Virtual File - Item

Text: March 13, 2017

The Honorable Kurt Daudt
Speaker of the House of Representatives
Room 463, State Office Building
100 Rev. Dr. Martin Luther King Jr. Blvd.
St. Paul, MN 55155

The Honorable Paul Gazelka
Majority Leader of the Senate
Room 3113, Minnesota Senate Bldg.
95 University Ave. West
St. Paul, MN 55155

Dear Speaker Daudt and Majority Leader Gazelka:

As we near the half-way point in this Session, and you begin to release your Committee
targets and omnibus budget bills, I want to provide you with additional details regarding my
priorities for a timely biennial budget resolution and a successful conclusion to the Session.

Thank you for setting deadlines that will require you to pass your omnibus budget bills
out of committee by March 31, 2017. Those deadlines provide ample time to negotiate biennial
budget bills to which we can all agree. To that end, I request that we set joint conference
committee targets no later than Friday, April 28, 2017. That is two weeks after the
Legislature returns from the spring recess and leaves more than three weeks to negotiate the
details of the omnibus budget bills before your deadline to adjourn.

I understand that we will approach the biennial budget with different priorities. Below are
principles and expectations that I will bring forward as we negotiate.

Since 2011, my Administration has worked hard to make state government work better
for the people of Minnesota. And we have been successful. We turned a projected $6 billion
deficit into eight-straight forecasted surpluses by raising income taxes only on the wealthiest 2
percent of our citizens and on smokers - cutting taxes for many others, and supporting a
sustained economic recovery. We paid back all of the $2.8 billion debt owed to our schools and
eliminated other budget shifts and gimmicks. We restored our AAA bond rating.

Our success has been recognized by numerous national experts. Just last month, U.S.
News and World Reported named Minnesota the third-best state. Last year, USA Today reported
that Minnesota was named the second-best run state in the nation. And in 2016, CNBC named
Minnesota the fourth-best state for business, after ranking us number one for the first time ever
in 2015. These national accolades, among others, demonstrate that we are doing many things right.

At the same time, our state is facing increasing needs for financial assistance and services
from a growing, changing, and aging population. As the numbers of children, seniors, and
people with disabilities increase, it is unavoidable that the State's obligations for the educations
and care of those Minnesotans would increase. As you know, 90 percent of General Fund and
Health Care Access Fund spending is for payments to schools, local governments, and
individuals in need.

I believe it is imperative that we continue to make those expenditures, which directly
benefit our citizens, and also to fund state government adequately to provide its essential
services. Fortunately, we have established a stable budget surplus, which was recently increased
to a projected $1.65 billion for the next biennium and $2.1 billion for the following biennium.
Those surpluses provide sufficient resources to address your budget priorities, as well as mine.
If you were to respect my priorities, I would respect yours.

However, I have received indications that, unfortunately, your budgets will take a very
adversarial approach to mine, even including significant reductions in the funding I have
proposed for state agencies and their services to our citizens.

Six years ago, the Republican majorities in the House and Senate took that approach. In
the face of a projected $6 billion deficit, some painful spending cuts were unavoidable. This
year, however, the State's fiscal situation is very different, with strong surpluses projected
instead of gargantuan deficits. There is no rational reason to cut agency budgets in the face of
the increased needs of our citizens.

However, if you are going to propose spending reductions, I will not accept an
arbitrary 10% across-the-board reduction. I insist that any budget reductions you propose
explain clearly the programs and services that you wish to cut. In other words, state
specifically what you want state government NOT to do.

In my budget, I have proposed $300 million in tax cuts targeted to middle-income
families, farmers, and others with special needs, and local government aid. Again, I have
received indications that your tax cut proposals will greatly exceed that amount. We currently
have a structurally balanced budget where revenues will support our continuing to be one of the
very best, and best-run, states in the nation.

We must not squander this hard-earned fiscal security. I will not consign our state to
another decade of deficits after I leave office. My tax proposals reduce taxes for 450,000
Minnesotans, yet maintain our structural balance for the next two bienniums. I will hold your tax
bills to this standard.

In addition, I strongly disagree with providing tax breaks for our state's wealthiest
and corporations at the expense of working Minnesotans and families most in need. While
businesses continue to see record profits, many families are just beginning to feel the effects of
our state's improving economy. Their economic futures remain uncertain, so tax relief should prioritize stabilizing family budgets through the Working Family Credit or Child and
Dependent Care Credit.

Finally, I strongly oppose including policy language unrelated to the budget in
omnibus budget bills. Those items should travel in omnibus policy bills or as stand-alone bills.
I am willing to debate policy proposals with you on their own merits, but I will not trade
controversial policy items for spending necessary to provide critical services for the people of
Minnesota. If you insert those policy provisions into budget bills in an attempt to force me to
accept them, you will create the same impasse, which caused the state government shutdown in
2011. Indeed, one of the agreements critical to ending that 2011 shutdown was to remove policy
items from the final budget bills.

I have often said that the definition of compromise is agreeing to things you do not
agree with. Minnesotans have elected me, a Democrat, as their Governor, and your Republican
majorities to the Legislature for the next two years. It is up to us to demonstrate that we can
work together to resolve our differences in the best interests of all Minnesotans.

Sincerely,
Mark Dayton
Governor

cc: Senator Tom Bakk, Minority Leader
Representative Melissa Hortman, Minority Leader