Dayton's Bluff

The table was set for a bitter end of session resolution. 

You had the House Republicans, with a 77-strong majority hoping to get some wins for their base in the form of

  • Tax cuts and Tax Reform. Especially property cuts taxes for farmers and the phase-out of taxes on social security taxes on Seniors. 
  • Education reform, including an end to seniority as the critical factor in teacher retention (LIFO) and school choice in the form of tax credits for private school tuition.
  • A bill on Female Genital Mutilation,
  • A stand your ground bill for the gun activists.
  • Some state downsizing and budget cutting.
  • Pumped up transportation spending. The trick here was to do it without raising the gas tax, or any other vehicle-related tax or fee like license tab fees which both of which Dayton had wanted.
  • Preemption.  Business was very keen on a law preventing cities from creating their own minimum wage and labor laws.

The Senate, on the other hand, had a one vote majority and a leader who was more temperamentally moderate. 

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 The Senate’s moderation led to some compromises even before bills got to the governor:

  • Tax cuts and Tax Reform. Property Tax empowerment provisions were stripped from the final bill.  The Social Security phase-out turned into a tax credit, with some stipulations.
  • The bill on Female Genital Mutilation got stalled as too controversial.
  • The Stand your ground bill got stuck in committee.  In general Gun activists walked away with very little to show for two supposedly pro-gun majorities. 
  • Tuition tax credits got stripped from the Tax bill.

 

It is true that some of these items would not have made it past the Governor.  But around the conservative constituent or base groups, there was a sense of deflation after the session, and the short special session ended.  Some, like us, will complain about the spending, others the gun bills, others real ID, and still others complained about the failure of education reform.

In addition, the GOP legislature took on some not so base friendly issues that could be called “governance.” 

  • Real ID was actively opposed by a portion of the base. Opponents saw constitutional and privacy problems. Pragmatists bought into the threatened inconvenience of the not being able to fly without additional documentation other than a MN Drivers License. Others thought that Real ID would offer a layer of added security.
  • Temporary fixes for the Individual Health Insurance Market.  Seen as a prop of the loathed MNSure, Minnesota’s Obamacare Health Insurance Exchange, this was not popular, but if it hadn’t been done, hundreds of thousands of Minnesotans stood to either lose health insurance and face medical as well as financial crises. There were also some reforms in the HHS bill concerning Medicaid fraud, like having the legislative auditor permanently monitor this area rather than just supply audit reports on an occasional basis as is the current practice.
  • The bonding bill.  While most of the conservative base is concerned about debt and sees nothing but a balloon mortgage on their grandchildren and other future Minnesotans, much of the general public sees schools, playgrounds, civic centers, river walks, cleaned up landfills and other tangible items that they can enjoy in their community.  This is especially true when set against the rural/urban (or suburban and exurban, in the case of Republicans) divide. With the thought of all those tax dollars going to the big city, “where’s mine?” is a strong pull here.  After a few years of projects deferred, the pressure was great to do a substantially sized one, especially one with a large transportation component. 
  • Pensions. Think of the Amtrak Empire Builder, a money-losing, heavily subsidized perpetually late passenger train that goes from the West Coast and ends in Chicago, stopping in Minnesota along the way.  Imagine that the train is in Saint Paul right now and there’s a major derailment down the tracks in Wisconsin Dells.  We’ve got a problem, but we won’t see direct effects for a while yet.  We could do some tweaks and push that problem off a bit to maybe the Milwaukee area. Or we could just get off the train and on to a bus or private car.  Unfortunately, the DFL and Unions would fight like hell to keep people from getting off the train. That’s a fight that will come, but with a DFL Governor heavily indebted to the unions, today is not that day. It wouldn’t end with legislation either; there would also be a court challenge and a PR battle royale in the media. The pension bill did not even make it to the floor this year. There was some language that was carried in the Preemption bill that proposed some tweaks to push off the train wreck until Milwaukee.
  • A Legislative Budget Office. This seems like a very policy wonky idea, and maybe even one that grows government a little bit. For every bill that a legislator puts in the hopper, the cost of implementing it is determined by the executive branch agency or Constitutional officer to whom it is applicable not the legislature.  That gives the executive branch immense policy control over what happens in a session because they are not neutral as to what policies they want to enact.  And we have seen this happen with Republican Majorities and a DFL Governor – even budget cutting bills were alleged to cost immense sums of money by the Dayton Administration.  State Auditor Rebecca Otto treated Fiscal note requests streamlining her operations like a joke and gave outlandish responses to what any changes would cost. When Minnesotans go to the polls to elect legislators, they expect them to do more or less what they promise to do.  With the entire budgetary process in the firm control of the executive branch, it was obviously hard for the legislature to make progress to their policy goals if they and the governor disagreed.  Having a Legislative Budget Office allows them more independent cost analysis, similar to the way that the Legislative Auditor provides an independent analysis of what state government programs are doing.

But when the session ended, and a short special session was cobbled together at the very last minute, supposedly there were agreements on what the governor would and wouldn’t sign. He would not sign the pre-emption bill, for instance. He stated that boldly even as Speaker Daudt said they would send him a preemption bill anyway. 

Tuesday evening after Memorial Day, the Governor announced his decisions.  He signed all the bills except for the Pre-emption/Pension bill (as promised).  But he did so angrily.  It was a bit surprising to see his white-hot anger both in person in the press conference and in writing in the veto letters since all parts of the bills had been negotiated.  But the biggest surprise of all was a line item veto to the State Government Finance Bill, which zeroed out the entire budget for both houses of the legislators, for their staffs and salaries. (Other legislative agencies, such as the Legislative Coordinating Commission, that runs joint commissions, the Revisor of Statutes and the Legislative Auditor and the Library, the Legislative Budget office had their appropriations left intact).

The Governor stated that this action was meant to bring legislators back to the bargaining table to give him more of the things he wanted.  Last time, he vetoed a bill due to what he said was a typo-o this time he brought out the big guns due to a small provision in the State Government Finance bill. 

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The provision states that until and unless HF1 (The Tax bill) is signed. There is no funding for the Department of Revenue.  Tit for Tat?  Apparently, in the Governor’s eyes, the Department of Revenue is just as important as the entire Legislative Branch of Government.

He provided a list of his demands:

1. “Eliminate the Tobacco Tax Breaks.” The tax bill removes the automatic increases to cigarette taxes and reduces taxes on “premium cigars.”  Although Governor Dayton painted a picture that this somehow benefited “Big Tobacco” and rich fat cats who smoke cigars, it was more of a benefit to c-store owners and cigar shops that were being hammered by recent significant tax increases. There was an increase in cross border sales after the last round of tax increases. More organized criminal activity surrounding cigarette smuggling increases the larger the differential between states’ taxes. In other words, it’s an open invitation to mobsters and gangs to make money from a government induced black market.  Premium Cigar shops’ principal competition is from online sales that do not always collect Minnesota sales taxes.  

2. “Cancel the Estate Tax Exclusion Increase.”  In order to level the playing field with other states, Minnesota would have to raise the exclusion to the federal level, which is $5M.  And that Dayton says would be “cost prohibitive.” Dayton says raising it by another million as this tax bill does would just benefit a few millionaires at the expense of the State.  We think making this gap between the federal and state exclusion even marginally smaller will help keep more Minnesotans, not just those with disposable wealth but those with business assets to pass on to the next generation, here. 

3. Get rid of the C-I Property Tax Freeze. Dayton agreed with the tax exemption to $100,000 but disagreed with freezing the rate, saying it would cost the state over a billion dollars in the next ten years. Too much money he said.

4. Remove the Driver's License Provision against issuing licenses to undocumented persons. The language in the Public Safety Bill (HF 470) prohibits undocumented immigrants from obtaining drivers licenses. Recall that this provision is in administrative rules, not law and although Governor Dayton claims that he would not try to change it without action by the legislature.  This seems kind of weak given that he has enacted measures by rule or in the case of union contracts, though Memorandums of understanding which not only didn’t have Legislative Consent, they had legislative opposition. 

5. Remove and renegotiate the Teacher Licensure Provision. HF 2 contains new pathways to teacher licensure. It is meant to increase the number of teachers who may have life experience or professional training outside of education.  This provision was renegotiated after Dayton vetoed an earlier version. This, together with LIFO angered the Teachers Union so much that they protested at the capitol and demanded he take down the whole bill, which would have forced a government shutdown.

So basically Governor Dayton wants everything he did not get this session. And he is demanding everything he didn’t want to be repealed in the bills he just signed.  In particular, he railed against the projected loss of revenue from the tax provisions and included a memo from his Minnesota Management and Budget Agency that cobbled together some gloomy economic uncertainty quotes from past forecasts.

The 2017 Legislative session is in the books. The 1st 2017 Special session is in the books.   Unless the courts undo the Governor’s line item Veto of funding for the legislature, it’s possible they’ll be back.  Pray that the deal doesn’t get any worse. 

 


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