Minnesota Legislative Update: 2008 Session Preview

The 2007–2008 legislative session reconvenes February 12 and must end May 19. In this second year of the biennium—with the two-year budget passed last year—the Legislature will be primarily concerned with major capital bonding projects. The bonding bill, likely to total $1 billion, will fund state buildings, transportation projects, environmental initiatives, buildings at the University of Minnesota, Minnesota State Colleges and Universities programs and several local projects.

A projected 2008–2009 budget shortfall outlined in the state's November forecast will be on everyone's mind when the session reconvenes.

Increased expenditures or a further drop in revenues may cause the state's shortfall to rise to more than the $373 million dollars projected in November. An updated budget forecast in February will help determine whether cash reserves are sufficient to cover the shortfall—or whether agency budgets will be reopened and tax increases considered. Minnesota's state constitution requires a balanced budget each biennium.

Another high priority issue in 2008 will be transportation funding. Lawmakers were on their interim break when the I-35W bridge collapsed last August. The disaster raised awareness of the conditions of the state's bridges—and will likely keep infrastructure and transportation issues at the forefront of discussions this year.

With all House members up for re-election and a DFL-controlled Legislature at odds with Republican Gov. Tim Pawlenty, balancing the budget, passing a bonding bill and reaching consensus on other high-priority initiatives will be challenging.

Special Election Renders Senate Veto-Proof

DFLers continue to hold the majority of seats in both the House and Senate. A special election in January gave Senate DFLers the two-thirds majority they need to override a gubernatorial veto.

During the interim, Pawlenty appointed Rep. Steve Sviggum (R-Kenyon) and Sen. Tom Neuville (R-Northfield) to serve as Department of Labor and Industry commissioner and Third District judge, respectively, resulting in two special elections.

Steve Drazkowski (R-Wabasha) won the District 28B House seat formerly held by Sviggum, who served eight years as House speaker. Kevin Dahle (D-Northfield) defeated Republican Ray Cox, a former state representative, for the District 25 Senate seat.

The victory by Dahle gave the DFL Senate Caucus 45 members. This two-thirds majority in the 67-member body means the Senate DFLers can override Pawlenty's vetoes. The House DFL caucus—with 85 DFL members—is five votes short of a two-thirds majority, affording the governor veto leverage if House Republicans support his vetoes.

Pawlenty Bonding Proposal Focuses on State's Bridges

The governor proposed a $1.09 billion bonding package in January, culling through $4 billion in requests. Forty percent of the proposed bonding is for transportation projects. Approximately one fourth of the recommendations are for higher education projects, which traditionally claim a third of all bonding recommendations. The remaining recommendations are for state buildings, environmental initiatives and local projects.

During the interim, the Capital Investment committees of the House and Senate toured many requested projects. They will begin deliberations when the Legislature reconvenes.

Transportation Funding Sources, Status of Molnau Likely to Be Debated

Next to the bonding bill, transportation funding will be the most important issue discussed during the 2008 legislative session. The I-35W bridge collapse emphasized for many that the state lacks adequate transportation funding.

Pawlenty vetoed a transportation funding package last session that included a 7.5-cent gas tax, 0.5 percent sales tax, and an increase in license tab fees. An attempted veto override failed in the House. Although the governor did not oppose all funding mechanisms in the bill, he objected to the sales tax in particular.

As a starting point this year, Pawlenty included $400 million in his bonding recommendations to fund local roads and bridges. Some DFLers said this amount is inadequate, and they objected to the use of borrowing as a funding mechanism—rather than paying for the projects outright. They will propose a comprehensive transportation funding bill that includes elements of last year's bill.

House DFLers, facing election in the fall, are committed to finding a compromise with the governor this year and producing a funding package that will become law. The sticking point for finding agreement, however, will be how to fund transit.

Minnesota's gas tax, which has not been raised since 1988, is constitutionally dedicated to roads and bridges. The transit funding solution most often proposed is a sales tax increase—which Pawlenty strongly opposes. Other possible funding options include capturing motor vehicle sales taxes on leased vehicles. None of these sources raises the amount of money transit advocates believe is needed.

It may be possible to find a transportation solution in 2008, but political obstacles loom.

Carol Molnau, who serves as both lieutenant governor and commissioner of transportation, has been criticized by DFL lawmakers regarding her actions following the I-35W bridge collapse. Molnau's appointment as transportation commissioner has never been confirmed. The powerful Senate Transportation Committee chair, Steve Murphy (D-Red Wing), has said the Senate will not confirm her and will most likely vote to strip her of her role as transportation commissioner.

Tax Increases Could Be Proposed to Balance Budget

In the final hours of the session last year, legislators passed a tax bill that would have allocated $123 million for homeowner property tax relief. This bill was vetoed by Pawlenty, who opposed a provision requiring state budget forecasts to include inflation in expenditures.

Many legislators, including Senate Tax Committee Chair Tom Bakk (D-Cook), say the state has grown too reliant on local property taxes to fund basic services such as education and transportation.

Depending upon the size of the shortfall, legislators may consider increasing taxes—along with cutting spending for existing programs—to achieve the constitutionally required balanced budget. Changes in the corporate income tax concerning foreign operating companies are likely to pass. Proposals to increase the personal income tax on higher incomes and business property taxes will also be debated.

Momentum for Environmental Issues May Continue

The governor has clearly put environmental issues at the top of his priority list. Substantial renewable energy legislation requiring utilities to obtain at least 25 percent of their energy from renewable sources by the year 2025 and a reduction in the emissions of greenhouse gases was passed into law last year.

This year the Legislature will hear recommendations from the Minnesota Climate Change Advisory Group regarding reductions in carbon emissions. These findings could become the basis for new legislative proposals.

Legislators will also deliberate water quality issues and continue work on renewable energy.

The Legislature will renew its debate on a constitutional amendment that dedicates sales tax revenue to outdoor projects and the arts. The Senate passed a bill last year that called for a sales tax increase to pay for protection of hunting and fishing habitats, lake and river cleanup, and arts and cultural programs. The bill died in the House, but it will likely be revived this year.

Health Care Policy Issues Under Consideration

During the interim, policy related to health care was an area of focus. Dozens of hearings were held, and the governor convened the Health Care Transformation Task Force, which is charged with developing recommendations on health care access, coverage for all citizens and preventative care.

Some health-care related issues may surface this session, including health care access for uninsured children. Greater activity on health care issues is likely during the 2009–2010 session when the state sets the budget for health care and the current shortfall has been addressed.

Education Issues May Be Deferred Until Next Session

Education policy and funding issues are always on the Legislature's agenda. However, this year these issues rank behind the bonding bill and transportation funding. We can expect to see calls for reform and promises of increased funding next year.

Education issues likely to be discussed include closing the achievement gap, early childhood education, preparing students for college and opting out of the federally mandated No Child Left Behind requirements.

Pawlenty Willing to Close Corporate Tax Loophole

A tax bill passed last session would have raised $125 million by changing the tax preference for foreign operating corporations. Pawlenty vetoed the tax bill for other reasons, but said he would support a foreign operating corporation's measure if new revenues are used to reduce tax burdens.

Consumer Privacy and Protection Legislation Will Abound

Expect to see proposals to protect your Social Security number, ban products made in China, increase requirements for product recycling and clamp down on foreign call centers.

Dome Dogs Are Safe

Minnesota Vikings' fans won't get their wish for a new stadium this session. The governor and Legislature have made it clear their priorities do not include sports facilities.

More Referenda on the Horizon

Legislators are getting in the habit of turning their votes over to the people. Two years ago the public voted to dedicate the motor vehicle sales tax to transportation funding. This year voters may decide to increase sales tax to help fund parks, environmental initiatives, the arts and transportation. Another ballot question may be a referendum on health care.

House Members Expected to Move On

Expect a large number of legislators, particularly House members, to move on to greener pastures at the end of this session. Two long-time legislators, Neuville and Sviggum, have already departed. Others have announced their intentions to retire.

Don't Forget Super Tuesday

For the first time, Minnesota will be part of Super Tuesday. Along with citizens in 21 other states, Minnesotans who participate in their precinct caucuses will make their presidential candidate preferences known. Precinct caucuses will be held February 5. More information is available at: www.sos.state.mn.us

Conclusion

All of the 2008 legislative session proceedings will be overshadowed by a projected state budgetary shortfall—as well as national and global economic downturns. In addition to addressing the budget shortfall, legislators will deliberate on bonding projects, transportation funding, property tax relief, health care and education during the session. All bills introduced in 2007 are eligible to be reconsidered this year.