Minnesota Legislative Update: 2008 Mid-Session Report

A Short, Action-Packed Session

The Legislature has already passed a Constitutional Amendment, overridden the Governor's veto of a major transportation bill and is deliberating a bonding bill in Conference Committee. Following an Easter break, the Legislature has focused on putting together tax and spending bills to address a projected budget deficit of $935 million.

Constitutional Amendment Passes and
Will Be On the Ballot in the Fall

The first legislative action during the 2008 Session was passing a Constitutional Amendment that would increase the sales tax and dedicate funding to the outdoors, arts, and cultural heritage. The Amendment was supported overwhelmingly in both chambers. If approved by voters in November, there will be an increase of the state sales tax of 3/8 of one percent.

Transportation Bill Passes, Commissioner Molnau Ousted

On February 25, the state's largest transportation bill in recent history was passed into law. Initially vetoed by the Governor, the veto was overridden by the Legislature. After a relatively easy vote in the Senate, the override passed in the House with a 91 to 41 vote count, one vote more than required. The six House Republicans who voted with DFLers were stripped of their minority leadership positions on committees and have faced challenges for the GOP endorsement for the upcoming House elections.

The bill raises $6.6 billion for transportation over the next ten years. $1.8 billion is dedicated to the trunk highway system from 2009 to 2018, and more than half of that will be spent in the first two years. The bill provides a 2 cent gas tax increase starting on April 1 and another 3 cent increase at the beginning of October. Other provisions include a County option ¼ cent Metropolitan sales tax increase for transit, a $20 excise tax on vehicles, and an increase in vehicle tab fees on new cars.

In other transportation news, Lieutenant Governor Carol Molnau was stripped of her responsibilities as Transportation Commissioner when the Senate voted not to confirm her on February 28. The vote was along party-lines with 22 Republicans supporting her confirmation and 44 DFLers disapproving.

Bonding Bill Is Still In Conference Committee

The bonding bill, which typically funds transportation projects, environmental initiatives, University of Minnesota and Minnesota State Colleges and Universities buildings and local projects, is still in Conference Committee. The Senate and House versions have significant differences and the Governor has objected to the total spending level. Negotiators have made little progress over the last several weeks.

For a full overview of the bonding proposal go to:
H.F. 0380 Overview

A Gloomy, Yet Manageable Forecast

Minnesota's economic forecast released on February 29 projects a $935 million deficit for the 2008-09 biennium. This means the deficit is up more than $530 million from the Department of Finance's November forecast. The largest impact comes from a dramatic decrease in corporate tax receipts of 20.6%, or $456 million. Much of the state's economic troubles are a result of broader national economic factors including tighter credit restrictions, higher energy costs, lack of job growth, and housing industry problems. For the 2010-2011 biennium the deficit is expected to rise to $1.09 billion.

For a 10 page Summary of the February Forecast findings go to:
Department of Finance February Forecast Summary

The Governor's Plan and the Legislative Leadership's Response

The Governor's plan to balance the budget was released on March 7. It includes $341 million in spending reductions and would use $250 million from state reserve funds and $250 million from the Health Care Access Account. Specific items of Governor Pawlenty's plan include a state-wide cut in the sales tax of 1/8%, no reductions in K-12 education funding or local government aid, increases for military and veteran benefits, and a 4% reduction in all state agency budgets. Additional sources of revenue in the Governor's plan include June accelerated payment adjustments, a mutual fund fee cap repeal, and collections from tax debtors via bank matching.

One revenue raiser the Governor and legislative leadership agree on is corporate income tax changes concerning foreign operating corporations. In the end, this change is likely to raise approximately $100 million. The legislative leadership has said that job creation will be their main focus. The remainder of the Session will be devoted primarily to solving the budget shortfall.

To review a specific breakdown of budget proposals
available on the Department of Finance website go to:
Governor's 2008 Supplemental Budget

Foreclosure Bills Abound

There have been a series of proposals to alleviate some of the problems from the sub-prime mortgage fall-out. Most are preventative measure for those facing foreclosure including laws to allow the refinancing of loan payments.

A Greener Minnesota

The Green Solutions Act of 2008 is a group of bills intended to make Minnesota a more eco-friendly state. One of the major laws discussed by the Legislature has been the creation of a market-based cap and trade system for reducing greenhouse gases. A regional cap and trade system is already in its initial developmental phases with the Governor's involvement in the Midwest Greenhouse Gas Accord.

Legislation for new sustainable building guidelines for state projects and carbon emissions caps on cars have also been debated during the Session. There are also a handful of bills which ban, or add regulations to, the sale and use of certain chemicals.

Debates on Social Security Number Use

A recurring issue in recent legislative sessions has been striking a balance between lawful and necessary uses of social security numbers while restricting those uses to prevent identity fraud. At this point in the Session the Senate has advanced a proposal balancing these two interests. The House continues to work on language that is acceptable to business and consumer advocates.

Changes to No Child Left Behind And
Creation of an Early Education Office

There are two bills which would create an Office of Early Learning within the Department of Education. These are aimed at bringing all of the early childhood education stake-holders to the table. There are also significant proposals to change No Child Left Behind ("NCLB") statutes to incorporate growth-based assessments in conjunction with the existing NCLB standards based test scores.

Conclusion

The remainder of the Session will be focused on spending and taxing decisions necessary to balance the state budget. Before the Session ends on May 19, legislators will also tackle property tax relief and health care reform, along with most of the aforementioned issues.