Divided Minnesota Legislature gets ready for $50 billion question

A DFL governor ready to make good on a slew of campaign vows. A new, energized House majority determined to ensure economic security for all Minnesotans. A fragile Republican Senate majority already bracing for Democrats' taxing and spending proposals.

Minnesota government is embarking on a new path when the divided Minnesota Legislature gavels into session on Tuesday, the only divided legislative branch in the country.

Incoming Gov. Tim Walz and legislators start out with the advantage of a $1.5 billion budget surplus, but they face a growing list of funding requests and ominous signs the economy might be slowing.

The new administration and legislative leaders have until May 20 to piece together a nearly $50 billion, two-year budget that pays for education, health care and public safety all while debating which taxes to cut, extend or increase. Any wrong move could blow a hole in the budget and hobble the new Walz administration and legislators' priorities.

"It's all bound up with the budget," said House Health and Human Services Committee Chairwoman Tina Liebling, DFL-Rochester. She noted budget negotiations will affect everything from elder care protections to disability services.

There will be a new cast of characters advocating for their budget priorities. The incoming raft of 134 House members includes 39 new faces, many of them Democrats who won previously Republican-held suburban seats. And they will be led by a governor who has pledged to narrow the rural-urban divide that has altered politics in Minnesota and across the country.

The 2018 election brings a more ethnically and racially diverse group of legislators to the Capitol than ever before.

The makeup of the Senate is unchanged, as only one district was on the November ballot. Republicans retained their one-seat majority in that special election, but they would like to further their hold in another special election scheduled Feb. 5 to fill a newly open seat that was held by Sen. Tony Lourey, DFL-Kerrick.

Whoever fills Lourey's seat will likely do so before legislators' budget work starts in earnest. Walz has a Feb. 19 deadline to debut his spending plan for 2020 and 2021, which he may have to adjust after an economic forecast is presented at the end of February. After the forecast, which includes estimates of state revenue and expenditures in the years ahead, lawmakers draw up their budget resolutions.

Rep. Tony Albright was one of several Republican legislators who said he is curious to see what funding sources Democrats turn to, such as the potential continuation of a tax on health care providers that is due to sunset this year.

"They are going to be looking for a lot of money to implement the programs they want. ... There's only so much money in the banana stand," said Albright, R-Prior Lake.

Senate Majority Leader Paul Gazelka put it bluntly when the surplus was announced last month. "We clearly won't need tax increases to fund Minnesotans' priorities in 2019, and we should do more to make sure families can keep their hard-earned money," said Gazelka, R-Nisswa.

State leaders enter the budgeting process from a relatively strong position with a budget surplus and a reserve fund at record levels.

Incoming legislators will inherit a lengthy list of previously vetoed proposals to reconsider, including changes to the state's tax code and a plan to dedicate $9 million to reimbursing deputy registrars burdened by problems with the state system for driver's licenses and vehicle registrations.

Soon-to-be House Speaker Melissa Hortman, a Democrat, and Gazelka said that early on in the session they intend to pass a number of less controversial measures in a first, early attempt at unity.

Hortman is striking a less combative tone than outgoing House Speaker Kurt Daudt, who will now serve as minority leader. "House Republicans are ready to stand up for your pocketbooks, and fight for meaningful tax relief for Minnesotans whose hard work has helped put our state on sound financial footing," Daudt said recently.

As legislators test out the new dynamics at the Capitol, Walz and Democrats in the House are expected to push hard on proposals that languished under Republican legislative leadership, such as regulating paid sick time, increasing the minimum wage and legalizing recreational marijuana.

And more spending on transportation remains a top priority in many circles.

"Our infrastructure is literally crumbling and without a major investment we're going to continue to fall behind other states," said House Transportation Finance and Policy Committee Chairman Frank Hornstein, DFL-Minneapolis. He has a piece of the collapsed I-35W bridge in his new Capitol office as a reminder.

The freshest signs of House Democrats' priorities will come Jan. 9, when they roll out their first 10 proposals of the year.