With less than one month to go in the legislative session, most of the big issues remain undecided, with wide gulfs that must be bridged.
Or must they?
If no supplemental budget is adopted this year to distribute a massive surplus of more than $9 billion, there is no real consequence. No agency will run out of money, because appropriations run on a two-year cycle.
For that reason, Gov. Tim Walz told an editorial writer, he will not call a special session. If the work doesn't get done on time, he said, "then it doesn't get done."
The essential difference, as in most years, is between the Democrats' desire to increase spending on those most in need, along with tax cuts targeted toward the same, and the Republicans' desire to enact permanent tax cuts.
In the middle stands Walz, who is leery of both permanent increases in spending and permanent reductions in tax revenues. He wants one-time rebates that would send checks of $500 to $1,000 to Minnesotans this summer. He, like House Democrats, would raise the cap on Social Security taxes. Republicans want to axe the Social Security tax entirely. Minnesota is one of only 13 states still taxing those benefits.
There is good reason to be more cautious this year. The surplus is higher in part because of federal relief unlikely to recur. The recovery has triggered the highest inflation levels in 40 years. By law, state officials are not permitted to officially factor inflation into budget forecasts. But now that the annual rate has soared past 8%, the repercussions of ignoring it will be far bigger next year, when a budget must be passed.
Certainly the continued lack of movement on what should have been an easily attainable deal to combine front-line worker bonuses and restoration of the unemployment trust fund (UI) does not bode well for dealing with far more difficult issues.
Walz, in a wide-ranging interview with an editorial writer on session goals, said he remains frustrated that with so much money, the DFL-controlled House and GOP Senate have failed to reach agreement on the bonus/UI issue. The two sides have been fighting for months on whether to expand the pool and increase the amount for front-line worker bonuses as DFLers want, or to fully restore the UI fund, thus avoiding steep increases for businesses across the state. A majority of states have opted to use federal COVID funds to replenish unemployment money.
"The worker bonuses should bring folks along on UI," Walz said. "I'm deeply concerned about taxes going up on small businesses." Because the deadline was missed for when the new UI rates for businesses took effect, Walz said, extra work will now be required to put such a deal in place. "They're like kids who leave their homework to the last minute," he said. "It's expensive. And we're the ones who have to go back and fix it. Businesses really did need to know this by March 15."
House Minority Leader Kurt Daudt told an editorial writer that as far as House Republicans are concerned, "We're open to a decent-sized bonding bill. We think that's important. We want to see real tax relief. There needs to be a deal on front-line bonuses and UI. Beyond that, the reality is there's not a lot that has to get done this year. And I would say there is a strong likelihood that nothing gets done this year." Daudt noted that House Democrats have not included funds for "Walz checks," as the governor calls them, in their budget. "So that seems unlikely," he said.
House Speaker Melissa Hortman told an editorial writer that she and Republican Senate Majority Leader Jeremy Miller continue to discuss the matter. "I talked to [Miller] today," she said. "We're still working on this." While Walz and others were gloomy about the prospect for ending the session with satisfactory deals, she remained confident that an agreement would be reached before the session ends in late May. Hortman is reserved about rebate checks, preferring the House agenda of targeted tax cuts and credits directed at renters, child care, student loan debt and lower-income seniors.
There is one element that may drive the two sides to compromise: Should they fail — and if there is no special session — then $1.14 billion in federal funding falls to Walz to administer. Walz said he would keep nearly $500 million for ongoing COVID-related costs. Beyond that, he has not decided. The remainder, he said, "is not enough to restore the UI trust fund or reach the goal on front-line bonuses."
Hanging in the balance is a once-in-a-generation opportunity to advance important reforms on public safety, jobs, education and the environment while offering a bit of relief to Minnesotans coping with a pandemic and fast-rising inflation.
This may all slip away over the sheer inability of two sides to acknowledge a painful but unavoidable reality: We have narrowly divided government in this state. There is no winner-takes-all. If neither side compromises in the next few weeks, it is Minnesotans who will lose out.
Editorial Board members are David Banks, Jill Burcum, Scott Gillespie, Denise Johnson, Patricia Lopez, John Rash and D.J. Tice. Star Tribune Opinion staff members Maggie Kelly and Elena Neuzil also contribute, and Star Tribune Publisher and CEO Michael J. Klingensmith serves as an adviser to the board.