The main issue: How much of the Minnesota’s surplus money — along with unspent cash from the federal American Rescue Plan — the state should spend.

Minnesota legislators are taking their Spring Break this week, giving everyone time to contemplate how far apart House DFLers and Senate Republicans are on the main issue of the 2022 session: how and how much of the surplus money — along with unspent cash from the federal American Rescue Plan — the state should spend.

The most-common conclusion: very far apart. DFLers generally want to spend more of the $9.25 billion surplus and $1.15 billion in ARPA funds on policies and programs with a little set aside for tax cuts. Republicans want to spend a bunch of money on tax cuts with a little set aside for policies and programs.

Matt Shaver, the policy director of Ed Allies, an advocacy group for students of color and those with special needs, used Legos and a map of the state to display the gap between the House’s $1.2 billion for new education spending to the Senate’s $30 million.

“If every mile was 10 million dollars, the two sides would be the distance from the Mall of America to International Falls apart,” Shaver said in a Tik Tok video in which he suggested negotiators could meet at the halfway point of McGregor, Minnesota.

But education, while one of the most obvious areas of disagreement, isn’t the only one: The House wants to spend $240 million on environmental programs; the Senate proposes $1 million. The House would spend $56 million on agriculture and rural development; the Senate: $5 million.

And while both the House DFL and Senate GOP propose spending around $200 million on public safety programs, their plans go in very different directions.

On taxes, the Republican-controlled Senate passed a $3.4 billion tax cut, primarily by nearly halving the lowest income tax tier and ending the state’s remaining taxes on Social Security income. Senate Republicans are proposing spending about $1.7 billion on new spending, with the bulk of that going to increase pay for long-term care workers.

The House DFL has proposed $1.6 billion in tax cuts, which are mainly targeted at lower-income residents and families via child care credits, rental credits and student loan credits. In turn, they have crafted new spending that totals around $5.4 billion on education, early childhood programs, health and human services, housing and other areas of government.

And then there’s Gov. Tim Walz, who shares a political party with the House majority but is not in agreement with the caucus on several key issues. Walz supports what his staff dubbed “Walz Checks” — one-time payments to taxpayers that total $2 billion — rather than the GOP income tax cuts or the DFL’s targeted tax breaks. Walz agrees with House DFLers on spending $1 billion on bonuses to essential pandemic workers — as opposed to the Senate’s $250 million — but he agrees with Senate Republicans on devoting $2.7 billion to replenish the unemployment insurance trust fund; House DFLers want to spend $1.85 billion on the trust fund, up from a previous offer of $1.4 billion. 

But an early test of how Walz, House Speaker Melissa Hortman and newish Senate Majority Leader Jeremy Miller might be able to broker deals didn’t end well. A series of meetings to agree on worker bonuses and unemployment insurance failed, though related talks on renewing the state’s “reinsurance” program, a mechanism to subsidize some health insurance premiums, was more successful.

Not just one-time spending

You can’t listen to floor debates or committee hearings for long without hearing someone call the budget surplus “historic” because, well, it is. Taken together, the surplus and the unspent ARPA funds are about 20 percent of the state’s current two-year, $52-billion budget.

And while previous surpluses, often in the range of $1.5 billion, disappeared when projected into the following budget period, this time the state is forecasting another $6.3 billion surplus in the 2024-2025 biennium.

That has allowed both the House and Senate to do more than propose one-time spending — expenditures that only affect the current budget and don’t obligate the next Legislature to either keep the spending in place or cut it. So the House DFL can take a chance on new ongoing programs and the Senate GOP can impose what they repeatedly describe as “permanent, ongoing tax relief.”

Yet concerns over the future, despite the current revenue forecast, contribute to Walz’s preference to use one-time rebate checks instead of cutting tax rates.

Failure is an option

While the House and Senate have each made serious spending proposals, most aren’t to be taken seriously. That’s because they aren’t meant to be a path to an agreement but rather a statement of positions. As in previous sessions when the two parties share political power, any controversy is either wrung out in closed-door leadership negotiations or dropped on account of being intractable.

Unlike some recent session-ending dramatic finishes, however, there is no government shutdown awaiting if a deal isn’t reached this year. The state is not yet halfway through the two-year $52 billion budget adopted last June. If unspent, the surplus simply goes into the bank, and the unspent ARPA funds go to the Legislative Advisory Commission, a group of lawmakers that Walz needs to consult before spending the money, though he does not need the group’s approval. 

Failure, therefore, is an option. Such an ending, however, will leave a lot of disappointed people among those with expectations for spending on social programs, or tax cuts, or bonus checks, or reductions in unemployment taxes — or any of the other much-touted uses of the money.

The politics of the session are a choice between whether doing nothing and waiting for the election is more advantageous than getting something to talk about during the campaign.

“Republicans are open to any ideas to put money back into the pockets of Minnesotans,” Miller said last week. But the Winona Republican said he thinks their plan is the best way to do that.

DFLers are reluctant to agree to tax rate cuts — even for the lowest tier of income — because every taxpayer pays some of their taxes in that bracket. “Rather than do a little bit for those who don’t need it, we thought: How can we move the dial, really make a difference, in the lives of our families, our workers and our senior citizens?” said House Taxes Chair Paul Marquart, DFL-Dilworth.

When the session reconvenes on April 19, it will have a month to finish its work.

In those final weeks, legislators and Walz will be reminded why compromises this year will be even harder. Both the GOP and DFL are holding their party conventions in Rochester in May (May 13- 14 for Republicans and May 20-21 for the DFL). Delegates to those conventions tend to come from the right and left flanks of the party, respectively, which means conventions aren’t usually the place to brag about getting some of what you want — and giving the rest away to the other side.

(MinnPost)

The Minnesota Legislature rushed through $1 million in emergency funding Thursday to bolster the fight against bird flu, a highly contagious disease that has cost the state’s turkey farmers more than 1 million birds.

Senate Agriculture Committee Chair Torrey Westrom, R-Elbow Lake, pointed out before the nearly unanimous votes in both chambers that the number of Minnesota farms and birds affected by the highly pathogenic form of bird flu has doubled in less than a week. Only Rep. Erik Mortensen, R-Shakopee, voted against the bill.

Minnesota is the top turkey producing state, with nearly 700 farms that raise about 40 million birds per year. According to an update on Thursday from the Board of Animal Health, the virus had infected 19 commercial turkey farms and two backyard flocks in 11 Minnesota counties with a combined 1,017,568 birds.

Across the U.S., the outbreak is the biggest since 2015, when producers had to kill more than 50 million birds to keep the virus from spreading. Cases have been reported in 24 states this year, with Iowa the hardest hit. The number of chickens and turkeys killed in the past two months has climbed to more than 24 million. Zoos across North America are moving their birds indoors and away from people and wildlife to protect them.

Rep. John Burkel, R-Badger, a former turkey farmer, recounted how his farm in Roseau County was struck in 2015. That outbreak required euthanizing 9 million birds statewide.

“The virus is different this time, and the need and the urgency is greater,” Burkel said.

Rep. Dave Baker, R-Willmar, who represents one of the hardest hit areas of Minnesota, said the cold weather and worker shortages are making it harder this time for producers to euthanize infected flocks because the foaming machines used to suffocate the birds don’t work as well.

The bill, which Gov. Tim Walz is expected to sign soon, is meant to buy time by putting an extra $1 million into an emergency account at the Minnesota Department of Agriculture to supplement the $400,000 currently there. It will help pay for testing materials, equipment and personnel. Lawmakers are expected to field requests for more money later.

The U.S. Centers for Disease Control and Prevention says bird flu poses little risk to the general public and that poultry remains safe to eat as long as it’s properly cooked.

Correction (April 8, 2022): An earlier version of this story incorrectly stated that the vote was unanimous. One vote in the Minnesota House was against. The story has been updated.

(MPR News)

The Minnesota Senate passed the keystone of the Republican plan for the state’s projected $9.25 billion surplus – a tax bill that would cut income taxes by $3 billion this year and at least $2.5 billion each year after.

Senate Majority Leader Jeremy Miller, R-Winona, leaned on a well-worn mantra as he described the goal of the bill, which passed by a 42-24 vote, with six DFLers crossing over to join all Republicans.

“To put more money in the pockets of working Minnesotans, every single paycheck, week after week, month after month, year after year,” Miller said.

“Taglines don’t solve problems. Let’s come to the table with real solutions and not fake fixes,” said Senate Minority Leader Melisa Lopez Franzen, DFL-Edina. She described it as a risky plan that could come back to haunt the state.

The bill takes a cleaver to the bottom income tax rate – dropping it from 5.35 percent now to 2.8 percent. It applies to the rate assessed on roughly the first $40,000 joint filers earn and about the first $25,000 in taxable income for singles.

Senate Taxes Committee Chair Carla Nelson, R-Rochester, argued that Minnesota is an outlier because its lowest rate tops the highest tax rate of many states.

“This is a small step to right the ship, to support hardworking Minnesotans and to make our state a bit more competitive, and to encourage innovation, growth and economic expansion in our state,” Nelson said.

The other big piece of the plan would exempt all Social Security income from taxation. A change like that would align Minnesota with most states, but it would also deliver the most money to people with annual earnings above six figures because most people receiving those benefits already don’t pay taxes on them.

Democrats see the plan as a recipe for disaster.

“Another Legislature is going to come back next January and face the music of whatever decisions that we’re making now,” said Sen. Erin Murphy, DFL-St. Paul. “And I think the Republican majority is spending money like teenagers who have just earned their first paycheck.”

Sen. Matt Klein, DFL- Mendota Heights, said a huge tax cut will crowd out other pressing needs.

“If you were a Minnesotan who had hoped we would use this historic surplus to address climate change, to rebuild our schools after these difficult couple of years, to address the housing crisis and get homeless people into safe places,” Klein said. “If you were hopeful that we would finally reward our heroes and our frontline workers, you will be disappointed in this bill.”

An analysis from nonpartisan staff shows that 75 percent of taxpayers would benefit from the income tax rate cut, at an average of $759 per year. Those with higher incomes generally fare better in dollar terms. The Social Security tax change would award the biggest savings to upper earners.

Klein called that irresponsible.

“The surplus is spent and much of it on very affluent people,” he said.

Republicans argued that tacking more money onto state-supported programs isn’t the answer. Sen. Julia Coleman, R-Waconia, said families need a break as they cope with rising costs of almost every essential item, from groceries to gas to heating bills.

“They aren’t asking for a government spending spree,” Coleman said. “They aren’t asking for a one-time check. They are asking for permanent tax relief so they can catch their breaths.”

The Senate plan isn’t the only one in play at the Capitol. DFL Gov. Tim Walz has proposed expanded education and family care credits along with a one-time rebate that would send up to $1,000 to 2.7 million households.

Sen. Ann Rest, DFL-New Hope, tried to put those $2 billion in rebates in place of the Republican-backed bill, but the Senate rejected the move.

“I think it’s insulting to think Minnesotans would prefer a one-time check as opposed to ongoing tax reform, ongoing tax relief,” Nelson said.

House Democrats have proposed a tax plan one-third the size of the Senate’s that would deliver money through income-based credits, existing property tax aid programs and a smaller-scale rebate.

Lawmakers are a day away from starting a week-long break. When they return, they’ll have about a month left to fit the pieces together before shifting focus to an election that will determine the Capitol power structure in 2023.

At a press conference ahead of the Senate bill’s passage, Miller wouldn’t say whether a permanent income tax rate cut was imperative for striking a deal.

“I think it’s too early to answer that question,” Miller said. “Republicans are open to any ideas to put more money back in the pockets of Minnesotans.”

(MPR)