Minnesota budget deal reached

Analysis on WCCO with Gov. Walz, Blois Olson

WCCO Radio Newsroom
May 19, 2019 - 6:09 pm
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Minnesota Governor Tim Walz and top legislative leaders have reached a bipartisan budget agreement that drops the governor's proposed gasoline tax increase but gives middle-class Minnesotans an income tax cut and preserves most of an expiring tax that funds health care.

The Democratic governor, Republican Senate Majority Leader Paul Gazelka and Democratic House Speaker Melissa Hortman announced details Sunday, with just over 24 hours before Monday night's adjournment deadline. The leaders expect to call a one-day special session for Thursday to finish the work.

Walz said the negotiations were difficult and neither side got everything it wanted, but that it showed they were able to make divided government work.

Gazelka said the talks ended in a draw that will be good for Minnesota.

Legislators had until Monday to finalize a budget deal.

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Governor Walz released this statement regarding the budget agreement;

In one of the only divided governments in the country, Governor Walz stayed true to his One Minnesota promise and brought legislators together across party lines to put together a budget that will improve the lives of all Minnesotans. This is the first time in over a decade that a governor has reached a bipartisan deal with the Minnesota State Legislature on time.

Throughout negotiations, Governor Walz fought hard and pushed back on devastating cuts to our schools, health care, child care, housing, and more.

EDUCATION

A former public school teacher, Governor Walz successfully fought to increase annual investments in each student by four times the amount Republicans proposed.

The agreement increases the general education basic formula by two percent in the first year of the biennium, and two in the second, for a total new investment of $388 million. This is in comparison to the Republicans’ proposed 0.5% increase on the formula.

The general funding formula is the biggest source of state aid to schools in Minnesota and impacts every student in the state. It is also the most flexible aid schools receive, allowing them to make local decisions to meet the unique needs of their students. Other financial streams build off the formula, targeting resources to children with additional needs.

HEALTH CARE

Governor Walz protected the health care of more than 1.2 million Minnesotans by fighting off Republican efforts that would jeopardize the Health Care Access Fund. He successfully moved Republicans from 0% on the provider tax to 1.8%. He also succeeded in permanently removing the sunset provision so that the Minnesotans who depend on this critical fund for affordable health care are never put in jeopardy again.

COMMUNITY PROSPERITY

Governor Walz successfully fought off cuts to programs and critical services that help ensure our communities are thriving. Combatting Republican targets at zero or less, the agreement makes strong investments in housing, public safety, higher education, and more.

Senate Republicans released this statement regarding the budget agreement;

Senate Republicans held firm on their opposition to Gov. Walz’s massive transportation tax increases and instead pushed for a permanent cut in the middle-income tax rate that will deliver tax relief for millions of taxpayers, the first permanent income tax cut in 18 years. The final budget deal also includes increased funding for K-12 schools, a top priority for both Gov. Walz and Senate Republicans.

“A true compromise has things you like and things you don’t like,” said Senate Majority Leader Paul Gazelka. “I’m thrilled to deliver middle-class tax relief to families with a permanent rate cut, I’m not so thrilled with the growth in government spending demanded by Gov. Walz and the DFL House Majority.”

No to the gas tax

Gov. Walz and House Democrats agreed to drop all of their transportation related tax increases including the 20 cent per gallon increase in the gas tax, tab fee increases and sales taxes to pay for transit. In all the transportation tax increases proposed by Democrats totaled more than $1.64 billion.

“Stopping the gas tax increase was one of our top priorities and I’m pleased Gov. Walz and House Democrats ultimately listened to the people of Minnesota and rejected this approach,” added Gazelka.

Tax relief

The budget will include the first income tax cut for the middle-class in nearly 20 years. A rate cut of .25% to the second-tier income tax bracket takes it from 7.05% down to 6.8% beginning in tax year 2022. Minnesota taxes will also finally conform to the federal tax code, reducing the extra steps required for tax filers.

“Minnesota is finally going to see income taxes go down for the first time in 20 years,” said Sen. Gazelka. “And everyone knew we needed to get conformity done for 2019. We made promises to lower and simplify your taxes, and we did it.”

K-12 Schools funding

Education funding was another top priority for Senate Republicans and the budget deal includes enough new funding for a 2% increase to the per student formula for each of the next two years.

Human Services and Healthcare

A Blue Ribbon Council is created to identify $100 million in savings and provide recommendations for legislative action in the area of Health and Human Services.

House Minority Leader Kurt Daudt, R-Crown, issued the following statement after the budget agreement unveiled by DFL Speaker Melissa Hortman, GOP Senate Majority Leader , and Governor Walz.

"It's unfortunate that Democrats demanded tax increases that will raise the cost of health care on Minnesota families by more than $2 billion," Daudt said. "Democrats campaigned on lowering health care costs, but chose to send us into an unnecessary special session by demanding health care tax increases."


With a special session looming, House Republican votes will be needed if House leadership wishes to suspend the rules for a one-day special session, or for any general-obligation bonding bill. Leader Daudt said Sunday that House Republicans did not plan to put up votes for a suspension of the rules or a bonding bill as a result of a budget deal that raises the cost of health care on Minnesotans.

"House Republicans will not vote to accelerate a budget deal that raises health care costs. This was the least transparent session in Minnesota history—Speaker Hortman's promises of transparency proved to be nothing more than lip service. House Democrats excluded the voices of legislators representing hundreds of thousands of Minnesotans, and failed to get their work done on time," Daudt concluded.

Last year, Speaker Hortman tweeted "The dynamic of five individuals meeting with staff behind closed doors has to stop. We need a new construct for our conversations that brings the give and take and debate fully into public view." This year, budget talks concluded with just three individuals and staff in the room.
 

Senate DFL Leader Tom Bakk, DFL-Cook, released the following statement in response to the announced state budget agreement.

“I’m pleased the administration and Senate Republicans have reached an agreement. Spending in the areas of E-12, higher education, public safety, and broadband are acceptable. The tax bill appears to have the resources to restore state aid to local governments to 2002 levels prior to the Pawlenty-administration cuts.

“I’m deeply disappointed in the Senate Republicans’ fierce objections to funding transportation infrastructure and jobs. Using the state’s rainy-day fund to prop up spending in the next biennium is a significant concern going forward. That type of shift jeopardizes Minnesota’s long-term fiscal health and the state’s AAA bond rating.

“I congratulate the Governor, Majority Leader Gazelka and Speaker Hortman for the long, arduous process they endured to accomplish a budget agreement prior to the constitutional deadline to adjourn.”