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Gov. Tim Walz and Lt. Gov. Peggy Flanagan spoke Wednesday, May 8, 2019, at an event highlighting efforts to keep drinking water safe. Dana Ferguson / Forum News Service

Will they take the bait? Spending talks in limbo but deal could come at fishing opener

ST. PAUL — Budget negotiation talks remained in limbo Wednesday, May 8, days after Minnesota legislative leaders and the governor deadlocked over plans to raise taxes to fund boosts to education, road repairs and other state government spending.

But two key leaders said they'd be willing to talk shop Saturday, May 11, at the Governor's Fishing Opener. The event has traditionally offered a reprieve from budget talks for legislative leaders and the governor as they cast their first lines of the fishing season together.

“I’m open to talking about it on the boat for sure,” Senate Majority Leader Paul Gazelka, R-Nisswa, said. “It certainly is a potential that we haven’t had and we’re also close to the end where something could actually happen there.”

Gazelka, DFL Gov. Tim Walz, and House Speaker Melissa Hortman, DFL-Brooklyn Park, are set to sail together Saturday morning in Albert Lea. And they each hope they can get the others to take the bait on their two-year state spending proposal.

“We’ll be out on that boat, talking, getting it done,” Walz told reporters on Wednesday.

The fishing outing follows days of talks about where each leader stands on what the state should spend over the next two years and how much taxpayers should be on the hook to pay for those services.

Democrats have proposed keeping a 2% tax on medical providers and boosting the tax on gasoline to fund road and bridge repairs. Those tax increases and others would fund funding boosts to schools, health care programs and community prosperity efforts.

Republicans, by contrast, said taxes are stiff enough and the state should fund its priorities with the dollars it has.

Budget talks abruptly ended on Monday night, May 6, when Republicans said they'd boost their planned spending to E-12 education by around 12% percent if Democrats dropped their proposed gas tax hike and let the provider tax expire.

The offer came in response to pitches from Walz and Hortman to cut $200 million and $664 million from their respective plans in exchange for the Senate boosting its spending and agreeing to keep a tax on medical providers and phase in a tax increase on gasoline.

The trio left the talks in disagreement and each said it expected the others to come back to them with a better offer.

“We’re waiting for the response to that, one that’s realistic,” Walz said Wednesday morning.

Minnesota Management and Budget Commissioner Myron Frans said the Republican offer would add $25 million to education spending and could cause problems for their bottom line, which he projects would be $61 million short of proposed revenues.

Gazelka said he expected the Democrats to come back to him with a counter-offer that comes closer to GOP lawmakers' plans. And he said they had the burden of proving that proposed tax hikes were needed.

If neither side budges, they'll have Saturday to discuss their plans. And they're set to meet again Sunday evening if necessary. Lawmakers have a May 20 deadline to write a balanced budget or risk forcing a special session. And if they can't reach an agreement by July 1, the state government could shut down.

Gazelka, Hortman and Walz said they were still hopeful they could reach a deal by early next week. In the meantime, conference committees have begun meetings at the Capitol to iron out differences between Senate and House spending proposals.

While some have been able to talk through policy changes laid out in their bills, there are limits to what the panels can accomplish without targets for how much they'll be able to spend over the next two years, House Tax Chairman Paul Marquart, DFL-Dilworth, said. Marquart said if legislative leaders can strike a deal on how much to spend before next Wednesday, committee chairs will be able to make their deadlines.

"That will give us time," Marquart said.

Gazelka also said he's aiming for a negotiation to be completed early next week.

“The last number of times it’s been Friday, Saturday, Sunday and it’s almost guaranteed then that we’re going to have some sort of special session," Gazelka said. "So we’re still communicating, we still all want to get there."

Forum News Service reporter Don Davis contributed to this report.