Minnesota Weekly Legislative Update: 01/30/2015

The release of the Governor’s transportation funding package on Monday and Operations Budget on Tuesday dominated conversations at the Capitol this week. After the release, committees began to hear budget details and explanations from respective state agencies.

Governor’s Budget

Governor Dayton’s $42 billion budget focused heavily on education funding changes. His transportation proposal is projected to spend $11 billion over the next decade. The budget proposal also features $3.4 billion in tax credits. Legislators will spend the coming weeks picking apart sections of the Governor’s proposal and adding their own proposals before negotiating a final budget package later in session.

Transportation
The makeup of Governor Dayton's transportation proposal includes funding for the repair of more than 2,200 miles of road and 330 bridges, as well as local infrastructure projects. While much of the funding for other parts of the Governor's budget stems from the state's $1 billion-plus surplus, this transportation plan would be financed by an additional 6.5 percent tax on wholesale gas prices, with $2.50 per gallon set as the “floor” for the tax. Additionally, license tab fees would be raised, and a separate 0.5 percent sales tax increase in the metro area would help to pay for transit improvements. The proposed wholesale gas tax is projected to raise $4.4 billion dollars over the next 10 years.

Education
The Governor’s education budget made up nearly 50 percent of the entire budget proposal ($17 billion), with much of the new funds targeted at the youngest children in Minnesota. Dayton seeks to expand the early childhood scholarship program’s capacity and reach. The Governor proposes to increase funding for K-12 and early education by $373 million. The budget also includes funding for free breakfast for all children ages preschool to third grade ($28 million) and a multi-year ramp up to universal preschool ($109 million). The budget also includes $93 million in new spending for higher education.

Health and Human Services
The Governor’s health and human services budget proposal also stresses the importance of children and families, by investing $44 million in children's and families' needs such as mental health services for children and enhanced child protection efforts. This proposal also includes loan forgiveness for health care professionals who choose to work in Greater Minnesota and also works to reform residential health care supportive housing.

Disaster Relief

On Monday, the House passed the disaster relief deficiency funding bill related to the flooding that occurred this past spring. With federal matching and the available funds in the disaster contingency account, this relief ended up costing the state just over $2 million. The House Tax Committee heard testimony from the Department of Revenue on Wednesday regarding the tax portions of the Governor's budget proposal. The five major tax proposals include:

• Transportation Proposal Tax Provision: Implement a 6.5 percent tax on wholesale gas prices to fund transportation projects.
• Child & Dependent Care Tax Credit Provision: Expansion of this credit accounts for $100 million of the Governor's proposal and allows for an average credit increase of $429 to 130,000 families.
• Railroad Property Tax Refinement: Update 20-year-old assessment process for railroad property taxation.
• Corporate Tax Reform: Provisions include expansion of the Research & Development tax credit, an Economic Substance test for the validity of corporate transactions as business-related, and provisions designed to dissuade corporate sheltered income.
• Tobacco Smuggling Provisions: Proposal creates tobacco sales licensure and provides additional resources for the purpose of reducing smuggling of tobacco from out of state.

The Governor's proposal also included various minor updates and corrections to the tax code, as well as several tax fairness provisions.

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