Minnesota Weekly Legislative Update: 04/07/2015

With policy committee deadlines out of the way, Minnesota state legislators return this week to focus on passing finance bills, working in conference committees, and putting together a bonding bill. Both Speaker Daudt and Majority Leader Bakk have said they expect to finish conference committees by May 1. The legislative session has a constitutional adjournment date of May 18.

Next year’s session will relocate outside of the Capitol building while significant renovations continue. All those with office space in the Capitol itself are preparing to be out by June 1. As legislators finish this session, they will be thinking about new offices and chambers for the 2016 session.

Taxes

A $1.9 billion budget surplus has Governor Dayton and both legislative chambers proposing spending and tax changes. Dayton directed potential tax relief to working families and children in his supplemental budget, with expansions in the Working Family credit of $83 million and in the Child and Dependent Care credit of $103 million. Senate DFL leaders targeted $459.8 million for tax relief, with much of that dedicated to property tax relief as well as eliminating previous accounting shifts, such as June-accelerated sales tax payments for businesses and local government aid payout dates. This is in contrast to the House GOP budget targets that devote $2 billion for tax relief. While still unspecified, this will likely include business property tax reductions and research & development tax credit enhancements.

Transportation

With the announcement of a House GOP transportation plan last week, both bodies of the legislature and Governor Dayton have distinct and comprehensive long-term transportation funding proposals.

Governor Dayton’s plan calls for $11 billion in funding over 10 years, featuring a new 6.5 percent tax on wholesale gasoline, structured to yield at least 16 cents per gallon. The new gas tax, along with an increase in license tab fees and $2 billion in trunk highway bonds, would raise $7.85 billion to improve and repair 2,200 miles of road and 330 bridges statewide. Additionally, $120 million would be allocated from the General Fund toward transit in Greater Minnesota, and a ½ cent metro sales tax increase would raise $2.8 billion for metropolitan area transit.

The Senate DFL transportation proposal is similar to the Governor’s in terms of funding mechanisms, as SF87 also calls for a 6.5 percent tax on wholesale gas prices (with a floor of 10 cents per gallon) to raise $580 million a year for road and bridge projects. Additionally, the proposal calls for $567 million in general obligations bonds and $800 million in trunk highways bonds over four years, as well as a metro area sales tax increase of ¾ cent to raise $251 million per year for metro transit projects.

The most recent House GOP proposal, The Road & Bridge Act of 2015, increased its proposed funding from $750 million over four years to $7 billion over 10 years. The GOP plan does not increase taxes, instead reallocating existing auto parts, rental vehicle and vehicle leasing taxes from the General Fund into a new $3 billion Transportation Stability Fund dedicated mainly to road and bridge improvement. The Act would also use $2.35 billion in Trunk Highway and General Obligation bonding and include a one-time General Fund infusion of $228 million for the next biennium. Outside of a small allotment to Greater Minnesota bus services, the GOP proposal includes no additional transit funding. Finally, the proposal cites $1.2 billion in funding from MnDOT resource realignment.

Health and Human Services

The largest discrepancy in the budget proposals occur in the Health and Human Services budget. The Senate DFL allocates an additional $341 million, while the House GOP proposes to cut $1.1 billion. House leaders cite stricter enforcement of eligibility for those using state-subsidized health care as a major contributor to reduced spending in this area. The other contentious issue is the future of MNsure. The House GOP wants to eliminate the program (HF1664 – Dean-R) and move to the federal exchange, while the Senate DFL believes re-organization as a state agency (SF139 – Lourey-DFL) is the best route. Governor Dayton has stated that he would like to establish a year-long taskforce to explore all possible MNsure options, including moving to the federal exchange.

Education

The debate over teacher tenure and quality has been discussed with an impending teacher shortage taking shape across the state. Proposals have included a House GOP measure that eliminates seniority preferences to allow retaining teachers based on quality, a bill to streamline licensing for teachers coming from other states, and relaxing rules around licensing to allow “community experts” to offer courses within school districts where fewer teachers are available.

Universal preschool has attracted considerable attention since the House DFL version was voted down in the House’s education policy committee and laid on the table in the Senate’s education committee. In addition to the preschool proposal, other programs focusing on early childhood education have been hotly discussed, including funds for school readiness, early learning scholarships, child care assistance and a child care tax credit. Legislators will need to come to an agreement in conference committees about what funding and policy changes they’ll make to address early education in Minnesota.

Environment

A policy priority of Governor Dayton’s has been to require 50-foot buffer strips of perennial vegetation along water bodies across the state. The “buffers” would serve as animal habitat, filter agricultural runoff and reduce erosion. Championing the bill in the legislature (HF1534, SF1537) are environmental groups and sports groups which want to increase water quality near farmland and create more wildlife habitat. Opponents from the farming community have raised concerns regarding the potential loss of productive farmland. Current statute requires 16.5-foot buffers, a standard that opponents of the Governor’s proposal want to preserve.

The March release of the Minnesota Pollution Control Agency draft proposal to adjust the water quality standard relating to wild rice and sulfates has prompted legislative activity. Instead of adhering to the current sulfate standard of 10 mg/L, the MPCA is recommending creation of new standards tailored to individual lakes and rivers. Sulfates have been criticized for creating unsuitable wild rice habitat because they support higher mercury and sulfide levels in sediment. The MPCA says new standards wouldn’t be developed for 1-2 years, and in the meantime, HF1000 (Melin-DFL) and SF1007 (Tomassoni-DFL) would prohibit enforcement of the current 10 mg/L standard. Both versions of the bill were laid over for inclusion in the omnibus environmental policy bills.

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