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Minnesota Capitol focus shifts to timetable to avoid shutdown

By Brian Bakst, Minnesota Public Radio News

DFL Gov. Tim Walz acknowledged Thursday that tax increases on people with high incomes won’t survive in negotiations on a new state budget.

Speaking of his plan in the past tense, he said he’s facing stiff resistance from Republicans.

At an event to promote walk-in COVID-19 vaccine clinics Thursday, Walz said that he’s now striving for a deal that would keep a government shutdown at bay.

Walz had proposed a new fifth tier on the income tax while reducing taxes through more credits for people with lower earnings. His goal, the governor said, “was to lower the taxes on the vast majority of people but to even the system up.”

Neither he or allied House DFLers have explicitly dropped their call for new taxes, and few details have emerged from private discussions among Walz and legislative leaders. But Walz spoke in practical terms about where the tax debate stood.

“I’m willing to compromise. I’m willing to talk,” Walz said. “Republicans have come into this negotiation and said, ‘We are willing to shut things down before we’re willing to tax someone making $1 million a year.’ I disagree with them but I respect their position. They’ve made that clear.”

At the Capitol, Senate Majority Leader Paul Gazelka reiterated “we don’t need a tax increase on anyone” given a $1.6 billion projected surplus and $2.8 billion in help that will come from the federal government in the next two years.

Gazelka also said avoiding a shutdown was paramount.

“We want to open up Minnesota, we don’t want to close it down,” he said.

Walz said any final deal must include more money for schools and distressed small businesses. He said there is room for compromise because the improving economy could naturally push up tax revenue .

Monday’s session adjournment deadline is likely to come and go without lawmakers completing their work. That means a certain special session, which only the governor can call.

Walz said he’s inclined to wait a few weeks to call a special session but leave enough time to get a budget enacted by July 1. Missing that deadline would cause all or parts of government to shut down.

There are still some substantial hurdles.

One resurfaced earlier in the day in a committee working out new budgets for programs geared toward Minnesota’s natural resources and environmental protection.

A top Republican senator again stressed that vehicle emissions standards were a sticking point.

Sen. Bill Ingebrigtsen, R-Alexandria, said he won’t agree on a bill to pay for state parks, zoos and science museums unless a proposed clean-car rule is delayed for two years. The Minnesota Pollution Control Agency has advanced the rules.

The rules would require auto manufacturers to make more electric vehicles available for sale in Minnesota, increasing each year. The new emission standards wouldn’t go into effect until at least January 2024, meaning they would apply to model year 2025 vehicles.

They’re modeled on rules approved by California, which has special authority from the Environmental Protection Agency to adopt emissions standards stricter than the federal government’s. By law, states can either choose to adopt California’s rules, or follow federal standards.

Ingebrigtsen said market forces should be followed instead.

“Industry is moving in that direction. People have a choice. They are obviously making choices,” he said. “And again, they don’t need the heavy handed regulations of government to dictate.”

Rep. Kelly Morrison, DFL-Deephaven, described the funding threat as dangerous.

“The irony of holding up our budget talks in the environment and natural resources committee over working to address air quality problems and to address climate talks honestly is nonsensical,” she said.

Police accountability is also an unresolved issue.

House DFL negotiators have presented several proposals to bring more regulations and transparency to law enforcement. There have yet to be any counter offers or any commitment. Senate GOP members said they can’t make agreements until budget targets are settled.

“We seem to have these invisible barriers being laid out as reasons why we can’t do our work,” said Rep. Cedrick Frazier, DFL-New Hope, who accused his Senate counterparts of stall tactics.

Sen. Mark Johnson, R-East Grand Forks, pushed back.

“There has been no effort to say ‘No’ to these things,” he said, adding, “We’ve been here digesting the offers that have come through.”

MPR News reporter Dan Kraker contributed to this story.