Election year could complicate Gov. Tim Walz's agenda

Gov. Tim Walz's political legacy is on the line this year, as he debates a historic budget surplus with a divided Legislature and faces the voters for the first time since taking office.

The DFL governor remains hopeful, seeing potential for compromise on everything from front-line worker checks and business tax cuts to a package of construction projects. He wants lawmakers to consider one-time spending solutions, with the pandemic continuing to cause unpredictability in the economy.

"History should be an indicator on this, we were able to pass the state's largest bonding bill two months before an election last time," Walz said in a wide-ranging interview with the Star Tribune. "The public wants us ... to be fiscally responsible with the surplus, lower costs for folks and get some compromises."

But election year politics could complicate his legislative agenda. Control of state government is at stake this fall with the governor's office and all 201 legislative seats on the ballot. Already the governor's race is shaping up to be a referendum on sweeping actions Walz took to slow the spread of COVID-19.

"Gov. Walz's unilateral dictates and governing via executive order resulted in the massive disruption of Minnesota's families' lives," Republican Party of Minnesota Chairman David Hann said last week. "He decimated small businesses across the state and shut down schools, doing great harm to children's education and their future."

Still, Walz says he's optimistic the two parties can come together this year around needs highlighted in the second year of battling the COVID-19 pandemic. Lack of availability and high childcare costs require permanent changes, he says, and he will renew a push for paid family leave in the state.

"What we've seen during COVID, you get those sniffles and that back ache and you're like, 'Oh crap I've got omicron,'" said Walz, who recently recovered from his own COVID-19 infection. "We're making people make the decision of, how am I going to pay the rent because I've got no paid leave and I have to stay home."

He said a paid family leave program, which would be funded by a payroll surcharge, works much like the state's system for unemployment insurance. That fund was drained during the pandemic amidst a historic surge in requests. Walz said he supports a push from business groups and Republicans to replenish the Unemployment Insurance trust fund.

"I kind of view this unemployment insurance as an unsecured debt and you need to get it paid off," Walz said. "You need to have the fund ready, God forbid, that we have another crisis to come."

Laura Bordelon, senior vice president for advocacy at the Minnesota Chamber of Commerce, said she's encouraged by Walz's support for unemployment insurance relief, with some businesses already anticipating tens of thousands of dollars in new taxes if nothing is done.

But she said adding a paid family and medical leave program would make Minnesota an outlier for businesses, and now is not the time for a new payroll tax.

"There's a lot of pressure for businesses right now and pilling on with an employer-only paid leave mandate is extraordinarily burdensome," she said.

With the state facing a projected $7.7 billion budget surplus, Walz also opened the door to other business relief, including more direct aid for the hospitality industry, which is being hit hard by the latest surge of COVID cases. He'd also like to see the $250 million lawmakers are debating to send in direct checks to front-line workers grow as high as $500 million to include more people.

Along with budget measures, Walz is pitching a roughly $2 billion package of construction projects to complement billions heading to the state from the federal infrastructure bill. The details of his plan will become clear when Walz releases his supplemental budget proposal later this month, which is also expected to include adding a public insurance option on the MNsure individual marketplace that would compete with the coverage available through traditional health plans.

The pandemic emphasized the need to lower health care costs for Minnesotans, and Walz said a state program that provides insurance for health insurers — known as reinsurance — isn't the best way to drive down costs.

Steven Read, who runs a small family farm near Northfield, told the governor in a health care roundtable last week that he's worried about young farmers like his son, who wants to take over their business.

"It's not news to anybody that most small family farms are running on a pretty narrow margin and your health insurance costs can be the difference between profitability and being under water year-to-year," said Read, whose family gets their health insurance through MNsure. "A public option for us, and for a lot of those young farmers, is really going to be critical going forward."

Walz sees opportunity for both parties to get things they want next session, but the governor acknowledged that deepening political divides across the country will seep into whatever happens at the Capitol this spring. The intensity of Republican calls to re-examine the last election underscores that, he said.

"Every person running for governor other than myself will not say the election was fair and Joe Biden is president," Walz said. "Boy, I don't know where you find compromises around things like taxing ... if you can't agree on that."

Walz is facing strong political headwinds, including low polling numbers for Democrats in Washington. But he's said he's proud of his record in his first term, including his response to the pandemic. He thinks he stacks up well against the field of a half dozen Republicans seeking to challenge him.

"Don't judge me against the almighty, judge me against the other guys," Walz said, paraphrasing President Biden's philosophy on elections. "I think when [voters] start to see that, it makes a pretty good case for us."

Staff writer Jessie Van Berkel contributed to this report.