Republicans: Spending and tax bills filled with provisions Dayton wanted

Republican legislative leaders said Monday they are hoping for a change of heart from DFL Gov. Mark Dayton on his promise to veto big tax-cut and spending bills that they sent him in the final hours of the legislative session.

"It's an indisputable fact that if he vetoes these bills, he will be inflicting harm and chaos on literally millions of Minnesotans," said Rep. Jim Knoblach, R-St. Cloud, the chairman of the House Ways and Means Committee. GOP leaders said Dayton will find many provisions he likes in the bills, and that they hope he considers the negative consequences of vetoing them.

Dayton has been resolute in vowing to veto both a tax bill and a hefty catchall bill with nearly 1,000 pages of spending and policy changes; he has two weeks in which to decide for sure. Dayton cited a long list of what he called examples of Republicans caving to interest groups.

A measure to protect seniors in nursing homes was all but written by the nursing home industry, Dayton alleged. Pharmaceutical companies that manufacture opioids will be subject to no new taxes or fees that Dayton and a bipartisan group of lawmakers hoped would force them to help pay for the consequences of the opioid epidemic.

The corporate income tax rate was cut in the tax bill, along with income tax reductions for the state's two lowest income tiers. Neither bill contained one of Dayton's top requests: $138 million in new "emergency" funding for schools struggling with budget shortfalls. Republicans set aside $225 million for schools, but much of it is redirected from other pots of money now available to schools for purposes like teacher training — which Dayton called unacceptable.

"I've never seen a session this badly mismanaged. I've never seen a session less transparent. I've never seen a session more beholden to special interests," Dayton said Sunday.

The governor was in Washington, D.C., on Monday. His staff said Dayton planned to spend time reviewing each of the bills before acting on them; he must make a series of complicated calculations as he decides whether to follow through with the vetoes.

On the spending side, the 1,000-page bill includes provisions he asked for, while a veto would create difficulties for various state agencies.

The Legislature allocated $21.7 million to help fix and operate a broken vehicle registration system and $5 million compensating businesses harmed by the software glitch. Secretary of State Steve Simon's office would receive $1.5 million to secure voting systems under threat of cyberattack.

Nearly $27 million would go to districts for school safety-related spending. A change in the education funding formula to reflect the most recent trends in enrollment and special education costs would mean another $77 million for school districts. Rural communities would receive $15 million for broadband funding; $6 million would go to attorneys for abused and abandoned children; $1.35 million for monitoring of deer suffering from chronic wasting disease to protect the herd; and, $1 million for a Duluth paper mill that Dayton has championed.

A fix for the Department of Human Services would bring the state into compliance with federal regulations and prevent hospitals from losing $190 million in federal money, Republicans say. Another measure would bring the state into compliance with a federal child-care development block grant, preserving the grant that is now imperiled. And without $6.6 million in new money for prison health care, the state faces the risk of litigation for unconstitutional treatment of the incarcerated.

Knoblach said the GOP removed items that Dayton found most objectionable: "If the budget bill had included non-starter provisions like pre-emption [of city labor rules], Medical Assistance work requirements or two-tiered minimum wage, the governor could claim that a veto would somehow protect Minnesotans from having their health care taken away or something like that, but that's simply not the case here," he said.

But there remains a list of items Dayton finds concerning. For instance, one measure would effectively prevent the state from expanding its MinnesotaCare health insurance program.

After passing the initial bill, Republicans passed a second "repealer" bill that would undo some of the provisions Dayton finds unacceptable, including the one related to MinnesotaCare. The governor has not signed either bill.

DFLers contended that they had little time to make informed decisions about the wide-ranging bill; the final version — running the length of a weighty biography — was released just hours before the House and Senate voted on it. Republicans largely ignored Dayton's requests to send stand-alone bills for high-profile items like school safety, opioid prevention and elder-care reforms.

A veto of the tax bill, meanwhile, would likely mean a chaotic tax filing season next year. State taxes are based on federal taxable income, and a veto would mean Minnesotans would have to use IRS rules that were in place before the major tax overhaul passed by Congress last year. State taxes would increase for about 300,000 Minnesotans.

If Dayton signs the tax bill, state taxpayers in the two lowest income tiers would see cuts: It reduces the 5.35 percent rate to 5.3 percent and the 7.05 percent tax rate to 6.95 percent for tax years 2018 and 2019, and to 5.3 percent and 6.85 percent for later tax years.

The tax bill includes relief for the city of Mazeppa, whose main street burned in a fire. Minneapolis and St. Paul won approval to increase their hotel room taxes. Virginia, Minnetonka and Inver Grove Heights would receive a sales tax exemption on construction materials for new fire houses. The bill also would distribute $50 million owed to school districts but thus far unpaid by the Department of Natural Resources.

Dayton called this cash infusion — along with provisions that would grant school districts more flexibility to spend money they already have — a "phony" proposal that would not help schools facing shortfalls.

He also complained that the bill provides too much relief to the wealthy while protecting corporations from fair taxes.

Staff writer Jessie Van Berkel contributed to this report.

J. Patrick Coolican • 651-925-504