The November general election obviously represents a sea change in how business will be conducted at the Minnesota state capitol when legislators return to work on January 3, 2017. House Republicans will enjoy a comfortable 76-57 majority (they will pick up one additional seat in February after they win a special election in House District 32B-Lindstrom) and Senate Republicans will return to the majority, by a slim 34-33 margin, after four years in the minority.
So what should everyone expect and prepare for under this new world order? With Republican majorities in both chambers and DFL Governor Mark Dayton serving out the last two years of his tenure, we are in for a monumental fight. The backdrop will be the actions of president-elect Donald Trump and an emboldened Republican-controlled Congress. Messages and actions coming out of Washington are going to be a powerful driving influence in Minnesota on issues ranging from tax cuts, capital spending, and the health and human services budget.
The following is a brief analysis of some of the issues to watch as the legislature prepares to go back to work in January.
This isn't 2011
The last time Republicans had top to bottom control of the Minnesota legislature, the state was faced with a $6 billion deficit and almost everyone in charge faced a steep learning curve. Governor Dayton was in his first year in office and both Republican legislative leaders were new to the job. After a highly-publicized scandal in the Senate, a government shutdown and controversial constitutional ballot questions placed on the 2012 general election ballot, Republicans lost control of both chambers and the DFL took top to bottom control of Minnesota state government.
That is unlikely to happen this time.
Both Republican Speaker Kurt Daudt and newly-named majority leader Senator Paul Gazelka are seasoned legislators who have openly stated that they are students of history and that they are not going to repeat the mistakes of their predecessors and let their new majorities slip away. The new majorities also have something else going in their favor: Minnesota enjoys a strong economy and a $1.4 billion budget surplus that should make keeping all the troops in line that much easier.
Look for Republican leadership to take a very measured and cautious approach to governing.
It has been over four weeks since the general election and yet little is known about the DFL post-election game plan. Little, if anything, has been heard from Governor Dayton or DFL legislative leaders. Infighting continues over the DFL's lack of success in the election and the absence of any type of economic message for disenfranchised outstate and middle class voters. If the DFL doesn’t retool quickly, they are in for a long legislative session.
Real Tax Cuts
With a $1.4 billion surplus and a few budget cuts here and there, Republicans have the opportunity to put together a significant tax cut package in 2017. This could include repeal of statewide business property tax, property tax relief and, possibly, tax relief for military veterans and social security recipients.
It's All Up to Congress?
The most difficult obstacle the Minnesota legislature may have to grapple with is the question of what, if anything, is going to happen when the U.S. Congress convenes and president-elect Trump is officially in office. The first six months of activity at the federal level will have a profound impact on what legislators at the state level decide to tackle.
For instance, how do legislators begin to tackle all of the issues relating to Minnesota's beleaguered health insurance marketplace while Congress is contemplating outright repeal and replacement of the Affordable Care Act, better known as ObamaCare? On the human services side, how will the Minnesota legislature address Medicaid spending while at the same time Congress will be debating fundamentally changing the Medicaid program and going to a block grant system that could significantly reduce the amount of funding Minnesota receives from the federal government.
As of this writing, Governor Dayton and legislative leaders are in negotiations to hold a special session on December 21 for purposes of addressing health care premium increases in the individual market. If a special session happens, legislators are also expected to take up a capital spending package and omnibus tax bill that were left unfinished at the end of the 2016 legislative session. Absent a special session, all of this unfinished business will carry over into the 2017 legislature, compounding the amount of work legislators will need to tackle this winter.
What Will Dayton Do?
Finally, the real mystery before the 2017 legislative session may be the question of how Governor Dayton plans to spend his last 24 months in office in the face of Republican majorities. So far, he has not been willing to show his hand. Perhaps the outcome of a yet-to-happen special session in the next two weeks will set the tone and tenor of the 2017 session. Absent a resolution on a special session, Dayton and the new Republican legislative majorities will grapple with twice as much work and a daunting legislative agenda that looks difficult, if not impossible, to resolve. That leaves the increasing likelihood of a government shutdown showdown and a long summer.
Minnesota's Budget Outlook Remains Stable
With the November forecast, Minnesota now has a $1.4 billion surplus for the upcoming budget. This is lower than initially forecast due to slower economic growth. Spending in the current biennium is projected to be $245 million lower than prior estimates. Current law allocates 33 percent, or $334 million of the resulting balance to the budget reserve. The budget reserve now totals $1.9 billion. The FY2016-17 budgetary balance is now $678 million; that is $51 million lower than previous estimates. This balance will carry forward into the next budget cycle.
Experts at Minnesota Management and Budget attribute the slower revenue growth to lower consumer spending, strong demand for workers, and a low unemployment rate. Minnesota's structural balance is intact with the bond rating returning the AAA. Revenue growth is expected to outpace spending growth into FY2020-21.
One portion of the budget that came in significantly below forecast for FY2016-17 was HHS was Health and Human Services (HHS) where there was $206 million in savings realized. Minnesota Management and Budget attributes the savings to lower enrollment in programs coupled with lower payments for home and community based services.
When session begins on January 3, legislators and the Governor will begin their work to come up with a nearly $45 billion budget for the next biennium.
For more information, please go to MMB Budget & Economic Forecast.
Minnesota State Senate
Next month the Minnesota Senate will have a Republican majority for only the second time in the last several decades, and a 34-33 margin that has not been seen since 1971. Senator Paul Gazelka (R – Nisswa) has been named the new Senate Majority Leader, and Senator Tom Bakk (DFL – Cook) will again lead the DFL caucus. A number of outstate seats long held by the DFL were flipped by Republicans on election night, and Republicans even saw losses in Eden Prairie and Lakeville, yet still netted eight new seats; the partisan divide between rural and urban Minnesota is now even more pronounced.
Along with new majorities come new committees and chairs. Only four current Republican senators have experience chairing a committee, meaning a number of new voices will play leading roles in 2017. Notable among them will be new Tax chair Sen. Roger Chamberlain (R – Lino Lakes) and Finance chair Sen. Julie Rosen (R – Fairmount). The overall committee landscape has also been pared down and designed to better align with the House. The one-vote margin is an important detail to remember as issues are raised and debated through the session. With only simple majorities required to pass most legislation, it opens the door for each member of the majority to potentially hold significant leverage. It also raises the ability of the minority caucus to influence outcomes in some cases. Given these new dynamics, it will be interesting to see if Republicans look to tightly tailor their agenda around only issues with very strong caucus support.
One topic that will certainly be scrutinized is the cost and availability of health care and insurance. Senator Gazelka has already stated that Senate File 1 will focus on these issues, which were hotly debated through the campaigns. To further highlight the importance of health care issues this year, the new committee structure features two committees that will focus on HHS spending and reform chaired by Sen. Michelle Benson (R – Ham Lake) and Sen. Jim Abeler (R – Anoka) and a sub-committee focused on aging led by Sen. Karin Housley (R – St. Mary's Point).
All of these circumstances make the Senate very intriguing looking ahead to 2017.
Minnesota House of Representatives
Like the Senate, the Minnesota House has seen the urban versus rural divide grow. Unlike the Senate, the House GOP has expanded its already solid margin by yet another four seats, to a burley 76 GOP – 57 DFL lead. Those numbers add to one short of a full 134 member House. The district 32B seat is unfilled because the incumbent member was recently found to have not fulfilled the residency requirement House and Senate members must comply with. A Valentine's Day special election will determine the fate of that seat.
Speaker of the House Kurt Daudt announced that the House committee structure will remain largely unchanged from last biennium. There will be 24 standing House committees and divisions during the term. In addition, three House subcommittees have been established to focus on affordable child care, care for the elderly, and key industries like mining, forestry and tourism. Speaker Daudt has made it clear throughout the election that the House’s key legislative priorities will include lowering health care costs, growing well-paying jobs, and reducing taxes for middle-class families.
For a complete list of newly-elected legislators, please go to Minnesota Legislature Election Directory and for a complete list of newly-appointed committee chairs, please go to 2017 Committee Chairs.