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Walz, legislative leaders strike budget deal, drop gas tax hike

Legislative leaders and Gov. Tim Walz on Sunday, May 19, 2019, announced a two-year budget plan with a day left in the regular legislative session. Dana Ferguson / Forum News Service1 / 2
Legislative leaders and Gov. Tim Walz on Sunday, May 19, 2019, announced a two-year budget plan with a day left in the regular legislative session. John Autey / John Autey Photography2 / 2

ST. PAUL — Minnesota legislative leaders and the governor on Sunday, May 19, announced a compromise budget deal with hours remaining in the legislative session.

After days of closed-door meetings, House Speaker Melissa Hortman, Senate Majority Leader Paul Gazelka and Gov. Tim Walz emerged with a plan to spend $48 billion over the next two years, a roughly 6% increase in spending from current funding levels.

Two of the sticking points — raising the tax on gasoline and keeping in place a tax on medical providers that was set to expire — saw compromise from leaders in the nation's only divided Legislature.

“We did something here that in 2019 is a big deal," Walz said. "Divided government with vastly different visions and vastly different budgets that came together in a manner that was respectful."

Walz said he would call for lawmakers to return for a special session as soon as Thursday, May 23, to complete their work and pass a budget. The regular session is set to end Monday, May 20, at midnight and the leaders said conference committees would be encouraged to work at a "breakneck pace" to get work done with the hours left.

The compromise budget deal comes with a provision that would keep in place a tax on medical providers that is used to fund health insurance coverage for children, elderly, disabled and low-income people that was set to expire at year’s end. The continuation of the 2% tax, which was dropped to 1.8%, was a top priority for Democrats but a point of opposition for Republicans, who deemed the tax a “sick tax.”

And the state will continue paying insurance companies for two years to help manage the risk of those on the individual insurance market, which is intended to bring down premium prices.

Democrats had to drop a plan to gradually increase the tax on gasoline by 20 cents per gallon to fund road and bridge repairs. Walz and Democrats had proposed the tax hike, while GOP lawmakers adamantly opposed it.

The plan also includes changes to the state tax code to conform with federal codes and will include tax relief for middle-class Minnesotans.

Legislative leaders and the governor said the proposal was an example of compromise. While neither side came away completely satisfied, they were glad to put forth something that covered a middle ground between the very different initial budgets by Democrats and Republicans.

“In the end, I think we found that place in the middle, which you have to find in divided government,” Gazelka said. “What we have here today is a draw, and it’s good for Minnesota.”

The plan would also boost per-pupil funding to public schools by 2% next year compared to current levels and an additional 2% in the following year. And another $40 million would also go to funding broadband expansion.

The leaders also proposed dipping into the state's rainy day fund to pay for new spending in education, health care, community prosperity projects and other areas.

While all three said they would aim to make the budget-writing process more transparent this year than in years past, conversations around the state spending plan were shrouded in secrecy. For almost a week, the leaders held daily meetings behind closed doors and offered few public comments about the process, saying the details should remain in the “cone of silence.”

On Sunday, the sixth day, prior to the announcement legislative leaders and the governor avoided publicly disclosing details about the conversations. And Senate sergeants at arms shooed away reporters who tried to ask questions of Gazelka between meetings.

The three apologized for the secrecy surrounding the process and said it was necessary to have the conversations behind closed doors to allow for more candor in putting forth offers.

"With regard to the transparency, I can't change the culture of the Legislature single-handedly or overnight, and that is a process to change the culture," Hortman said. But now, the process will fall to conference committees where spending debates will be public, Hortman said.

Members of the House minority party said they wouldn't support the proposal as it included the continuation of the provider tax and they raised questions about $500 million proposed in new bonding for various public works projects.

“This is not a good product for Minnesotans,” House Minority Leader Kurt Daudt said, signaling the compromise plan didn't meet his expectations. "Half of a bad deal is still a bad deal."

Lawmakers and the governor must approve the budget before July 1 or risk a state government shutdown.

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