Clashes over taxes, policing, emergency powers stymie budget talks at Minnesota Capitol

It was always going to be a heavy lift: Set the next state budget with a politically divided government and vastly opposing views on taxes and government spending.

Throw in a global pandemic, lingering uncertainty around public health and federal aid and passionate disagreements over police reform. Oh, and conduct some of those tense negotiations over Zoom.

"We have not the greatest track record of ending on time. And this year COVID, emergency powers, federal money, police reform, make ending on time even more difficult in 2021 than in the past decade," said Democratic House Speaker Melissa Hortman of Brooklyn Park.

While state leaders search for compromise on a roughly $52 billion two-year budget, they are also making their final stands on policy goals before the regular session ends in a week. Democrats continue to call for additional law enforcement accountability measures, more education spending and tax increases on wealthy residents and corporations. Republicans have resolutely opposed any tax increases and say a final budget deal is contingent on scaling back the emergency powers Gov. Tim Walz has wielded throughout the pandemic to slow the spread of the virus.

Walz laid out a plan Thursday to lift COVID restrictions on business capacity and gathering size by May 28 and eliminate the mask mandate July 1, or as soon as 70% of Minnesotans 16 or older are vaccinated.

"We're not going to negotiate away safety and protocols that are dictated by science, but we're certainly listening to folks about what will help," Walz said earlier in the week. He said Republicans' efforts to tie a budget deal to emergency powers is "a bit reckless," as he still needs them for vaccine rollout and testing.

Republican Senate Majority Leader Paul Gazelka of East Gull Lake countered that the governor should immediately end the mask mandate for anyone who has been vaccinated and lift restrictions on gathering sooner.

"We are moving in the right direction, and if the governor will work with us on some of the mandates I have highlighted here, we'll get done, we'll find a way to finish," Gazelka said. "And if we can use federal stimulus money, that will make it a lot easier for all of us."

The tension over emergency powers and policing was on full display in a Friday judiciary and public safety conference committee. Sen. Andrew Mathews, R-Prince­ton, said licenses should be renewed for businesses that violated the state's COVID-19-mandated closures.

"That is likely the thing that would put them under," he said. "They barely survived COVID, they barely survived the lockdowns."

Democrats, who offered a dozen police accountability proposals in the committee last week, fired back.

"The compassion that folks find when we're facing having a liquor license suspended, I would really urge folks to find even more compassion when people's lives are actually in danger," said Rep. Jamie Becker-Finn, DFL-Roseville.

Gazelka said the Senate is going to make sure law enforcement is included in police reform discussions at the Capitol.

"We just want to make sure that the police are able to do their job and that it's not penalizing them, it's not vindictive," he said.

The Minnesota Legislature's regular session ends May 17, but the critical deadline for lawmakers to set the budget and avoid a government shutdown is June 30. That task got a bit easier this year after state economists in February shifted their prediction of a deficit in the next two-year budget to a $1.6 billion surplus. The state's revenue outlook has continued to improve since then.

Republicans have repeatedly highlighted the state's projected surplus and the billions coming from a federal relief package as they make the case that Minnesota should not raise taxes this session. Gazelka suggested that if they can't reach a deal in time to avoid a government shutdown, they could pass a "lights on" budget that does not include any significant spending increases.

Hortman says it's premature to talk about that sort of last-resort budget, calling it "a June 25 conversation." She added that budget deal-making — especially anything related to Walz's emergency powers — is politically complicated by the possibility that several Republican senators could run against the governor in 2022.

While Republicans are focused on no new taxes and Walz's powers, Democrats have dug in their heels on the need for raising new revenue. DFL leaders contend that making top earners pay more in taxes is critical to create an ongoing source of financial support for struggling schools.

"We're all looking at big cuts happening right now in our school districts. Layoff notices are going all around. Programs will be cut, music classes. Class sizes are going to be getting bigger if you have fewer teachers. In my community people are saying, 'Wait a minute, I thought we had a surplus. Why are we getting these cuts in our schools?' " said Senate Minority Leader Susan Kent, DFL-Woodbury. "The issue is because it's overwhelmingly one-time money and schools need ongoing structural funds."

The money Minnesota is anticipating from the federal government is a "huge wild card" in the next budget, Kent said. The state expects to get nearly $8 billion from the American Rescue Plan, much of which is allocated for specific uses. But the state will get to determine, within certain parameters, how to use nearly $2.6 billion of the money.

A spokeswoman with the U.S. Treasury Department, which is responsible for distributing the funds, said in a statement Thursday that they are "working to release guidance and allocations soon in order to get resources to states as quickly as possible." She did not say whether money would go out early this week, as previously expected.

Senate Republicans have proposed using the federal dollars for business relief, infrastructure projects, replenishing the state's unemployment insurance trust fund and other needs. Gazelka said an essential piece of the ultimate budget deal will be ensuring the Legislature is working with Walz to decide how to spend the money.

Meanwhile, House Democrats have held off on including plans for the federal dollars in their budget, and Hortman said it's not clear whether the ideas GOP members proposed would even be allowed.

"That is a question that I can't answer, and nobody can answer at this point," Hortman said. "How long will it take and what process will we undertake to determine how that money is spent?"

Jessie Van Berkel • 651-925-5044

Briana Bierschbach • 651-925-5042