What Minnesota Can Teach America About Avoiding Future Government Shutdowns: Don’t do What we did, Adopt an Automatic Continuing Resolution Law

The US government shutdown is over and now the obviously and entirely predictable boring ping pong match begins.  By that, the entire focus will be on one side gloating that Democrats and Nancy Pelosi won and Donald Trump lost.  Over-quoted and deserved to be ignored conservatives like Ann Coulter on cue bemoan how Trump lost and the Rachel Maddows of the world  respond to her equally on cue, all as part of a click-bait politainment process to hype ratings.  This column will not use the phrase “cave in” more than once, but as of Saturday morning (January 26, 2019) that phrase had 15,300,000 results on a Google search.
The real focus now should be on the causes and consequences of the shutdown and how to prevent a future one.  Technically the government shuts down when there is no legal authorization to spend money. There is a simple way to prevent shutdowns whether in three weeks or the future and it is the same solution I have argued for in Minnesota for the past 15 years–pass a law enabling an automatic continuing resolution to continue funding the government in the event that no budget agreement or normal continuing resolution are adopted.
Minnesotans know a lot about government shutdowns.  We have had three since 2001–more than any government in the US, if not the world.   What we have learned about what causes and ends them might tell Americans something about why the current US shutdown occurred and what it will take to end it and perhaps prevent future ones.
Minnesota is a microcosm of the US.  It once enjoyed a  pristine image political image.  Touted in the 1970s with then governor Wendell Anderson on the cover of Time Magazine as the state that works, the reality is that Minnesota has become a partisanly divided state that has impacted the performance of its state government.  Minnesota is the only state with split partisan control of the legislature. Similar to the federal government which has a budget process and deadlines, Minnesota has one too. 
Yet since the beginning of the twenty-first century, the state has more often than not missed statutory deadlines, resulting in government closures and court fights.  In 2001 with Democrats in control of the Senate, Republicans in the House, and Independence Party Governor Jesse Ventura, the state started its new fiscal year without a budget but was saved from a shutdown with a last minute deal.  With a similar partisan legislative split in 2005 and Republican Tim Pawlenty as governor, there was a partial shutdown of nine days, and in 2011 with Republicans controlling both houses of the legislature and Democrat Mark Dayton as governor, there was a 20-day partial shutdown. In each case, state courts intervened to order essential governmental functions to be funded, and the shutdowns ended when public pressure and political self-interest drove leaders to compromise.  It also did not hurt that the inability to issue beer licenses added to the public pressure.
In addition to these shutdowns, in 2009 Tim Pawlenty sought to use special powers referred to unallotment to end a budget impasse (perhaps similar to President Trump’s threat to use the National Emergencies Act to build the wall), only to see the state supreme court reject it.  In 2017 Governor Dayton used his line-item veto to eliminate funding for the state legislature’s operations in retaliation for the latter’s refusal to follow his budget wishes.  In 2018 he vetoed an omnibus spending bill the Republicans had adopted, containing 80% of all the substantive legislation they had adopted that year.
The causes of Minnesota’s budget woes are multiple. The state has an antiquated budget process, built for a horse and buggy era seeking to operate in a twenty-first century environment.  The budget process is highly decentralized, imposes unrealistic deadlines, and has built into it simply bad policies such as a requirement counting inflation for the sake of revenue but ignoring it when it comes to obligations.  The defective formal process is compounded by partisan divides and polarization not anticipated when the budget process was first designed, as well as by inflated egos, partisan ambitions, and lack of leadership.  When a flawed process is accompanied by petty politics, the result is political dysfunction.  The way the shutdowns ended was a combination of court interventions, public pressures, and fear of electoral reprisal.
Much of what we see in Minnesota is exactly what we see at the federal level.  The formal budget process as articulated in the 1974 Congressional Budget and Impoundment Act simply is broken and needs to be remade. It was legislation adopted post Watergate when there still existed a high degree of consensus on spending priorities and when federal spending was significantly less than it is today. Over time, the process has only four times produced a budget on time (the last in 1997), with most of the time the federal government operating on a series of continuing  resolutions. Fast forward more than 40 years, the budget process is too weak to combat the partisan divide and lack of leadership in Washington, demonstrating that now it is completely broken.
Process and procedure are important, but the history of Minnesota’s and the federal budgeting demonstrate that formal procedures can only go so far.  A bad process makes it hard to do good budgeting.  But processes are only as good as the people who use them.  Budget disputes and government shutdowns are the product of significant political dissensus and failures of leadership.  So much of the US government, from the days of the constitutional framers to the present, was premised upon a basic underlying consensus and commitment to the public good that has evaporated.  Unfortunately, what is needed are new institutional rules to address this reality.
For the last 15 years in Minnesota I have argued for adoption of an automatic continuing resolution that would keep it funded no matter what.  The same should be adopted at the federal level.  The federal government should also consider biennial as opposed to annual budgets, and consider changing committee structures and time lines to streamline the process.  But even with these fixes, they will not solve the core problem driving government shutdowns–polarization, political pettiness, and a crisis of leadership.  After each of its shutdowns Minnesota failed to learn from it mistakes, making no changes in the budget process or adopting the automatic continuing resolution idea.  Instead, the focus was on who was the winner and loser.  The same is now occurring after this federal shutdown.  We will learn little from it and set the country up perhaps for another shutdown in three weeks or in the future.

Government Shutdown One Year Later: Reforming the Minnesota Budget Process

It is now the one year anniversary of the Minnesota government shutdown and proposals are flying off the shelf regarding what needs to be done to avert future budget impasses. Solutions range from cutting off legislative pay to exempting certain organizations from the shutdown (the zoo and the state lottery) to even saying that simply creating one party government (vote DFL and throw the bum GOP out this November) is what is needed.  All these are worse than band aid solutions; they really are going after the symptom and not the cause.

            The real problem is the flawed budget process in Minnesota. It is a process built for the horse and buggy days trying to operate in the 21st century. Government is so much more complex, the budget numbers so much larger, the functions more diverse, that it is perhaps impossible to reach consensus and make decisions between the beginning of January and ending on the first Monday following the third Saturday in May as specified by the State Constitution. These are deadlines from the nineteenth century and reflect a different era for the state. There simply may not be enough time to do the budget by law in the 21^st century.

            But think also how flawed the current budget process is right now.   We have elections in November, The state then receives a fiscal forecast at the end of November telling the governor what the economic assumptions and budget situation in the state will look like in the coming months.  The governor then finalizes a budget premised on these assumptions.  If there then is a new governor (as there was in 2010) then the new governor when he takes office finishes the budget of the old governor.

            Now the new legislature comes to work in early January and then it waits until late January or so for the governor to release the budget. Then they all wait until late February for the updated fiscal forecast. Thus, it is really not until late February or March that the work on the budget commences. And even then, there are separate hearings in the House and Senate, forcing conference committees to act. The budget also is really ten separate bills, with spending distinct from taxation, and no real work gets done until there are agreements on the different spending targets for each of the areas such as HHS, K-12, and so on.

            Sound confusing? It is. It is also inefficient. At least two months are wasted at the beginning of every budget cycle waiting for the governor’s budget, the fiscal forecast, and then agreement on budget targets. Now add more wrinkle–budgets are created right after state elections when often many new legislators or constitutional officers are elected. They are green, often learning on the job while creating a new budget. This is what happened in 2011 after the 2010 elections.  The same will be true in 2013 when the 2012 elections produce a legislature with at least 25% of the legislators being new.  These new legislators are barely in office, barely understand the state government when they are asked to review the budget.  This makes no sense. In a distant past when life and budgets were less complicated (and smaller), perhaps it was possible to do all this with a part-time citizen legislature. But those days have passed. A new budget process is needed, with new time lines and ways to move the work along.

            Is there a better way to do the budget?  For nearly a decade I have argued that the current budget process is backwards and that a new mechanism is needed.  Many of these reforms are found in our neighbor state of Wisconsin.  What are these reforms?

            In Wisconsin there is a joint House (Assembly)  and Senate committee that does the budget.  It is one bipartisan committee and not separate committees in the two chambers as in Minnesota. Second, there should be one budget bill and not ten separate ones as is currently the case in Minnesota.  Moving to create one budget with one committee primarily but not exclusively responsible for it is a necessary correction and centralization to the highly decentralized process that currently occurs in Minnesota.  Additionally link budget and tax bill together.  Spending and revenue need to be connected.

            But in addition, one of the best ideas from Wisconsin is that of an automatic continuing resolution.  By that, if the budget is not passed on time in Wisconsin then the existing budget continues in force until the budget is agreed to.  This reform alone would prevent a shutdown.

            There other possibilities for reform.  One would be to pass the Truth in Budget Act. It would do two things.  First, it would undo the current asymmetry or stupidity in the law that counts inflation for the purposes of revenue but not obligations in Minnesota.  This law dates back to the 2002 when Roger Moe and Tim Pawlenty, in running for governor while they were still in the legislature, creating the gimmick to avoid having to deal with the real budget problems during the election.  The Truth in Budget Act would also ban spending shifts (shifting spending obligations past July 1, to push the matter off in the next budget year) and “borrowing” from schools and other entities with the false claim of paying them back in the future.  These are truly gimmicks.

            But even other reforms could take place.  Why should the legislature do the budget in the odd years right after the election?  Why not move the budget year to the even years and give legislative members a year to learn about the state government before tacking it?  Other possibilities include changing the timing of the budget, or when the legislature is called into session.  Instead of the legislature coming into session in early January, then waiting for the governor’s budget and then the fiscal forecast, change the timing of one or all of these to create a process that makes more sense.

            The point here is that there are many ways to fix the budget process to avert future government shutdowns.  The proposals being floated now will do little to correct the process.  Broader structural changes, such as those described here, are needed and can work.

The Minnesota Budget Deal: Lipstick on a Pig

The deal that ended the government shutdown in Minnesota was terrible both in how it was negotiated and in what it produced. While initially all parties who negotiated it described it as bad, increasingly they are defending it, seeking to find beauty in its ugliness. Yet let’s call this effort what it is—putting lipstick on a pig!

A Bad Budget Process

The government is shutdown. Barricades block access to the capitol. The legislature is suspended. The press and public are barred from observing negotiations. The opposition is kept in the dark. Once a deal is struck and the legislature is allowed to meet the public is given little notice about their deliberations which take place in the dark of the night. Members are restricted in their debate; they have no time to read the bills. They are told to vote for the bills and ordered to be finished by dawn. Sound like politics in a dictatorship or former communist country? Welcome to Minnesota.

From the week before the shutdown to the ugly end last Wednesday, Minnesota was a model in anti-democratic politics that violated all accepted norms of transparency, openness, and accountability. The Republican leadership and Governor Mark Dayton insisted on secrecy to allow for candidate debate, demonstrating hostility to democracy, a contempt for process, and an indifference to open government. What they did is possibly also illegal, violating Minnesota Statutes §13.D, the Open Meetings Law. Were a local government to have done what the legislature and the governor did it would violate the law. The process was bad.

And A Bad Budget Deal

But did the ends justify the means? Did the bad process produce a good result? Except for the delirious who have to salvage something out of it, no one likes the deal struck. But there are two types of dislikes. One is where everyone has to give but the final product is good for the state. The other is where everyone gives and it is bad for the state. The deal struck is the latter.

The budget deal is bad for Minnesota. Nothing was done to address the long term structural deficit the state faces; it is more budget gimmicks. K-12 faces more shifts and possibly borrowing from schools that never gets repaid. Minnesota’s competitive economic edge has historically resided in its highly educated workforce. Yet the budget deal sacrifices long term welfare and economic good for the state, continuing a repeated raiding of education money that questions how much of a priority Minnesota really places on schools.

The tobacco settlement money gets robbed, diverting it from the stated purpose to address health costs and education surrounding smoking. The borrowing here off the tobacco money means increased debt for the state. Thus, Minnesota continues to borrow and shift debt to the future in ways similar to what federal government has done for years. It is no different than paying off one credit card with another. In 2013 Minnesota will be back to the same place it is now. Minnesota is effectively deficit spending but budget tricks and borrowing hide that reality.

In short, long term problems and needed investments are sacrificed to end the current shutdown crisis. The governor and the legislature shut Minnesota government down to reach this deal? Given how bad it was, maybe it would have been better to continue the shutdown.

The Leadership Crisis

But why such a bad deal? One can point to political gridlock, dueling claims of political mandates, ideological polarization, and a host of other issues. But ultimately the blame comes down to a lack of leadership among the three principals–Senate Majority Leader Amy Koch, Speaker of the House Kurt Zellers, and Governor Dayton.

But why the lack of leadership? One answer is that all are inexperienced. None of them had ever been responsible for moving a budget through the legislature. For Koch and Zellers, they are new leaders heading up caucuses for the first time in years in the majority, composed of many new members and rookie committee chairs. They were not up to the job. For Dayton, the lack of leadership was surprising given his resume. Yet his experience in executive positions is distant, his relationship with the DFL party has always been fragile, and this was his first time shepherding a budget through the legislature.

Terrific, Minnesota’s political leadership this year were rookies and JVs.

So here is the leadership deficit: If this is the best deal Dayton, Koch, and Zellers can negotiate, with a process that was undemocratic and possibly illegal, then that questions their ability to lead the state and their parties. The three should have never let Minnesota get to this place.

Bachmann,Pawlenty, and the Government Shutdown: As Minnesota Goes, so Goes the Nation

The parallels between the politics of the Minnesota governmental shutdown and the impasse at the federal level to extend the debt ceiling are compelling. But to understand both, one especially needs to look at the transformation of the Minnesota Republican Party, a party once representing a more moderate stance which is being increasingly remade in the image of Michelle Bachmann and the Tea Party. This change offers lessons about the prospects of a deal on the debt ceiling, the rival presidential campaigns of Minnesotans Michelle Bachmann and Tim Pawlenty, and the nature of American politics and the Republican Party in general.

On the surface the dispute in Minnesota between the Democratic Governor Mark Dayton and the Republican legislature had been over the state budget. Dayton wanted to spend $37 billion and erase the $5 billion deficit with some cuts that do not hurt the poor or education, and with tax increases on the wealthy. The GOP wanted to spend $34 billion and erase the deficit with cuts alone that seem to burden the poor, elderly, education, and local governments. But the budget is a proxy for a deeper disagreement over rival views of the government versus the market. The Republicans see government and taxes as bad, intruding upon the wisdom and functioning of markets. Let markets act and they will generate jobs prosperity, and solve the basic problems of society.

For Dayton, while market solutions and the private sector are the preferred places to produce jobs and make decisions, they recognize markets fail. Markets fail to address needs of equity. They produce inequities in wealth and income distribution, they fail to address core problems of education funding and disparities, they fail to address problems in infrastructure investment.

Yet the Republicans are not consistently anti-government. Many still find it necessary to hire police and enforce basic laws, and apparently to enact laws to prevent same-sex couples from marrying, ban stem-cell research, and outlaw abortion. The real difference between the Republicans and Dayton is over how much government and who it should favor. It is a debate of government versus the market, individual versus society, and secularism versus religion. These debates in Minnesota parallel what is happening at the national level in Congress and with the Republicans and President Obama. The fight over the debt ceiling is merely a proxy for a deeper divide over government.

The debate over 'why government' is ideological. Yet arising simultaneously are other phenomena aggravating the debate over 'why government'–the triumph of ideology over pragmatism and party polarization. Minnesota microcosms the nation. The ideological divide, especially for the Republicans, means all or nothing. By that, if one side is right the other must be wrong and therefore no compromise is possible. As Kurt Zellers, Minnesota's Republican speaker of the house, stated: “Whether it's a half a tax increase, a whole tax increase, or a quarter tax increase ... it's a bad idea.” Thus the equivocation of compromise to capitulation.

But demographics reinforce partisanship. Minnesota is more than a red and blue state–it is polka dotted. The partisan distribution of the state has a clear geographic pattern. The Democrats solidly have the Twin Cities and some of the other urban cores, the Republicans have the rest. The geographic partisanship is hard to correct with redistricting given residential patterns. This means the electoral forces that should drive elected officials to compromise do not exist. Instead, fully partisan areas simply reinforce the current ideological divide. In Minnesota there are only a handful of legislative seats that can really swing, the rest are solidly partisan. This creates little incentive to compromise. The same pattern exists in Congress, with less than a quarter of the seats really swing.

But political parties nationally and in Minnesota are more polarized than a generation or so ago. There is more ideological cohesion in the parties, especially for the Republicans. At one point the Minnesota Republican Party was moderate, selecting individuals such as former governor Arne Carlson and U.S. Senator David Durenburger. They represented a party still connected to the old Rockefeller wing. Neither are now welcome in their old party. They have been eclipsed by two new versions of the Republican Party. Version one, the Reagan remake, produced Tim Pawlenty and it was clearly more skeptical toward taxes and government, yet not uncompromisingly hostile. Arne Carlson raised taxes when needed and Pawlenty did it via user fees.

Yet Minnesota now has a new version of the Republican Party replacing the Reagan brand. Its roots go back to Barry Goldwater and it expresses frustration with the Reaganites who it viewed as too willing to compromise with Democrats. Reaganism lost nerve and principle, and it needed to complete what he started but did not finish. It is a party centrally guided by religious fundamentalism, constitutional originalism, and political purism. This is Tea Party Republicanism–the party of Michelle Bachmann in Minnesota and Sarah Palin nationally.

Pawlenty’s presidential bid is a casualty of this new Republicanism. He is either too moderate for it or he is forced to drive further to the right, aping messages his rival Bachmann already resonates. He is a dinosaur or Johnny-come-lately, a candidate without a clear narrative or constituency. But the other casualty is Minnesota state politics. The inability of Tea Party Republicans to compromise drove Minnesota into a shutdown, and it continues to dog its resolution even after Dayton gave into many of its demands. The Minnesota shutdown is the moment of opportunity for the Republicans–use the leverage to get it all. This too seems to be the mantra for the Republicans at the national level when it comes to the debt ceiling.

The lessons one learns from Minnesota is that the remaking of the Republican Party, reinforced by demographics, has produced a showdown with disastrous effects. This is the same phenomena operating at the national level regarding the debt ceiling. The results from Minnesota offer pessimistic predictions for the country.

Blink: How and Why Mark Dayton lost the Budget Battle

The loser always blinks first in a staring contest. Governor Mark Dayton blinked first.

The late Thursday afternoon announcement that Dayton and the Republican Legislative leadership had reached a tentative budget deal was a near capitulation by the governor. He failed to get his tax increases on the wealthy to fund his spending, instead agreeing to the final Republican offer to fund the budget with more accounting shifts and a borrowing off of the future tobacco settlement funds. Dayton gets to say he got more spending and maybe a bonding bill without social legislation that he opposes. But these victories were insignificant and irrelevant. What does the deal mean for Dayton, the Republicans, Minnesota, and perhaps the Democrats in Minnesota and at the national level?

What Dayton lost: It’s not just the budget battle

The budget battle was a contrast of dueling ideologies and claims to mandates. Dayton ran promising tax increases on the wealthy to fund new spending, erase the deficit, spend $1 billion on a bonding bill to put Minnesotans back to work, and change the direction of the state. The Republicans ran against taxes, new spending, and staying the course. They got more of what they wanted than Dayton.

Dayton consistently blinked. He cut back several times on his idea for tax increases. He kept reducing or hedging his electoral pledge on taxes, at each point further reducing the amount he wanted to tax. He even compromised on taxes, pleading instead for any type of revenue increase. At each juncture the Republicans said no, seeing weakness offers to compromise. In the last few days, despite claims his claims in court that the governor had inherent authority to address the budget shutdown, Dayton was never willing to use this claimed authority. Perhaps Dayton thinks to the general public this final giving in to the Republicans looks like he was the more responsible one willing to compromise in the best interests of the state, to Tony Sutton and the GOP it is a sign of weakness. A sign perhaps that in future negotiations Dayton will similarly give in.

Dayton’s decision to compromise potentially makes him irrelevant in the future. Think about it. Dayton gets a bonding bill. Politically who is helped by the bill? Not Dayton since the bill will long since be forgotten if he runs again in 2014. Instead, the Republicans benefit. They get funding for capital projects back in their districts that will help them with their re-election in 2012. The GOP does not need Dayton for social legislation. Gay marriage is already going to the voters as a constitutional amendment. The same can happen with abortion, stem cell research, and voter ID. The Republicans can end run Dayton at will in the future.

Moreover, Dayton just alienated the DFL and state workers. DFL legislators stood behind Dayton and he abandoned them, giving them little cover for 2012 and with their supporters. Among his base there is anger too that he gave up on them after they all supported him in 2010 and in the shutdown.

A bad deal for Minnesota

The budget deal is bad for Minnesota in many ways. Nothing was done to address the long term structural deficit the state faces; it is more budget gimmicks. It appears K-12 faces more shifts and possibly the borrowing from them never gets repaid. The tobacco settlement money gets raided, diverting it from the stated purpose to address health costs and education surrounding smoking. The borrowing here off the tobacco money means increased debt for the state. Thus, we continue to borrow and shift debt to the future in ways similar to what federal government has done for years. It is no different than paying off one credit card with another. In 2013 Minnesota will be back to the same place it is now. Minnesota is effectively deficit spending but budget tricks and future debt obligations hide that reality.

Perhaps Dayton is counting on 2012 producing DFL victories in the legislature that will change things, but do not bet on that.

But why did Dayton blink first?

The answer is simple: Dayton cared more about the government and Minnesota than did the Republicans. He was afraid of the lasting impact the shutdown would have on the state’ economy and government. Settle before more damage is done. The Republicans were willing to risk more–their negotiating strategy dovetailed with their views on government. So what if government is shutdown or crippled. They wanted to reduce government so hanging tough worked for them. For Dayton and the Democrats, they believe in government and what it does and the idea of supporting government by prolonging a shutdown ultimately proved too much for the governor.

So what does it all mean?

The Minnesota budget impasse and the shutdown was becoming a nationalized political issue much in the same way that the battle over collective bargaining became so in Wisconsin. Do Republicans in Congress read what happened in Minnesota as a sign that if they took hang tough Obama too will blink? Obama too cares more about government that Congressional Republicans. He faces a tough election in 2012 and he has already demonstrated willingness to compromise (the Bush tax cuts) to reach out to moderate or swing voters. Look too to see him blink before or more than the Republicans in Congress.

Afterthought

It was not the closing of many governmental services that drove Minnesotans to anger about the shutdown. The real crisis seemed to be when the racetracks and lottery closed, bars had difficulty getting beer, liquor, and cigarettes, beer distributors could not stock Minnesota shelves, and the baseball fans faced the prospect of baseball without beer. Perhaps life without gambling, booze, and smokes is what brokered the compromise. What would Minnesota be without the them?

Broken Politics: Ending the Shutdown and Fixing the State

Minnesota politics and its once pristine national reputation are broken. Politically, the government shutdown is only the mostly recent reminder of how decrepit and polarized it is. A near shutdown in 2001, partial in 2005, a botched unallotment in 2009, heated recounts in 2008 and 2010, and now 2011 all point to something beyond personalities and more structural in Minnesota. The faces have changed, yet the problems persist. The State’s reputation for the Minnesota Miracle, the land of Lake Wobegon, a state where government is clean and works, is shot. Even states like California, with persistent budget problems, or Wisconsin under Scott Walker, do not shut down but eventually manage to adopt budgets. We stand alone as a dysfunctional example of political polarization.

Divergent ideologies, combined with partisanship and rival claims of electoral mandates certainly feed the impasse between Dayton and the Republican legislative leadership. But the roots of this impasse go deeper. Demographic and electoral forces in Minnesota explain how ideology created the shutdown, offering clues both to short and long term solutions to ending this current crisis and perhaps addressing future ones.

Ending the Shutdown this Time

Dayton and the legislature appear not to have a sense of urgency in resolving the deadlock. This is the argument I made on Fox 9 News on July 6, with Heidi Collins. There are many political reasons for this lack of urgency.

Short term the shutdown does not end unless one side surrenders or both sides compromise. Surrender is difficult, no one wants to look like they have caved in. Conversely, with the two sides ensconced in their rival positions, compromise too looks like capitulation. Any good mediator will tell you that the way out of the current problem is something that allows both sides to claim victory–a perceived face-saving or win-win situation. Republicans cannot give on taxes and revenue unless they get something else their political base wants–new laws on social issues. Thus, not a surprise that prior to July 1, the Republicans seemed willing to give on some revenue, but in return for limits on stem cell research. The Republicans need to show something to their base if they are to compromise. Similarly, Dayton has been willing to give on taxes, but needs something else such as a global agreement on spending, to look like a victor and appease his base.

But while one waits for the compromise or capitulation to occur, one has to ask what forces will drive the two sides to this compromise? Clearly appeals to the public good have not worked for the last six months. Once the shutdown occurred, and the longer it goes, the short term sting from it decreases as life under partial government become normal. Moreover, the courts, the special master and even Dayton seem willing to let the judiciary order more spending, thereby reducing more pain. It appears no one trusts the political process to do the right thing.

What about an outside force to resolve the dispute? The Carlson-Mondale blue ribbon panel was stillborn from its inception, both because the Republicans do not trust Arnie Carlson who is not one of them anymore, and because adopting recommendations of a panel would imply deference to reason and rationality and not politics. The panel could have offered political cover to the two sides to compromise, but its logic appeals to moderates and swing voters, not the political bases who are driving the impasse. Perhaps the bases need to feel the pain of the shutdown? For the Republicans, something is necessary to make millionaires demand an end to the shutdown, something that costs them money. The same is true for the Democrats.

But perhaps a different outside force is needed to bring the parties together, but what? This is the structural issue.

Broken Politics and the Electoral Connection

One would have thought that political anger of voters would drive legislators and Dayton to the table. But that presupposes they and Dayton fear reelection. Certainly some legislators, maybe 30 or less, live in swing districts where this is an issue. But for the vast majority, this is not a concern. Minnesota is a red and blue state. The partisan distribution of the state has a clear geographic pattern. The DFL solidly have the Twin Cities and some of the other urban cores as well as St. Louis County, the Republicans the rest.

The geographic partisanship is hard to correct with redistricting given residential patterns. This means the electoral forces that should drive elected officials to compromise do not exist. Instead, fully partisan areas simply reinforce the current ideological divide. Longer term, then, one of the causes of the partisanship is the geographic red-blue divide in the state reinforced by districting. Addressing this problem is an imperative, but the solutions are hard to envision. In the short term, impetus for ending the shutdown may come from the legislators in the swing districts who are fearful of losing in November 2012.

Partisanship is also exacerbated by the caucus system. It rewards extremists on both sides who have the time and tenacity to outlast everyone else in seeking to influence the direction of the major parties. The caucus system nurtures zealots, ideologically opposed to the other side and often unwilling to compromise. Abolishing the caucus system, or at least seriously restructuring it to encourage more diversity within each party, should also be on the horizon.

At the gubernatorial level, not since Arnie Carlson’s reelection in 1994 has a governor been elected with a majority vote. Since then, the winners have been elected essentially by their political bases. The presence of a third party candidate has literally guaranteed minority governors not to be beholden to swing voters for their election. Adoption of ranked choice voting for statewide offices might resolve this, making governors indebted to more swing voters might force them to compromise.

Non-Solutions: It's not the gift ban law

Finally, two non-solutions. Some will call for the return to non-partisan legislative elections as Minnesota once had. Removing the party labels will not remove the underlying partisanship. Second, some will point to the state gift ban law, contending that because lobbyists can no longer wine and dine legislators, members of the two political parties no longer socialize. The gift ban law does not prevent legislators from socializing, it simply says special interests cannot buy influence through gifts. Blaming the gift ban law for the impasse is no different than a legislator stating: “I will not cooperate with the other side unless a lobbyist buys me a meal.” This sounds like a five year old threatening to hold his breath until he gets the toy he wants.

Overall, the government shutdown is sourced in partisanship rooted in demographic forces accentuated by an electoral system that makes compromise more difficult. It renders both a short and long term solution difficult, damaging the governability and reputation of Minnesota.

Minnesota Government Shutdown--What's Next?

Analysis on FOX9 News regarding what it might take to get the two sides to come to the table and hammer out a deal.

Professor Talks Shutdown after Prediction: MyFoxTWINCITIES.com

Minnesota’s Budget Battle: Assessing Gearin’s Decision

“It’s time you did your job.” Essentially this is what Judge Gearin stated today in her ruling that only core functions will receive core mandated funding. In reaching that decision she took a minimal view of the role of the courts in resolving the budget dispute, clearly placing the responsibility on the governor and the Republican legislative leadership to reach agreement. But how do we read Gearin’s order, as well as the one yesterday, ordering funding for the state court system, in terms of what it means for Minnesota and the different players in budget battle?

Comparing 2005 and 2011

In 2005, seven of the budget bills did pass the legislature and were signed by the governor. They excluded K-12, Health and Human Services (HHS), and transportation. Those three bills accounted for about 70-75% of the state budget. Thus, the seven bills that passed before the shutdown accounted for about 25-30% of the state budget. Once you throw in the judge's order for temporary funding you probably had 90% of the state budget addressed. For the most part most of the functions of the state were covered.

This year one of ten bills was passed and signed into law. The one bill signed in to law, the agriculture bill, accounts for about 1/2 of 1% of the state budget. Thus, 99%+ of the budget was not adopted or agreed to by the governor and legislature. As of yesterday with the court decision to fund the courts, approximately another 3-4% of the state budget is addressed. This still leaves about 95% not covered.

Judge Gearin’s decision is minimal. It covers core state constitutional functions, programs mandated by federal law, and some additional funding for health care and to keep the animals at the zoo fed and safe. Additionally, funding to school districts and local governments, to the extent already obligated, must be paid. Gearin’s order is largely consistent with what I argued in a Minnpost piece from June 9, 2011 .

Given Gearin’s order, what percentage of the state budget will be addressed by it? It is difficult to ascertain from the order how much of K-12 gets funded. The same is true regarding the state HHS funding. These are the two largest pieces of the budget and constitute about 70% of the budget. Estimates are 80% of K-12 are covered. If K-12 is 40% of the state budget then about 32% of the budget is covered here. In terms of Health and Human Services, assume also about 3/4 covered. If HHS is 30% of the state budget then that is about 23% of the state budget. Add in local government aid (LGA) which is about 9% of the state budget. Most of that is covered by Gearin's order. Assume 90% is covered and that is another 8% of the budget. Finally add to that funding for core administration of the executive branch and public safety about another 7%. In total Gearin's order mandates funding for about 70% of the state budget., Add to that the current 5% covered already with the agriculture bill and the funding for the courts, then maybe 75% of the state budget has been addressed.

The Gearin order also suggests that most of the 36,000 state workers are out of work on July 1. An estimate is 23,000 lose their jobs. The real issue becomes how many state workers are needed to work the prisons, provide medical care, and perform core public safety and other functions. No question the Minnesota unemployment rate takes a major hit and goes up dramatically on July 1.

Legal Analysis

There were legal winners and losers in the Gearin decision, as well as in the Tuesday one on court funding issued by Judge Christopherson.

Governor Dayton appears to be a legal winner in that Gearin sided with him on a minimalist interpretation of what will be funded. However, Dayton did not win everything. He did not win the mediation and he also did not win in his argument that the case was not ripe for review and that the court should not issue an order. The Court implicitly rejected Dayton’s argument that he had inherent executive authority to act and therefore the Court should not.

Conversely, Attorney General Swanson and many organizations seeking to have their definition of core state function funded lost. Horse racing, continuing construction projects, and keeping zoos open, while nice, are not essential. Gearin offered reasonable legal arguments, seeking to balance Article XI of the Minnesota Constitution (No money shall be paid out of the treasury of this state except in pursuance of an appropriation by law”) with the Federal Constitution’s Supremacy clause with Article III of the Minnesota Constitution (separation of powers). Essentially she said yes, appropriates and the budget need to be handled by the legislature and the governor as required by Articles III and XI, but these clauses must also be read in light of the requirements of the Supremacy Clause and separation of powers so as not to threaten the constitutional duties of the executive branch. While Swanson made good legal arguments, Gearin construed her powers narrowly in order to respect the powers of the other branches.

The House and Senate Republicans lost legally similarly to the Attorney General. Yet the biggest losers were the four Republican senators who argued first to have the court order the governor to call a special session and then to declare that Article XI precludes any judicial orders to maintain temporary funding. The core of their argument was a wooden reading of Article XI that seemed to assume only the legislature can order funding “by law.” Gearin rejected that argument by appealing to the Supremacy clause and by asserting that respect for separation of powers required and permitted court action.

Judge Christopherson also rejected this reading of Article XI. He too appealed to the U.S. Constitution and the State Constitution to make his claims. But also in a section of his decision entitled “reconciliation” he contended that this clause has to be read in light of other clauses of the State Constitution and not as stand alone. It was necessary to do that to give meaning to the entire Minnesota Constitution and not just part of it. More or less, this was again the argument I made in my Minnpost piece. In short, the a core legal argument that Republicans have been using in battles or court-ordered funding for abortion and in other budget battles, was rejected.

Last Thoughts: Political Winners and Losers

Simple: Dayton wins the political-legal battle and has a strategic advantage over the Republican legislature. Dayton has new leverage to use in negotiations, with voter ire taken out in 2012.

Of course, Minnesotans lose here. A second shutdown in six years, a loss of services, and embarrassment nationally as a state that cannot get its work done.

Constitutional Chicken: Litigating the Minnesota Shutdown

As kids we played chicken all the time, daring someone to do x or cross over a line. The same game of chicken is being played now with the Minnesota budget and economy. First it was between the Governor and the Republican legislature during session, now in Court and the participants have expanded to include the Attorney General, interest groups, and the courts themselves.

At Thursday’s hearing in Ramsey County (which I attended) Judge Gearin closed the day by indicating that all of the sides were playing chicken with the state. And numerous times she admonished that the stakes were high, the problems serious, and that no one should expect her to bail them out. In many ways, her threat too was one of chicken. Do not expect her to blink. See my first thoughts on the court proceeding on Fox 9 News from Thursday, June 24, 2011.

The Stakes

There are numerous agendas at play here. Of course, there is the agenda to secure a budget by July 1, to avert a shutdown. There is also a broader agenda between contending and philosophical views on state spending and what role we view for the government in our society. But there are also significant other economic, political, and legal or separation of powers issues here.

Economic

The economic stakes are significant. I discuss them on Kare 11 News on Thursday, June 23, 2011.

According to the Bureau of Labor Statistics the May unemployment rate in Minnesota was 6.6%. This is based on a state workforce of 2,977,400, with total employed being 2,781,000 and unemployed 196,300. Assume all 36,000 state workers given notice are furloughed. Using the May figures, this pushes the total unemployed to 233,300, yielding an unemployment rate of 7.8%. The economic consequences of the shutdown are apparent–nearly a 20% increase in the unemployment rate almost immediately.

Laying off state workers and cutting state services is only the beginning. There is also the multiplier effect. By that, for every dollar of state spending, it produces more down the line. Paying public employees means they will additionally purchase food or consume items, thereby resulting in more spending across the economy. Now some market fundamentalists claim the government adds no value and produces no multiplier. Yet they are often the same ones who claim that tax cuts for the wealthy trickle down to the poor.

Mainstream economists who have studied government spending verify that multiplier effects exist. University of California San Diego Professor Valerie Ramey is considered the leading expert. She indicates that the historical average for the United States government is 1.4. For every government dollar the ripple effect across the economy is $1.40. Money spent early in a recession has a larger multiplier than in a recovery. The multiplier effect varies with consumption. Government spending placed in the wallets of those who will consumer more of it will produce greater multipliers than those who do not. This is the concept of marginal propensity to consume.

Minnesota’s current gross state product (GSP) is about $275 billion. One estimate from the United States government is that Minnesota spending is $20 billion per year, or about 7% of the GSP. Assume a State multiplier of 1.4x; then total annual state spending produces additional effects equal to another $8 billion. Suddenly state spending accounts for over 10% of the GSP.

The shutdown will clearly have dramatic effects on the economy and unemployment rate beyond laying off state workers. The State recently informed 572,000 Minnesotans on cash welfare, food support and health care programs; 7,000 families receiving adoption assistance payments, and 26,000 families receiving child-care subsidies that they may not receive help after July 1. All these are individuals who will most likely consumer most money they receive from the government, thereby producing a higher multiplier effect. But the multiplier does not stop there.

Many private vendors and contractors doing business with the state–including those from the private and non-profit sectors–may not get paid and would stop work. Local governments too, facing uncertainly and a halt to payments, might also be forced to layoff. It is not inconceivable to see a partial or total shutdown of the state pushing the unemployment rate to over 8%.

Political

The political stakes here are significant. The GOP Legislature and the Governor are in a battle over who controls the state and the political agenda. But both are also battling with their bases.

If the GOP blink and compromise they have a better chance of winning re-election in 2012. But if they do they alienate their political base and Tony Sutton, facing challenges from the right. They are trapped by their own rhetoric.

Dayton so far has played it well with the cut spending and raise some taxes and then agreeing to cut more and reduce some taxes. Public opinion still supports him but recent polls show support for him is down to about 43%–approximately his vote last November. He is down to base politics in terms of support for his leadership. But support for the legislature is in the 25% range–even worse. Dayton can continue to use the 4/2 strategy to his advantage. He is up for election in 2014, the GOP next year 2012. An angered public takes it out on them first.

If Dayton forces the GOP to crumble because of public opinion and fears of 2012, he breaks the GOP’s back. He does that by pushing Tony Sutton and the TEA Party wing to challenge the already conservative state GOP, forcing a war within the party.

Dayton has to win this battle to retain support of his base, he appears to have lost support from all but that. If he gives in anymore he damages support to his core constituency. Thus the reasons or why Dayton added medical payments at the last minute to his list of core functions to be funded–better not alienate the grandma in the nursing home vote.

Legal

The legal battle here are amazing and reveal contrasting views of the State Constitution and political power.

AG Swanson has produced the best legal brief and arguments that build on past state law. She has argued for a more expansive notion of core functions, using her consumer advocate role to represent the people. Her brief argues for continued funding of federal mandates, the constitutional obligations, statutory requirements, and protection of vulnerable people in the event of a shutdown. This would result in a soft shutdown, less onerous than Dayton.

Dayton’s legal arguments are most fascinating. He first asks that Judge Gearin order mediation. She cannot do that since the legislature is not a named party and therefore cannot be brought into mediation. There also are constitutional problems (separation of powers) in issuing this order. not issue any orders until after July 1. Dayton’s second legal argument is that the issue is not ripe. He also opposes allowing the joining of additional parties, contending that there is no real dispute here yet. His attorney argues that once July 1, hits, then maybe one can go to Court to order certain action but until then there is no real legal issue. But more importantly, Dayton has suggested that he has inherent constitutional authority as governor to act on July 1, to keep core state functions going! This is an amazing argument based on separation of powers and the governor’s veto. His arguments remind me of Nixon during Watergate, Bush after 9/11, and Pawlenty when he acted to use unallotment to end the budget impasse. This is a significant assertion of authority. Dayton’s arguments for the funding of core functions by the court is far less than Swanson, but the legal implications of his arguments more extensive.

Now the GOP. First the four GOP senators who cannot shoot straight. First they go to the Supreme Court asking a halt to the Ramsey County proceeding. The basis of their claim is that they did not think they could win in district court so therefore they wanted to go to the Supremes. (They also mentioned in their brief that they did not want the court to intervene since it would change the balance of power in a political dispute). The Supreme Court correctly told them to go to district court. They reminded them they would take original jurisdiction only in emergencies and this was not one. Overall they instructed them on Civil Procedure and Law School 101–file complaints in the proper court and don’t venue shop.

Then on Thursday the same gang of four ask the judge to order Dayton to convene a special session. They somehow forgot the plain language of the state constitution textually commits this decision to the governor. Somehow all the language about the political question doctrine, separation of powers, and constitutional interpretation they developed in their Supreme Court brief was forgotten. This is also the gang that takes what they think is a literal reading of Article 11 of the State Constitution in contending (wrongly) that only the legislature can appropriate funds. Obviously they have forgotten about issues such as the Supremacy Clause and do not understand the difference between the state and federal constitution.

Then there is the House and Senate GOP. Their main legal strategy seemed to be to agree with Swanson and allow for more of the government to be run as core functions. If Swanson wins then the GOP get the minimal government they want.

Finally, the courts are a major player here. They too have filed to make sure they are funded. And then of course Gearin. She made clear her disgust with the whole process, threatening minimal action that will please no one.

Overall, everyone is playing chicken. But what are the real stakes here? Former AG Mike Hatch stole the show. He indicated he was representing a woman who received state medical assistance to breath. He pointed out that she wanted to continue to do so after July 1. That summed it up.

Closing Thought

How long the shut down? Submit your answers to my blog. I do not know how long but am certain it better not go to State Fair time. Imagine 1.6 million angry Minnesotans talking to elected officials at the Fair.

Do the Math: The Costs of the Government Shutdown (And how to avoid them in the future)

This originally appeared as an opinion piece on June 10, 2011 in Politics in Minnesota.

The Minnesota state government shutdown looms larger and larger. But what is the cost of the shutdown? Some may think that closing down Minnesota government, partially or totally, however briefly, might yield savings. For those who believe government taxes and spending hurt private investment, the shutdown should produce a bonanza for private economic growth. Yet with public employees furloughed and their salaries and benefits not paid, programs not implemented, and projects not funded, all of this should lead to significant savings to the state, especially if it produces broader cuts and reductions in state and local spending.

But savings as a result of a shutdown are illusionary, outweighed by the costs. While ideally it would be best for the governor and the legislature to reach agreement, there is a serious need to consider adopting an alternative proposal to prevent future threats or real shutdowns–an automatic continuing resolution that funds and taxes the state at the same level of the previous biennium if no agreement is reached by the end of regular session.

There are savings associated with the shutdown. They include not having to pay wages and benefits to public employees. There are also operating costs as a result of not having to delivery certain programs. These could be savings in terms of health care expenditures to individuals for programs and services. The question is whether costs due to a shutdown are more or less than the savings?

How does one calculate the cost of a real or threatened shutdown? Economists use the term avoidable costs to refer to expenses that would not have to be incurred were some transaction or event not to occur. There are certain costs incurred with the shutdown that could be avoided if a budget deal were secured or no interruption in funding occurred.

What are avoidable costs? There are a host of costs incurred as a result of a shutdown that could be avoided. First, there are the costs associated with planning for the shutdown and then the start up of government functions. This also includes time spent by state agencies and workers on planning for the shutdown that is not spent on doing regular work. One cannot simply close and lock the state door at 5 PM–there must be an actual plan on how to do this, with this planning diverting state resources away from regular service delivery. These planning costs occur even if the actual shutdown does not occur. Second, there are the actual costs of shutting down the government such as laying off people, terminating or halting contracts.

Third, there are uncertainty costs. These include costs to state and local governments and school districts incurred as a result of not knowing how much money they will have for the next two years. A local government or school district not knowing know much money it will have may refrain or delay hiring teachers or planning programs. Uncertainty means creating contingency plans or otherwise delaying making some choices, thereby costing more money.

In addition to planning for the shutdown and restart, there are actual costs of starting up government functions such as rehiring individuals. It will cost money to notify, rehire, resume benefits, notify vendors, and begin implementing programs.

While government is shutdown, the State of Minnesota potentially loses revenue. This loss of state revenue includes delayed payments and tax collections and park fees. There are also litigation costs such as asking for temporary funding in court or in other litigation surrounding a partial shut down.

Finally, two last costs. There is a loss of personal income and out of pocket expenses associated with public employees being out of work. Many of these workers will have to pay for medical benefits out of their pocket or assume other expenses. And there is also a loss of state income and consumption as a result of public employees planning or actually being out of work. This loss of income includes losses to private vendors not being paid on contracts, lost business due to parks being closed, and other losses of income resulting in the state not operating. As more people are out of work, this hurts Minnesota’s economy.

Adding it up, the total costs associated with the shutdown exceed total savings. Moreover, many of the savings disappear once workers are rehired and programs have to address backlogs in services undelivered during the shutdown.

The point of this exercise here is simple: Taxpayers are going to spend more as a result of a government shutdown because Dayton and the Republicans could not agree. For conservatives who rant about government spending and taxes, their intransigence over tax increases and their unwillingness to compromise means taxpayers pay more.

Given the costs of a real or potential shutdown, can something be done? One solution is to adopt a variation of what they do in Wisconsin. In that state an automatic continuing resolution funds state programs if the legislature and the governor fail to reach agreement on the budget on time. Here in Minnesota given that there was a real shutdown in 2005, an almost shutdown in 2001, and many other years where special sessions were needed to reach agreement, automatically carrying over into the new biennium the previous budget and taxes solves many problems. It certainly does not address all budget issues and it is inferior to reaching agreements, but it is one way to avoid the costs associated with the threatened or actual shutdown.

Minnesota judges can order temporary spending to prevent a government shutdown

Today's blog post was on Minnpost.com on June 9, 2011.

May a Minnesota judge order the spending of tax dollars to fund essential state functions if the state Legislature and Gov. Mark Dayton do not reach a budget agreement by July 1? This is a legal question that will be asked in the coming days as it is anticipated that Attorney General Lori Swanson will approach a Ramsey County District Court judge with a court order for just this purpose. Yet some contend the court lacks this authority and it cannot do this. They are wrong.

The core of their argument rests on three claims. First they point to Article XI, section one of the Minnesota Constitution, which states: "No money shall be paid out of the treasury of this state except in pursuance of an appropriation by law." Second, they argue that the failure to reach a budget deal is a nonjusticiable "political question" that should be resolved by the political process. Third, they contend separation of powers precludes the courts from addressing budgetary matters. These arguments all rest upon an incorrect understanding of the Minnesota courts and the state constitution.

The central error here is drawing a parallel between the Minnesota and the federal courts. The argument is that the U.S. Constitution and its separation of powers preclude federal courts from intervening in political questions and from ordering spending. Besides this claim being wrong on the national level, there is a major difference between the federal and state courts. Whatever limits there are on federal courts, they do not necessarily apply to the state judiciary. State courts, including those in Minnesota, have unique powers compared to those found at the federal level. They are governed by state constitutions that allocate powers to the three branches of government that often differ from those found at the national level.

Across the country state courts have been given powers under their constitutions to issue advisory opinions, to order spending to achieve adequate school funding, serve on redistricting commissions, and to enforce unique rights not found at the federal level. The same is true in Minnesota. There is case law supporting Minnesota courts ordering funding to ensure that the state judiciary can operate. What if the Legislature and the governor disliked a Minnesota Supreme Court decision and decided to retaliate by not funding the judiciary? Such a move would violate the state constitutional separation of powers clause (Article III) and Article VI, which invests judicial power in the Minnesota Courts. At the very least, separation of powers demands funding for the courts, regarding of whether it was appropriated according to whatever Article XI states.

Reading in light of other clauses

A central canon of statutory and constitutional interpretation is to read words to avoid absurd results or to render some language superfluous. A reading of Article XI that states money can only be appropriated if approved by the Legislature would produce odd results that render Article VI and Article III meaningless. Article XI must be read in light of other constitutional clauses.

Moreover, a so-called strict constructionist reading of Article XI and separation of powers must be understood within the context of the Minnesota and not just the U.S. Constitution. Article III of the Minnesota Constitution has a different history and meaning from federal separation of powers, thereby again suggesting that Article XI appropriation authority must be read differently from what is found at the federal level.

Because Minnesota courts follow different rules from the federal courts, claims of justiciability and separation of powers that appeal to federal analogies are inapt. What might be considered a political question or otherwise textually committed to Congress or the president under the U.S. Constitution might not be true in Minnesota.

An additional duty

But in addition to the Minnesota courts having different powers from those found at the federal level, they also have an additional duty beyond interpreting state constitutional provisions and the law. They are expected to enforce the U.S. Constitution and federal law. When state and federal constitutions and law conflict, the federal wins. Thus, notwithstanding any state constitutional provision, a state court might be required to order the funding of any federally mandated program, even if the no budget deal was reached. Thus, whatever Article XI of the Minnesota Constitution might mandate is overridden by federal law.

In sum, those who argue that the Minnesota courts cannot order funding for essential governmental functions are asserting a wooden and formal reading of the law. The uniqueness of state court authority, constitutional provisions, and the need to enforce federal law give Minnesota courts the power to act. This was true in 2001 and 2005 when state courts declared they had the authority to act, and the same should be true in 2011 if called upon to so rule.

A Rock and a Hard Place: Why the Republican Party of Minnesota is a Victim of its Own Rhetoric

If ever a party were trapped by its political rhetoric it is the Republican Party of Minnesota (RPM). With two weeks to go before the end of the regular legislative session it is more than ever clear that there will be no budget deal by then, forcing a special session and perhaps running a risk of a partial government shutdown on July 1.

Right now it does not look like there is a common ground or room for compromise–mostly because of the GOP–and the Republicans stand to be the biggest loser if there is a shutdown, so long as the DFL can play it right. Fortunately for the RPM, the DFL is probably unable to set the political hook.

An Easy Prediction
In January as the legislative session began I argued that the issue was not whether there would be a special session but whether a deal was possible before July 1. Given that more often than not in the last 15 years the Minnesota Legislature and the governor have been unable to arrive at a budget during regular session, predicting a special session was easy. Moreover, given the respective views of the governor to spend $37 billion and balance the budget and address the $5 billion deficit with cuts and tax increases, versus the RPM desire to spend $34 billion and balance with cuts alone, finding room for compromise by May 24, seemed unlikely.

Hardening Positions
Since January the positions of Dayton and the Republican legislature have hardened even more, with them turning more firm in the last few weeks.

First, Tony Sutton, RPM Party Chair, sent a letter to the Republican legislators urging them to remain firm on no tax increases. Second, Geoff Michel has stated that the Republicans have already compromised enough in agreeing to spend $34 billion or $3 billion more than they wanted. (Yet he did not indicate how with that compromise the Republicans planned to pay for that extra spending). Third, last week the Republicans rejected racino, sending a signal that they are opposed to any revenue increases. Fourth, the Republican budget bills have delivered on their promise–significant cuts to cities, education, and the poor while not authorizing tax or revenue increases.) Whether the numbers add up here to balance the budget is another question.)

Conversely, Dayton has made it clear that he does not support these cuts. He also stated last week he would prefer a special session rather than sign these bills.

The lines have been drawn in the sand. There seems to be no room or avenue for compromise. Both sides are playing chicken, waiting for the other side to blink or give in. As of now, there seems to be no middle ground for compromise, rendering deadlock and partial shutdown a possibility.

Who is to blame?: The Republicans
Who is to blame for the impasse? It would be easy to blame both sides, but this is one time where the Republicans bare the majority of the responsibility.

For the Republicans, compromise on taxes and revenues is tantamount to surrender. Opposition to tax increases has become an article of faith for Republicans in power. They and the base of their party appear to view taxes as a line in the sand over which they do not compromise. To agree to increase taxes is a sell out and will cost you dearly with the base and in the party.

Literally, it is impossible given the special interests and entities that make up the RPM for them to give on taxes. Tony Sutton’s letter to the Republican Legislators makes that clear, and the recent hiring of Craig Westover for the RPM Party reinforces the sense that this is not the party of Arnie Carlson and David Durenburger. It is not a party about responsible pragmatic governance, but about an ideological opposition to taxes, whatever the cost to the public.

The Republican Rock and Hard Place
So here is the problem for the Republicans–they look unreasonable but cannot compromise because of their base and they face potential voter wrath in 2012 if the budget crashes and there is a government shutdown.

Dayton has played it well. His message of tax increases and some budget cuts resonates with the public. Polls support this approach and the combination of cuts and taxes sounds reasonable to most. Moreover, when deficit moved from $6 to $5 billion Dayton eliminated his onetime user fee as a token of compromise. Dayton has made it sound like he is willing to give, including considering racino and the Tom Horner type proposal that would substitute sales taxes for income taxes.

The RPM is trapped by conflicting goals. Its base and ideology says no taxes increases yet to go through with the pledge risks massive and unpopular cuts to education and health programs. It also risks a government shutdown which is not going to be popular.

Yet the RPM wants to retain control of the legislature and remain the in the majority the day after the 2012 elections. To secure that goal it has to win over swing voters, the majority of whom do not support their message. In the 2010 governor’s race, 56% of the voters supported Dayton or Horner for governor, both candidates who favored the tax increases and some cuts approach to balance the budget. These two candidates also captured the vast majority of the swing voters in the state.

If there is a partial government shutdown or if the cuts are unpopular, the Republicans stand to lose the most in 2012 since the entire legislature is up for election and the majority party generally takes the brunt of the voters’ anger. This is what happened nationally in 2006, 2008, and 2010. In all three elections the mantra or political narrative of “change" was popular. Look to see the same in 2012.

The RPM has every incentive to compromise and maintain their majority status. Yet they cannot do that or else face the anger of the Tea Party voters and their conservative fiscal base which opposes compromise.

Thus the rock and the hard place–compromise to keep majority status and face the anger of the base, or appease the base and lose the swing voters and the majority status.

The 2012 Strategy

This is what DFLers are hoping for–a RPM meltdown. They are hoping the Republicans meltdown and with 2012 potentially a better year for Democrats than 2010, they get back their majority status. Yet this requires the DFL to set the political hook and message correctly on this. One cannot bet on this.

One also cannot bet the DFL will not blink in the budget negotiations. This is what the Republicans are banking on.

Finally, in anticipating a tough 2012 year, the GOP is resorting to the placement of constitutional amendments on the ballot to reprise 2004 and motivate their base and offset a DFL year. Yet 2012 is not 2004. The ban on same-sex marriage may backfire and inspire progressives and the young to vote, and pushing social issues, while important to the base, may not be popular with the general public, thereby again alienating the swing voter.

The Republican Party of Minnesota is trapped by its own special interests and rhetoric, rendering 2011 compromise a dirty word and 2012 a possible loss of majority status.