Minnesota budget dispute endgame: What you need to know

There's been a lot of noise out of the State Capitol in recent days about lawmakers and Gov. Tim Walz fighting over money.

Q: So what's this all about?

A: DFL Gov. Tim Walz and the Legislature — divided between a Republican-controlled state Senate and a DFL-controlled House — need to finalize a state budget for the next two years before lawmakers are required to go on recess May 20. Further on the horizon, if they can't agree on a deal by June 30, state government shuts down.

Q: How much money are we talking?

A: State government is spending about $45.5 billion during this current two-year budget, so we can expect Walz and lawmakers to settle on something in that neighborhood. Walz and DFL lawmakers want to spend more, primarily on schools, health care and transportation. Republicans would also spend more, but their primary goal is to prevent a tax increase.

Q: Where does the money come from?

A: Most of that $45.5 billion comes in the form of sales and income taxes — about three-fourths of total revenue. The rest comes from corporate taxes, the statewide property tax on business, as well as liquor and tobacco taxes.

Q: OK, so it's about $45.5 billion. Is that it?

A: Not quite. Governments often collect money for special purposes, and Minnesota state government is no exception. The $45.5 billion figure is sometimes known as the "general fund," but there are other taxes and spending, too. For instance, the 28.5-cents-per-gallon of gasoline and a 2% tax on medical services go into separate accounts to pay for roads and some health care, respectively.

Q: What does state government spend the money on?

A: Aside from those special funds, state government is mostly buying education and health care. Preschool to grade 12 schooling accounts for 41% of the $45.5 billion; higher education another 7%; and health care about 22%. All together that's 70% of the $45.5 billion. Other safety-net programs aside from health care are another 7%. Aid to local government is about 8%.

Q: So what are they really fighting about?

A: The two sides are far apart on what state government should spend during the next two years. They started out about $2 billion apart on spending for schools, universities, the safety net, parks and other services, though they've inched closer together. (Given our population of 5.61 million people, that's about $356 per person.) The two sides are especially far apart on school funding. When negotiations began, Democrats wanted to spend $700 million more on schools than Republicans.

Q: Is that it?

A: No. Much of the debate is actually not about the $45.5 billion, but about those separate accounts for health care and highways. Walz and DFL lawmakers want a 20-cent-per-gallon increase in the gas tax for roads phased in over four years and pegged to inflation after that. That would allow them to spend more on schools and other programs because they could shift some sales tax money that currently goes to roads back into the general fund. Walz and the Democrats also want to raise corporate taxes. And they want the 2% tax on health care that would otherwise expire at the end of the year to stay in place. Republicans don't want any of those taxes.

Q: Can't Minnesota do what Congress does and just borrow the money?

A: Nope. The Minnesota Constitution allows debt for certain purposes, but paying the bills isn't one of them.

Q: What's the significance of May 20?

A: Minnesota doesn't have a full-time Legislature, and that's the date by which lawmakers have to finish. Here's our state constitution, article 4, section 12: "The legislature shall meet at the seat of government in regular session … for not exceeding a total of 120 legislative days. The legislature shall not meet in regular session … after the first Monday following the third Saturday in May of any year."

Q: What happens if Walz and the Legislature can't strike a deal by May 20?

A: The Legislature goes home, and only Walz can call them back into session. Special legislative sessions have become fairly common, especially during the odd years, which is when lawmakers have to craft a budget. House Speaker Melissa Hortman, DFL-Brooklyn Park, said that since she was elected in 2004, every budget session but one has required a special session to finish up.

Q: When does the state run out of money?

A: The state's fiscal year ends June 30. If Walz and lawmakers can't agree on a budget by then, state government shuts down like it did in 2011, when it was shuttered for 20 days. There's quite a bit of legal disagreement about what exactly a government shutdown entails, but be prepared to cancel your trip to a state park.

Q: You mentioned Hortman. Who else are the major players?

A: Walz was elected in 2018 after more than a decade in Congress. He was a soldier and a teacher and coach before that. State Sen. Paul Gazelka is the Republican majority leader. He's an insurance man and conservative Christian, known to be soft-spoken and deferential to colleagues. Chris Schmitter is Walz's chief of staff. State Sen. Julie Rosen, R-Vernon Center, is the chairwoman of the Senate Finance Committee and a GOP budget expert. Rep. Ryan Winkler, DFL-Golden Valley, is an attorney who returned to the Legislature this year after a stint living in Belgium.