April 20, 2017

The Honorable Mark Dayton

Governor of Minnesota
116 Veterans Services Building
20 W 12th Street
St. Paul, MN 55155

via electronic delivery

Dear Governor Dayton:

Thank you for your letter on Monday outlining your perspective on a successful end of session. We
share your goal of passing a budget comprised of the best ideas from you, senators, and
representatives that serves all Minnesotans.

As we have said regularly, we intend for the budget to be negotiated by policy experts in a
transparent, open manner. To that end, both the Senate and the House appointed members to our
Conference Committees Tuesday and each of those Conference Committees includes DFL
members. We appreciate your providing Commissioners letters regarding specific budget bills. Our
Conference Committee Chairs are reviewing them now. But we also invite and expect your
Commissioners to bring their subject-matter knowledge to Conference Committees, where we hope
they are authorized to negotiate on your behalf.

In your March 13, 2017 letter, you laid out a clear timeline which we have met. It is now incumbent
upon the Senate, House and your office to establish joint Conference Committee targets by next
Friday.

Thank you for setting deadlines that will require you to pass your omnibus budget bills out
of committee by March 31, 2017. Those deadlines provide ample time to negotiate biennial
budget bills to which we can all agree. To that end, I request that we set joint conference
committee targets no later than Friday, April 28, 2017. That is two weeks after the
Legislature returns from the spring recess and leaves more than three weeks to negotiate the
details of the omnibus budget bills before your deadline to adjourn.

In addition to staying on track timewise, we also want to address some points of contention in our
budgets thus far.

Base Levels of Funding. In your letter from Monday you state that at a minimum, Base Levels of
funding should be retained for each agency, suggesting that not a single dollar of savings can be
found within your administration. We respectfully disagree. Our committees have closely examined
how state government operates and have taken a prescriptive approach to both reductions and
increases in spending. Minnesotans hard work has resulted in a significant surplus, and we can all
agree it remains our responsibility to use tax dollars wisely regardless of the states financial
situation. Furthermore, Base Levels of funding are simply a tool for planning they are not
authorized appropriations. If lawmakers fail to approve a budget every two years, state operations
effectively cease.

Voluntary Pre-K. The 74 school districts currently participating in your Voluntary Pre-
Kindergarten Pilot (VPK) will continue to receive that funding in our Education Finance Budget
(House File 890). Our approach simply cuts the strings attached to those dollars to provide local
teachers and parents more flexibility. Not one school currently receiving VPK funding will see those
dollars zeroed out. As we have debated heavily for the past several years, House Republicans
believe the best approach is targeting early learning scholarships so three and four year olds from
low-income families have the opportunity to get a great start. Overall, our budget provides $300
million in early learning initiatives including scholarships and school readiness aid.

Tax Relief. With a $1.65 billion budget surplus this biennium, our top priority is allowing middle-
class Minnesotans to share in that prosperity by giving them their money back. The single-largest
component of our $1.35 billion tax relief package is relief for nearly 284,000 low-income senior
citizens by increasing the income limit thresholds for the taxation of social security income. Our bill
prioritizes 77,500 college students through a first-in-the-nation tax credit for student loan payments
and provides property tax relief for 240,000 farmers by reducing their disproportionate share of
school district debt service. These are real, hardworking Minnesotans who have earned the relief
found in our Tax Relief Bill (House File 4). In contrast, we have concerns that you propose
reinstating a regressive tax on health care. Your budget frees up General Fund spending by paying
for Medical Assistance out of the Health Care Access Fund ($716 million in FY18-19 and $1.147
billion in FY 20-21) and repealing the sick tax sunset to raise $748 million in FY20-21 in revenue.
With this repeal, you are reinstating a tax that will only increase the cost of health care for the
working poor.

We recognize all three of our budgets take different approaches, but we are optimistic that if we all
come to the table we can resolve those differences within the confines of our joint targets prior to
signing Conference Committee Reports. The Legislature has worked quickly to pass our budgets
historically early this session leaving all of us five weeks to work together. We do not want to send
you budget bills to veto. Now is the time for you to be engaged so important work does not get
compounded in the last few days of session.

We look forward to meeting with you this morning to discuss joint targets.

Sincerely,

Speaker of the House

Minnesota House of Representatives

Majority Leader
Minnesota House of Representatives