Gov. Mark Dayton wraps up his final State of the State speech with a focus on finances

Minnesota's schools, its job hunters and the state's finances are better off than when he took office, Gov. Mark Dayton said Wednesday in his final State of the State speech, even as he laid out an ambitious list of goals for his last 10 months in office.

The DFL governor, who is not running again, used his annual address to urge state lawmakers to unite to adapt the state's tax code to treat middle-class taxpayers more fairly, suggesting that both the tax bill passed last year by Congress and state tax changes earlier in 2017 disproportionately favored businesses. He also called for more state spending on education and public works infrastructure, emphasizing that he wants to leave the state in stronger financial condition than when he took office at the beginning of 2011.

"Restoring fiscal stability to our state budget is one of the most important legacies I can leave Minnesota," Dayton said. "During my final year in office, I will not support any budget, tax, or policy proposals, which would threaten that stability. I urge legislators to do the same."

Taxes are the biggest issue facing Dayton and the 201 lawmakers he addressed Wednesday, with a legislative session that runs just over two more months. Without Minnesota-specific adjustments, the major federal tax overhaul signed by President Donald Trump in late 2017 will leave residents and businesses swimming in a morass of new complexity or tax increases. Dayton will release his detailed tax plan Friday.

The Legislature has reduced businesses' property taxes, and the federal bill cut the corporate tax rate, Dayton said.

"So, our number one priority — which will be reflected in my budget on Friday — should be tax fairness for individual Minnesotans and their families," he said, drawing applause from both Republicans and DFLers.

House Speaker Kurt Daudt, R-Crown, said Republicans agree with that goal.

"We want to make sure our tax code is fair, and we want to make sure it is competitive," Daudt said after the speech. "And we want to make sure Minnesotans have an opportunity to prosper and do well for their families, for their small businesses, for their employees."

GOP leaders were not as receptive to Dayton's call for the Legislature to listen to students who are asking for gun restrictions. A bill to expand background checks for gun transfers and purchases, and another measure creating a registry of lost and stolen firearms would save lives, Dayton said in his speech, promising to sign such legislation should it reach his desk.

Those comments were "poking a finger in our eye" and are not going to happen, Senate Majority Leader Paul Gazelka, R-Nisswa, said. "We want to focus on the things that unite us."

Dayton and lawmakers have a $329 million projected budget surplus, but they also face fiscal challenges, including an uncertain environment surrounding federal health programs and the sunsetting of a lucrative tax on health care providers at the end of 2019.

Dayton also wants a big infrastructure bonding bill — $1.5 billion — with significant investments in colleges and universities and water treatment facilities.

"It's almost impossible to provide world-class educations in antiquated buildings with leaky ceilings, dilapidated bathrooms, worn-out exteriors, and in classrooms without advanced technologies and other learning aids," Dayton said.

In addition to higher education infrastructure funding, he said he would include $10 million for both the University of Minnesota and Minnesota State system in his proposal and called for the Legislature's support. University officials recently said they would not increase tuition next year if they got that amount in additional funding.

Amid his ambitious agenda and a shrinking window of time, Dayton must grapple with a Republican-controlled Legislature with whom he has clashed bitterly, going so far as to veto money for legislative staff and salaries in 2017. That fight wound up at the state Supreme Court, with Dayton winning the case but relenting on legislative funding in recent weeks.

Rep. Dean Urdahl, R-Grove City, chairman of the House Capital Investment Committee, said Republicans will take "a real good strong look" at Dayton's higher education bonding request. They will not agree to everything the governor wants but will spend more in that area than in years past, he said.

The $1.5 billion proposal includes $167 million for water infrastructure. Urdahl said that investment is key, as cities and towns' water pipes are wearing out. "That's a down payment essentially on something we will have to continue in the future," Urdahl said.

When he took office more than seven years ago, Dayton said state funding for elementary and secondary education was in the bottom half of the 50 states, but they are now ranked 18th. That's not good enough, he said.

It was one of several rankings that the governor, always fond of statistics, mentioned in his speech to highlight the comparative high quality of life in the state.

Dayton also renewed his call for a "MinnesotaCare Buy-In," which would allow all residents to participate in the MinnesotaCare health care program currently available to people with low incomes. It could offer some families better health care coverage at lower costs, he said, noting the recent spike in people without health insurance after several years when that number had trended downward.

Senate Minority Leader Tom Bakk said he wished Dayton would have raised one other tax in 2013: the gas tax to fund transportation infrastructure. "It's the one area that didn't get addressed during his time," Bakk said. But he praised Dayton for supporting the construction of a new Vikings stadium, which was not politically popular but has spurred development in Minneapolis.

Dayton started the half-hour speech by making light of his dehydration-related collapse near the end of last year's State of the State.

"Some people have suggested I conclude my speech now, to make certain I can walk out by myself," he said.

As he concluded his final State of the State address, the 71-year-old governor referenced the recent, $300 million State Capitol restoration, noting how legislators put aside partisanship to complete it.

"Look at what we accomplished, by working together," Dayton said. "Just imagine what more we can do if we continue."

Jessie Van Berkel • 651-925-5044

J. Patrick Coolican • 651-925-5042