Did Beer and Cigarettes End Dayton's Shutdown?
What happened, and what to do next
After 20 days of a costly and needless state government shutdown, the standoff has ended and suspended government operations are spinning back up in Minnesota.
There is ample evidence that the shutdown was a calculated political maneuver on the part of the governor, who incredibly claimed recently that he didn’t understand the latest pre-shutdown legislative budget proposal, and that the “misunderstanding” led to the shutdown.
When delivering his State of the State address, Dayton perplexed legislators by imploring the legislature to pledge not to shut government down, at a time when a government shutdown wasn’t even on anyone’s radar. No one’s except the governor’s, anyhow.
By the time the governor began his tour of the state to shore up waning support, he found that his shutdown strategy was backfiring and as the detrimental effects of the shutdown mounted, blame was being placed on the governor where it rightly belongs.
The governor successfully guided the process of defining essential functions to keep operating (including his personal chef) in order to protect his closest allies, but there were unintended and unanticipated consequences of the shutdown. Miller and Coors beer brands (about 30% of all beer sold in Minnesota) were about to be pulled off the shelves in Minnesota bars, liquor stores and restaurants due to a brand label registration glitch and cigarette sales were on the verge of ceasing due to a lack of tax stamps.
Seeing the public turning on him, the governor surprised his advisors by making a counter-offer to the Republican-led legislature’s June 30th proposal. Dayton said he was unaware that certain policy strings he found objectionable had already been taken off the table.
Republican leadership in the House and Senate were swift to respond to the governor’s counter-offer and budget negotiations resumed amid the longest state government shutdown in our nation’s history.
Republican lawmakers, who had campaigned and won in the majority of districts on a pledge not to raise taxes managed to keep their word. In fact, they managed a modest tax reduction in eliminating the so-called “sick tax” (a hidden 2% health care provider tax passed on to consumers).
By contrast, the governor won an election campaign characterized by calls for higher taxes by plurality, despite the majority of voters choosing a more fiscally conservative candidate (Tom Emmer or Tom Horner). In other words, the majority voted against Dayton’s tax hike proposals. Regardless, he shut down the state and refused to call a special session for 19 days because he wasn’t getting his way on an unnecessary tax increase. This, after he explicitly stated that he would not shut government down over his desired tax hikes.
The mandate from the public was clearly not with the governor’s plan.
Republican lawmakers also had a clear mandate to cut government. A recent poll found 65% of voters agreed that state government should be cut. Here, they were not as successful, ultimately agreeing to a budget that increases state general fund spending to $34 billion, 12% above the prior biennium. In addition, they enacted one-time spending above the general fund budget, finding the revenue in the equivalent of a “payday loan” against tobacco lawsuit settlement payments. While this is less than ideal, it isn’t permanent spending, so it doesn’t add to the structural budget problems.
About 75% of the budgetary reforms originally passed by the legislature survived negotiations with the governor and the net result is a dramatic decrease in the rate of state government spending growth going forward.
The insatiable budget monster is Health and Human Services, which gobbles up 32% of the budget, and growing. The projected biennial growth in HHS based on prior statutory funding formulas was 11.5%. Under the budget now enacted, the rate of growth has been curbed to 4.8%.
While the current increase in state spending, combined with an off-year $500 million bonding bill is a hard pill for some fiscal conservatives to swallow, it’s a far cry from Governor Dayton’s desired $39 billion budget, and structural reforms that have been signed into law go a long way toward solving the continual budget deficits. Given the current allocation of legislative and executive power, the final budget deal is close to as good as the deal was going to get. In fact, a lot more positive reforms emerged than most would have predicted.
To complete the redesign of Minnesota’s budget and to ensure that tax hikes haven’t merely been delayed, a few key pieces of legislation remain to be passed in the upcoming regular session. First and foremost, a constitutional amendment to require a supermajority vote in both chambers of the legislature to enact tax increases must be passed. The governor has no role to play in such a measure. Once passed by the House and Senate, the question is put straight to the voters. Next, an amendment limiting state budgeting to known revenues will complete the budget reforms.
Finally, a “lights on” bill that would continue to fund government at 90% of the previous budget levels in the event of another “misunderstanding” or other budget negotiation impasse would prevent future shutdowns.
Please join Minnesota Majority in supporting these needed additional reforms and together we can make sure that future budgets live within our means and a state shutdown never happens again.
Minnesota Majority is asking you to contact your legislators and urge them to support the three reforms needed to prevent future budget deficits and government shutdowns.
- Require a supermajority vote of the legislature to raise taxes.
- Limit future budgets to known revenue.
- "Lights on" legislation to prevent future shutdowns.
Cross-posted and comments welcome at Minnesota Majority.
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