More News from Minnesota

Late afternoon and evening on Monday, May 10, the Democrat controlled House and Senate in Minnesota passed a budget bill that includes some $435 million in new taxes, including a new fourth tier personal income tax bracket along with a $1.8 billion accounting shift and $680 million in spending cuts. Governor Pawlenty vetoed the bill quickly and notified legislative leaders this afternoon.

So how does this affect the wide open race for Governor in Minnesota? Remember, all of this turmoil is the result of a Supreme Court decision where a number of cuts to last year’s budget were undone by the Court on a 4-3 vote. Now the Legislature and the Governor are sent back to the drawing board with less than one week of regular session remaining.

We think the Speaker of the House; Gubernatorial Candidate Margaret Anderson-Kelliher is in the toughest spot. She now has to decide whether or not to attempt an override of the Governor’s veto. Because she needs 2/3 vote to override, she’ll have to hold her entire caucus in line to support a big tax increase coupled draconian budget cuts (and a fair number of accounting gimmicks). Since she already let 16 vulnerable Democrats vote against original passage of the bill, it’s not likely that she is going to attempt an override, forcing them into a bad flip-flop and a vote in favor of a tax increase. And with no override attempt, we think the Speaker is vulnerable to attack by her Democrat opponents for Governor for not providing leadership in the House and for caving into Gov. Pawlenty.

That means Governor Pawlenty wins this first round even after suffering a huge set-back from Minnesota’s Supreme Court. This is especially true since the Supreme Court left it unclear whether it was the Governor’s use of unallotment generally that was inappropriate. Or whether it was the specific application of unallotment, leaving open the window for another round should there be a stalemate. Either way, with no budget in place at the end of session on May 17th, the Governor alone controls the clock. And what we’re left with going into the next 6 days are a series of irreconcilable political considerations and a budget that is currently out of balance this year and the years to come.

Of course it’s a lifetime between now and May 17th. We’ll keep you posted.