March 29, 2019

Minnesota Legislative Update: Budget Targets Released Before Second Policy Deadline

Today’s second policy deadline had legislators racing throughout the week to get their bills through committee. House and Senate committees held day and evening meetings to process bills. On Wednesday, the House swore in Rep. Nathan Nelson (R-Hinkley) for seat 11B, which was vacated by now-Sen. Jason Rarick (R-Brook Park). Rep. Nelson won the special election with 68 percent of the votes.

House and Senate leadership both announced their budget targets for the FY2020-21 biennium. These targets reveal significant differences between the House and Senate’s overall budget amounts and spending priorities — and on the question of raising taxes. However, both have proposed budget totals lower than the Governor’s $49.3 billion biennial budget proposal. Finance committees will now begin marking up and moving appropriations bills. The third committee deadline, the date by which committees must act favorably on these appropriation bills, is April 12.

House Budget Targets

On Monday, House DFL Leadership released their budget targets, which they term the “Minnesota Values Budget.” The House budget target for the FY2020-21 biennium is $47.8 billion, or $1.5 billion less than Governor Walz’s revised budget proposal. However, during the leadership press conference, Majority Leader Ryan Winkler (DFL-Golden Valley) indicated that the House’s budget allocations mirror the Governor’s in terms of their spending priorities on health care and education

Speaker Melissa Hortman (DFL-Brooklyn Park) said the House budget restores tax fairness and makes significant investments in education while leaving $600 million on the bottom line in the next biennium. Specifically, the House budget increases E-12 spending by $900 million and higher education by $300 million, the latter which is intended to freeze tuition at all public higher learning institutions in Minnesota.

The targets indicate approximately $1.2 billion in revenue enhancements. House Tax Chair Rep. Paul Marquart (DFL-Dilworth) was unwilling to reveal specifics of the coming tax bill but did indicate plans to level the playing field by using a more aggressive approach on tax fairness. It is anticipated that measures to raise this revenue include freezing the C/I tax rate at the 2019 level, removing the sunset on the provider tax and reinstating various cigarette and tobacco taxes. The House will also be adopting most, if not all of, the Governor’s transportation plan, including a 20 cent per gallon gas tax increase.

Senate Budget Targets

Thursday afternoon, Senate GOP Leadership held a press conference to announce their budget targets for the FY2020-21 biennium. The Senate budget for the coming biennium is $47.6 billion, totaling $1.75 billion less than Governor Walz’s budget proposal. Total proposed spending by the Senate is $19.8 billion, a slight decrease from the House’s proposed spending amount of $20.5 billion. During the press conference, Republican leaders touted their plan as a way to fund priorities without raising taxes. Majority Leader Paul Gazelka (R-Nisswa) said the items cut from the Governor’s budget will not be anything “people will miss.”

The Senate budget plan does not include the revenue enhancements the House has proposed, such as the gas tax increase, the repeal of the sunset on the provider tax, and the reinstatement of the C/I inflator.  However, the Senate targets indicate increased spending in K-12 education and transportation funding. Other notable allocations include a one-time boost of $30 million for broadband expansion in greater Minnesota, $3 million dedicated to improving child care (with the goal of providing accountability in the state’s child care system), and social security tax cuts.

Prescription Drug Pricing

The House and Senate have both focused on reducing health care costs this session. This week the House directed special attention to prescription drug costs.

The House Health and Human Services (HHS) Committee heard a number of bills related to prescription drug benefits on Tuesday, March 26. Each of the bills was laid over for possible inclusion in the HHS Finance bill, which will be introduced in the next few weeks.

One of the bills heard this week was the Prescription Drug Pricing Transparency Act. HF1246, authored by Rep. Kelly Morrison (DFL-Deephaven), would require drug manufacturers to report increases in drug prices that exceed a certain threshold to the Minnesota Department of Health (MDH). In turn, MDH would post these drug prices for consumers. It would also require the MDH to provide an annual report to the legislature regarding drug pricing and spending. The bill is intended to help consumers better understand the drug manufacturer’s role in drug price increases. The bill was laid over for possible inclusion in the House HHS Finance bill.

The Senate companion bill SF1098, carried by Sen. Julie Rosen (R-Vernon Center), has also been moving through the committee process and awaits a hearing in the Judiciary and Public Safety Finance and Policy committee.

House Energy and Climate Omnibus Bill

On Thursday afternoon, the House Energy and Climate Committee members completed their markup of the committee’s omnibus bill, HF1833, authored by Chair Jean Wagenius (DFL-Minneapolis). The DE1 amendment was adopted, which extends the life of the existing Solar Energy Incentive Program by one year and allocates additional funds. The amended bill appropriates $54 million, including $16 million for a new “Solar in Schools” program; $6.9 million in rebates for purchasers of electric vehicles; $6 million each to the University of Minnesota and the Minnesota State system to aid in their transitions to renewable energy sources; and $5 million for the purchase of electric buses by the Metropolitan Council.

Opponents expressed concerns regarding the bill adversely impacting rural agriculture and referencing energy mandates to weapons, suggesting mandates are powerful and can be dangerous in the wrong hands. Concerns were also raised regarding the Public Utilities Commission (PUC) ability to increase a rate hike for “ancillary services.” An amendment prohibiting this practice was not adopted.

The bill passed 7-6 and was referred to the House Ways and Means committee. The companion bill SF2067, authored by Sen. David Osmek (R-Mound), is awaiting action in the Senate Finance Committee.

Important Dates

  • March 29, 2019 – Second Legislative Committee Deadline
  • April 12, 2019 – Third Legislative Committee Deadline
  • May 1, 2019 – All Finance Bills Passed Off House/Senate Floor
  • May 6, 2019 – Fiscal Targets Agreed to and Provided to Finance Bill Conference Committees
  • May 13, 2019 – Conference Committee Reports Due to Original Body
  • May 20, 2019 – Last Day of the Legislative Session

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