidates could cost them the majority and create giant headaches for Dayton — if he wins a second term. Democratic leaders are carefully trying to choreograph a voter-pleasing session that includes tax breaks for middle-class Minnesotans, a higher minimum wage and new state-backed construction projects around the state.

"You can't overreach and you can't underperform," said Ken Martin, Minnesota DFL Party chairman. "If you do good things for people, the people will re-elect you."

The governor is also looking to use some of the surplus to pay for the elimination of three new business sales taxes on warehousing and telecommunications equipment and repair.

Bakk supported the new business taxes and has been the most reluctant leader to scrap them, arguing that the state could run into budget trouble in future years without them.

Senate Minority Leader David Hann said he suspects the tax reductions will become part of final negotiations over a proposed $90 million ­Senate office building and parking ramp, a much-criticized ­project Bakk strongly favors.

"I think it may be part of the negotiating ploy," said Hann, R-Eden Prairie.

Staff writers Abby Simons and Jennifer Brooks contributed to this report.

Baird Helgeson • 651-925-5044