REGIONAL— With less than three weeks to go until adjournment, Republican lawmakers in charge at the Legislature and DFL Gov. Mark Dayton remain far apart as they work to finalize spending plans for the next biennium and beyond.

The two sides maintain wide differences over policy as well, but the budgetary gap is likely to prove the biggest sticking point as the Legislature and the Governor seek to craft a session-ending agreement ahead of the May 22 adjournment. Differences totaling nearly a billion dollars remain, as the two sides differ over how to assess increases in future spending, how much savings various reforms might yield, and whether deep cuts proposed to state agencies by the GOP Legislature are even sustainable. The differences could prevent a budget deal despite the fact that the state enjoys a $1.5 billion projected surplus heading into the next biennium.

At least two other wild cards remain in the mix as legislative leaders and the governor seek a way to bring the session to a productive end— including a $1.15 billion tax cut bill proposed by the GOP and a possible bonding bill, something the Legislature has been unable to deliver for the past two sessions.

The tax bill, as written, probably won’t survive according to Senate Minority Leader Tom Bakk, DFL-Cook. “I don’t think the Governor will sign it as is,” he said, noting that passage of the measure would largely eliminate the state’s ability to fund other needs, such as boosting K-12 and higher education funding. What’s more, said Bakk, there’s no real need for a tax bill since the current law seems to be doing a reasonable job of funding state needs. “The Republicans don’t have much leverage on the issue,” he said. “We don’t need a tax bill.”

But the governor will want funding for state agencies, and that it appears that GOP legislators are currently banking a few bargaining chips— including their current proposal to slash state agency and department budgets by ten percent.

Bakk said the impact of such cuts would be felt across the state. “We’ll have a lot of layoffs at the revenue office in Ely if these cuts are approved,” said Bakk.

But that’s unlikely, he said. “They know the governor will never accept these kinds of cuts,” he said, which means they most likely intend to trade them in the end for other Republican priorities.

Whether the Legislature can agree on a bonding bill remains another sticking point. The House, this past week, approved a $600 million capital spending plan, which is far smaller than the $995 million plan approved by the Senate last year while under DFL control. Bakk said he expects a final bonding package closer to $800 million, and may well include $800 million in both years of the biennium. “I think that would be a reasonable number.” Among Bakk’s local funding priorities is another $8-10 million for continued development of the Lake Vermilion-Soudan Underground Mine State Park. “We didn’t set aside all that land to do nothing with it,” he said.

Bakk also anticipates the Legislature will agree to a two-percent annual increase in K-12 funding over the next biennium, although that’s more than is currently included in GOP spending plans. “That’s what the districts are telling us they’ll need,” he said.

The Dayton administration continues to express concerns about a number of issues related to health and human services spending projections included in the GOP spending bills. Minnesota Management and Budget Commissioner Myron Frans, in an April 24 letter to House and Senate leadership, outlined a lengthy list of issues that Dayton insists must be addressed before any deal can be achieved.

A perennial sticking point is back in 2017, as the GOP budget plan eliminates the effects of medical inflation in its forecasted spending for Medical Assistance. According to Frans, that fails to account for $151 million in inflationary cost increases in 2018-19, and $465 million in the following biennium. “Removing inflation is not savings, it is simply not recognizing actual costs,” stated Frans. “This strategy underfunds expected costs and risks federal participation in our programs.”

Whether to include the effects of inflation in state budgets has been a battle waged by the DFL and Republicans in the Legislature for years. DFLers maintain that considering inflation is simply acknowledging that inflation exists and should be included in budgetary decisions, while GOP leaders have argued that including inflation fails to put a check on state spending.

According to Frans, the GOP spending bills show false “savings” in other ways as well, such as pushing out payments for some programs to future biennia. “In the Legislative proposals, $228 million of “savings” in FY 2018-19, with an additional $167 million in FY 2020-21, are the result of pushing costs out into the future and even beyond our planning horizon,” notes Frans. “In addition, $200 million of tax reductions are not fully recognized until FY 2023. We must recognize the full cost of our budget decisions now. By pushing these costs off into the future, we will jeopardize our recently re-established AAA bond rating.”

At the same time, the Dayton administration believes GOP leaders are forecasting unrealistic savings from a variety of programs, such as $155 million from a proposed pilot project in the Medical Assistance program.

The GOP spending bill also includes deep cuts, as high as 47 percent to a wide range of state agencies, most of which the DFL governor would never endorse according to Bakk.

In effect, according to the Frans, the GOP is not offering a truly balanced budget as the state constitution requires. “A balanced budget is one that has valid assumptions and is fiscally sound with sustainable budget strategies,” writes Frans. “After careful examination, I must express my concern that several components of the House and Senate omnibus budget bills do not meet this test.”

Some of the current back-and-forth represents political posturing by both sides. In the end, Bakk says he’s confident that the two sides will find a way to reach a satisfactory conclusion to the session. “It would be awfully hard to explain that with a $1.5 billion surplus, we couldn’t manage to get done in time,” he said.