Stage set for fight over tax increase(MN)

A Minnesota Supreme Court ruling that tipped the balance of constitutional power at the Capitol continued to reverberate Friday, as Gov. Tim Pawlenty and legislative leaders engaged in a fresh round of talks and maneuvering over the state's grim budget picture.

Pawlenty emerged from a morning meeting with his Cabinet and played down talk of a government shutdown but said he'd asked state departments for lists of spending priorities in the event of a cash crunch.

He blamed Wednesday's court ruling that restored funding for a small special dietary program, a decision that potentially puts $2.5 billion the governor unilaterally cut to balance the budget last year into play.

"Because of the court's order, we don't have the money to meet all the obligations," Pawlenty said.

But DFL leaders said the governor was exaggerating the impact of the court's order, saying any attempt to pin the state's budget crunch on the ruling was papering over "mismanagement" of state books. Senate Majority Leader Larry Pogemiller said the state would still have a cash flow problem without the ruling.

The upshot of all of this is that the state now has a $3 billion question before
it could be resolved (or not) in a number of different ways.

First, the question may not be resolved until a new governor and a new legislature
are elected, although this scenario is somewhat unlikely.

But the scenario is certainly possible. Remember that Minnesota’s constitutional
requirement for a balanced budget applies only to the end of the budget cycle.
In other words, the state can be in deficit as long as the books are squared by
the last day of the budget cycle, which in this case is June 30, 2011.

Also remember that the party that sued the state over unallotment was only one group
whose claim was worth only $5 million of the $2.7 billion. Put another way, the
other parties affected by the unallotments must first come to court and get a judgment
in their favor. Although these parties would all prevail against the state, the
point is that not every party is going to come forward and not all at once. Already,
some groups have said there is no point going to court to get money from a broke
state.

So, at least in theory, the state could limp along until a new line-up is elected
in the fall.

A second resolution could be to have the legislature simply pass a law ratifying
all of the unallotments. That would resolve most of the deficit and moot the remaining
legal claims, leaving the $536 million of current deficit to be resolved.

This is unlikely because the DFL won’t simply ratify what they “won” in court. They
want some tax increases.

A third scenario relies on tax increases, at least in part. This scenario is unlikely
as Governor Pawlenty is rock solid opposed to tax increases and the legislature
lacks the votes to override. In order to do so, Speaker Margaret Kelliher would
need to have all 87 House DFLers and then find three Republicans to join them for
the 90 votes needed to override.

In this political environment, none of the 47 House Republicans could survive voting
to override Pawlenty’s veto. Moreover, not all 87 House Democrats would go along
with it either. Many of them won narrow victories in traditionally GOP districts
in the waves of 2006 and 2008. For them, votes to raise taxes in an election year
would be political suicide. So, good luck with that one.

The most likely scenario is one in which the DFL gets some parting gifts that aren’t
tax or fee increases in exchange for ratifying the unallotments. An example would
be another round of bonding bills or some welfare healthcare spiffs.

The other issue at play is timing. The session ends next Monday. If there is no
agreement, the Governor will have to decide if he wants to call a special session
and haul legislators back the Capitol.

If there is no agreement, Pawlenty will likely call an immediate special session
to keep the pressure on the DFL to agree to a reasonable solution.

While there will be pressure on all parties to get the job done, the pressure on
Speaker Kelliher will be enormous.

She has a bruising August 10th primary coming up and will not want to be bogged
down at the Capitol negotiating a settlement.

Kelliher will also face pressure from many of her troops to get a deal because they
don’t want to be stuck at the Capitol when they could be home campaigning to keep
their seats.

Moreover, she will be buffeted by both sides of the tax increase debate. On the
one hand, her traditional base will demand tax increases, as will her DFL primary
opponents, led by Mark Dayton.

On the other hand, Kelliher knows tax increases are wildly unpopular within the
broader electorate, especially amongst independent voters. She doesn’t want to be
seen as the architect of a tax increase.

Finally, Kelliher will want to wrap up a deal quickly because she wants to be seen
as a competent leader and manager. Getting bogged down in a messy budget fight at
the very time she is attempting to sell herself to the electorate as chief executive
material.

(from Anoka County Watchdog)

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