by CHRIS ROGERS
Another legislative session is coming down to the wire in Minnesota, as lawmakers continue negotiating major tax and funding bills with just five days left. “It’s certainly crunch time, but we’ve been working toward a compromise the entire legislative session, and I’m hopeful we can get there,” Senator Jeremy Miller (R-Winona) said.
Governor Mark Dayton (DFL-St. Paul) and the Republican-controlled legislature are bargaining over three major pieces of legislation: a tax bill, to conform with the new federal tax code and give Minnesotans tax cuts; a bonding bill, to borrow money to spend on infrastructure projects across the state; and a budget bill, to increase funding for various areas of government, including school security upgrades.
Since Congress passed a new federal tax code last year, Minnesota’s tax code is now out-of-sync with federal law. “If we do not conform with the federal tax code, the tax filing process for Minnesotans on their income tax returns will become incredibly complex,” Miller explained.
In addition to conforming with the federal tax code, both Dayton and Republican lawmakers wanted to make other changes to tax code. Dayton proposed expanding tax credits for working families and reversing last year’s tax cuts on tobacco products; Republicans want to cut tax rates on individuals and businesses. The latest Republican proposal calls for cutting the state income tax rate on the lowest income bracket by 0.1 percent by 2020 and by 0.2 percent for the next lowest bracket while cutting the corporate franchise tax rate by 0.7 percent.
The Winona Area Chamber of Commerce and the Minnesota Chamber of Commerce have been lobbying the legislature to cut corporate taxes. Minnesota has one of the highest business tax rates in the U.S., and that makes it hard to attract and retain companies that create jobs in Minnesota, business leaders say. Conversely, Dayton has pitched his administration’s policies of raising taxes to invest in education, health care, and other programs as an economic success story.
Miller stood next to other Senate Republican leaders during a press conference last month when they unveiled an earlier version of their tax bill proposal. “The current tax system in Minnesota is abusive. It punishes success and hard work,” Senator Roger Chamberlain (R-Lino Lakes) said. “Tax reductions will generate economic growth and [produce] revenue,” he continued. “We need economic growth,” he added.
Meanwhile, Dayton has vowed that he will not sign any tax bills until the legislature agrees to fund his emergency school aid proposal. Dayton is pushing for $138 million in one-time school funding to help local school districts across Minnesota. State aid for schools is based on the number of students schools have, and many districts, including Winona Area Public Schools (WAPS), are facing budget cuts due, in part, to reduced enrollment. So far, Representative Gene Pelowski (DFL-Winona) said his Republican colleagues on a conference committee charged with drafting a budget compromise have not put Dayton’s education funding request in their budget bill, but there is still time to do so. One-time funding will not change school districts’ long-term financial challenges. However, Pelowski said the governor’s school funding proposal would take a significant chunk out of WAPS’ budget cuts next year. “It would be a huge help to them,” he stated. Asked if it is the state’s responsibility to fix school districts’ budget woes, Pelowski responded, “It has to be fixed.”
Although it would cut taxes on the lowest income brackets, Dayton administration officials claimed the Republican tax bill would benefit wealthy Minnesotans more than low- and middle-income earners. In a press conference on Monday, Dayton said of Republican lawmakers, “These folks are just falling all over themselves whenever they can to protect the monied interests of Minnesota … Then you’ve got just school kids who want a decent education, and they don’t have time to consider that.”
“First, the Republican tax plan focuses on middle-class families, providing modest tax relief for middle-class families,” Miller responded in an interview. “We do this by lowering the rates on the first tax bracket and the second tax bracket … And second, education is a priority for just about everybody in the legislature. It’s not a partisan issue.” Miller laid out a few criticisms of the governor’s particular proposal. The legislature did increase education funding last year, he pointed out. Miller added that Dayton’s proposal for additional school funding came late in the session, without adequate time for committees to vet it. Under Dayton’s plan, every district in the state would get money, but not all of them are in financial trouble, Miller observed. The legislature needs to provide adequate funding to schools, but local districts need to manage their finances, too, he added. “It’s a shared responsibility. I think school districts have a responsibility to balance their own budgets; at the same time, the taxpayers of Minnesota provide a lot of money at the state level to support our school districts,” Miller stated. Ultimately, he said, “The resources just aren’t there. If we’re going to do a supplemental budget bill, provide tax relief to middle-class Minnesotans, and do a bonding bill, there just isn’t enough there to do the governor’s bill.”
Lawmakers have until next Monday to work out final compromises and pass bills. Dayton said he will not call a special session to grant extra time for negotiations.