What's the holdup? 4 issues keeping DFL, GOP from a deal at the Capitol

House DFL leaders Liz Olson, Ryan Winkler and Melissa Hortman
House DFL leaders Liz Olson, Ryan Winkler and Melissa Hortman listen to a question about their budget bills and the last month of session.
Brian Bakst | MPR News

Minnesota lawmakers are bumping up against a deadline to end the 2019 legislative session — and they've spent a week hustling in and out of negotiations — but there's still no deal on the next two-year state budget.

So, what's the holdup?

Quite a bit, it turns out. Minnesota has the only divided Legislature in the nation, and there's a wide gulf between the two parties over, well, pretty much everything.

Just looking at numbers on a spreadsheet, they are still billions of dollars apart, backed up by vast philosophical differences over how much government should be taxing and spending on behalf of its citizens.

As the clock ticks toward the deadline to adjourn the session, here are the biggest sticking points that have emerged in negotiations.

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1) Provider tax

A fee on medical providers has become the linchpin of a deal on the state budget. The 2 percent tax, which pulls in roughly $700 million annually, was enacted more than two decades ago to help the state fund health insurance for the working poor.

In 2011, as part of a deal to end a government shutdown, Republican legislative leaders and DFL Gov. Mark Dayton agreed to end the tax at the end of this year.

Democrats now want to extend the tax indefinitely, to prolong the life of what's known as the Health Care Access Fund, where money from the tax goes. Republicans are pushing back, likening the provider tax to a fee increase on sick people.

2) Gax tax

Democrats have been pushing all session for a 20-cent increase in the state's per gallon gas tax that pays for road and bridge construction and maintenance. Republicans have been saying just as long that it's a non-starter for their caucus. Walz and the House Democrats in negotiations Monday proposed to scale that increase back to 16-cents.

"This isn't something we made up, and this isn't for an amusement park on the edge of my house or something," Walz said. "This is roads across Minnesota, this is bridges."

Senate Majority Leader Paul Gazelka called it a "tiny step," but he insists his caucus will not vote for any increase in the state's gas tax. "We've always said that the gas tax is not an option," he said. "What they do in their plan is lower it four cents, which makes Minnesota the number 6 highest state for gas taxes."

3) Other tax increases

While the gas tax and the provider tax have been getting the most attention, Democrats are also proposing to raise more taxes on corporations and other businesses through their plan to align the state and federal tax codes. Republicans also raise some money through tax conformity, but that is redistributed as tax cuts to various groups.

Walz said Republicans have taken a pledge not to raise taxes that's "simply unsustainable." "They know they've grossly underfunded these things, but they can't figure out how to pay for it," he said.

4) Spending

One of the fundamental disagreements between Republicans and Democrats is how much government should spend. Democrats argue hundreds of millions of dollars are needed to invest in classrooms, college campuses, local governments, health care and more. But Republicans argue government already spends too much.

Gazelka, R-Nisswa, said there are several pots of money that already exist in the state to spend more on education and public safety, including the state's $1 billion budget surplus, as well as the more than $2 billion in state budget reserves, which were recently fed even more when revenue collections came in nearly $500 million higher than expected last month.

"We can get to places of compromise that still do not need any tax increases to work," Gazelka said.

How Minnesota bakes a two-year budget