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April 28, 2017


House and Senate Leaders Announce Joint Budget Targets

This morning Senate Majority Leader Paul Gazelka (R-Nisswa), Speaker of the House Kurt Daudt (R-Crown), and House Majority Leader Joyce Peppin (R-Rogers) announced joint budget targets that will guide the finance committee chairs as they work through the conference committee to complete the state’s FY 18-19 biennial budget. Working with a forecasted $1.65 billion surplus, Republican legislators have stressed the importance of tax relief and investments in road and bridge infrastructure. The spending targets, sorted by committee jurisdiction, are below:

Target  FY 16-17  Joint Proposed 18-19  Change 
Education $17.4 billion  $18.57 billion  $1.14 billion 
Health & Human Services  $11.8 billion $13.82 billion  $2.05 billion 
Higher Education $3 billion  $3.19 billion $113 million 
Public Safety $2.2 billion $2.25 billion  $87 million 
Agriculture $117 million $118 million  $1 million 
State Government, Job Growth & Energy Affordability, Environment & Natural Resources, and Reinsurance $3.6 billion $3.41 billion  ($525 million) 
 Taxes & Aid $3.3 billion $3.45 billion $114 million 
 Tax Relief   $1.15 billion $1.15 billion
 New Transportation Funding   $372 million $372 million

Legislative leaders now have just over three weeks to negotiate with Governor Mark Dayton and reconcile the differences between the joint budget targets announced today and the governor’s budget recommendations made in January.

Tax Relief Package Takes Center Stage
Most Capitol insiders expect the size of the tax bill to be one of the primary points of contention going forward. From day one Republican legislators have consistently touted tax relief as one of their primary objectives for the 2017 legislative session. However, while Gov. Dayton has proposed some tax relief—primarily in the form of increasing the Working Family Tax Credit and the child care tax credit—he has been publicly skeptical of a larger tax relief package. On multiple occasions Dayton has stated his strong desire to leave the next governor a balanced budget (having inherited a budget deficit of more than $5 billion in his first term). The joint targets released today call for $1.15 billion in tax relief. This is significantly more than the approximately $300 million Dayton proposed in January and sets the stage for a couple weeks of tough negotiations. 

Policy Issues Remain Contentious
While the primary purpose of the omnibus finance bills is to provide for the ongoing funding of state government, each legislative session the budget bills (which can number in the hundreds of pages) also contain a broad variety of non-fiscal policy and reform provisions. This year is no exception. As legislative leaders and the governor’s office negotiate the framework of a state budget, considerable time and energy will also be dedicated to these policy initiatives. 

For example, the House Public Safety and Judiciary Finance bill contains high-profile and very controversial provisions which would increase the civil liability of individuals arrested as part of a protest which blocked a highway or other transit way. Similarly, the Omnibus Transportation Finance bill contains language which would require legislative approval of any light rail transit construction project regardless of whether state funds will be used in construction. Finally, the House Environment and Natural Resources Finance bill contains significant change to the responsibilities and authorities of the Minnesota Environmental Quality Board. Dayton has previously objected to these and other policy initiatives contained in the budget and legislative leadership will need to work through those objections in order to get the governor to sign the final budget bills.

Capital Investment Projects Remain on the Horizon
One of the final pieces to the end-of-session jigsaw puzzle is the capital investment or “bonding” bill. Traditionally, the Minnesota Legislature passes a capital investment bill in the second year of the biennium. However, because last year’s bonding bill failed in the waning hours of the legislative session and negotiations over a special session were unsuccessful, many Capitol insiders believe that a bonding bill may be an integral piece to the final budget negotiations. Gov. Dayton has historically promoted large bonding bills (often  $1 billion) as a mechanism for spurring economic development and employment as well as addressing the growing need for state funds to support public infrastructure. Republicans have historically been more skeptical of “borrowing” and have preferred smaller bonding bills. It remains to be seen whether a capital investment bill is part of the final budget deal, but many legislators—particularly in rural Minnesota—have turned to the bonding bill as the best option to assist some of their property-tax poor communities with their infrastructure needs.


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