Inside the Minnesota Capitol

Inside the Minnesota Capitol

Minnesota politics, regulatory agencies and state government news updates

Week in Review

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House Republican Budget

The budget outline House GOP leaders released Tuesday proposes $2 billion in tax cuts as part of their two-year budget plan. It also spends nearly $40 billion, excluding their recently announced transportation funding plan.

Despite the State’s projected $1.9 billion budget surplus, House Speaker Kurt Daudt (R-Crown), said that Republicans are trying to reduce government spending and said growth in government spending should not outpace growth in family budgets.

The Republican outline spends less than DFL Gov. Mark Dayton has proposed on education and health and human services. The plan is about $3 billion smaller than Dayton’s budget proposal.

House budget committees will begin making decisions based on the new outline.  House Ways and Means Chair Jim Knoblach (R-St. Cloud) said the proposed spending on Health and Human Services is $1.1 billion below projections. He highlighted the need to better enforce the eligibility of people using State subsidized health care. There are several bills moving through the Legislature to require DHS to contract with an outside vendor to conduct eligibility verification audits.

Minority Leader Paul Thissen (DFL-Minneapolis), warned that the budget proposal is a recipe for a State government shutdown.

Transportation

Minnesota House Republicans unveiled their much anticipated transportation funding proposal targeted to spend $7 billion over 10 years on roads and bridges without raising taxes.

The approach contrasts with DFL Gov. Dayton and Senate Democrats, who are pushing a proposal that relies on a gas tax and metro sales tax increase and also includes funding for metro area transit projects.

During a news conference Monday, House Transportation Chair Tim Kelly (R-Red Wing) said their plan uses $228 million of surplus money, $1 billion in general obligation bonding over 10 years, and another $1 billion in transportation bonds and existing sales tax revenue from auto parts, car rentals and leases. Rep. Kelly said the sales tax revenue would be dedicated to a new transportation stability fund. He said the plan would tap $300 million in existing general fund revenue the next two years. House Speaker Daudt would not say which areas of the budget would have to absorb that shift.

The Republican plan would require the Metropolitan Council to fund metro transit operations and requires the Minnesota Department of Transportation to find 15 percent savings ($1 billion over the 10 years of the plan) in their budget.

Senate Majority Leader Tom Bakk (DFL- Cook) said constitutionally-dedicated funding, like the gas tax, is a better approach for transportation because it could too easily be undone by the next Legislature.

Both sides agree that billions are needed to boost road and bridge investments.

Sunday Sales

A labor union is lifting its objection to Sunday takeaway sales of 64-ounce beer growlers from craft breweries.

Ed Reynoso of the Teamsters Joint Council 32 told a Senate committee on Monday that “at this point” the union won’t oppose a bill legalizing those growler sales on Sunday. It’s a shift from last year when Teamsters’ concerns about those sales affecting labor contracts helped derail the proposal. They said craft brewers should have to report off-site sales on a quarterly basis to make sure they’re not exceeding annual barrel limits for small breweries.

Assisted Suicide

Sen. Chris Eaton (DFL-Brooklyn Center), a registered nurse, said she proposed the legislation to begin a conversation on whether to allow dying patients to request and receive medications to control the time and manner of their deaths. Her “Compassionate Care Act,” was presented Monday at a Senate Committee on Health, Human Services and Housing hearing.  However, Sen. Eaton said she wanted to postpone any action on the bill until after she conducts informational hearings on the measure around the State between legislative sessions.

Under the bill, terminally ill Minnesota adults could request aid in dying. They would have to be mentally competent to make sound decisions and able to take the medication themselves. Two physicians would have to confirm that the patient met those criteria, and doctors could opt out if they wish.

The Minnesota Medical Association currently opposes assisted suicide. But Minnesota doctors might want to reconsider that policy, said Dan Hauser, MMA.

Physician-assisted suicides are allowed in Oregon, Washington, Montana, New Mexico and Vermont.

Religious Exemptions for Autopsies

Legislation to establish a religious exemption for autopsies has traveled through rocky terrain in Senate and House committees. Two recent deaths with the Fon du Lac Band involving a medical examiner who refused to respect the decision of the families, even ignoring a judicial order in conducting an autopsy, was the impetus for the bill. There is an agreement between the Tribes and Medical Examiners, but Legislators are still concerned about striking the right balance between protecting religious freedom and providing enough discretion to law enforcement and medical examiners for suspected foul play, drug overdoses, or poisonings.  Legislators also want to ensure that Minnesota law is congruent with national standards.

Tip Credit Bill

Just before midnight on Monday, the House passed a bill that caps wages for tipped employees at $8 an hour. The bill, sponsored by Rep. Pat Garofalo (R-Farmington), is an effort to revise the minimum-wage law passed last year.

The State’s wage floor will rise to $9 an hour this August, and will rise an additional 50 cents an hour by 2016. Beginning in 2018, the minimum wage will be indexed to inflation.

Under Garofalo’s bill, crafted by the Minnesota Restaurant Association, tipped employees’ pay would be capped at $8 an hour. The proposed pay change would apply only if those workers earned a total of at least $12 an hour in a two-week pay period, after factoring in tips. If they failed to meet that threshold, they would earn the prevailing state minimum wage.

Rep. Garofalo and other supporters of the legislation said it would relieve pressure on restaurants who say labor costs are growing after the Legislature raised the State’s wage floor last year. Others who testified recently in support of the proposal said it would allow them to raise wages for kitchen staff.

Restaurant operators also have said that automation would replace employees. However, according to the Minnesota Department of Employment and Economic Development the food and accommodations industry has added 1,100 jobs since August, when the minimum wage rose to $8 an hour.

Senate Majority Leader Bakk opposes the bill and has said it is unlikely to find much support in the DFL-led Senate. Gov. Dayton said Monday he also opposes creating an exemption for tipped employees.

Super Bowl Sunday

Senate Majority Leader Bakk said Tuesday that he and House Speaker Daudt will push for $2.8 million in additional tax relief sought by Super Bowl organizers for the 2018 game in Minneapolis. They agreed to try to find room for the provision in this year’s catch-all tax bill.

Gov. Dayton said in a statement that he hadn’t been informed of the request and that “unless that happens, there is nothing else to consider.”

Minnesota already exempts sales tax on tickets to the game (worth about $9.5 million in forgone revenue according to State officials). The new request would extend that exemption to cover events related to the game at the new Vikings stadium, such as an interactive zone for fans or certain tailgating events.

Super Bowl organizers have said that they believed they had assurances from State leaders that the related events would be exempted. Gov. Dayton and legislative leaders provided a letter of general support in the bid package approved by NFL owners in May 2014, but it contained no promises.

State leaders made it clear they would not be waiving player income taxes for the time they’re in Minnesota. Those costs will be covered by private fund-raising, officials with the host committee said. The Department of Revenue and stadium officials have estimated player income tax revenue at $1 million-$3 million.

Organizers say an additional $3 million in tax breaks is a small number, particularly when Meet Minneapolis has calculated that state and local governments will collect $32.4 million in tax revenue from Super Bowl visitors on items such as food, shopping, rental cars, hotels and entertainment.

Most of the Super Bowl expenses, they point out, will be funded through $30 million-$40 million in private donations.

The two leaders of the minority caucuses, Rep. Thissen and Sen. Hann (R-Eden Prairie), said they had not been informed of the host committee’s request.

Sen. Hann said he would be open to the request if it were part of a broader plan Republicans have been considering: a sales tax holiday for everyone in Minnesota during the Super Bowl. Rep. Greg Davids (R-Preston), Chair of the House Taxes Committee, said organizers need to act fast if they hope to get the exemption adopted this session.

Week in Review

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Friday marked the first committee deadline and thus a flurry of activity at the Capitol to act favorably on bills in their respective policy committees.

MNsure

When Governor Mark Dayton’s supplemental budget is released on March 24, it will include $500,000 for a special health care finance task force to evaluate the future of the state’s new health insurance website. The task force will consider options including MNsure’s long-term financial viability, moving to a federal exchange, and changes to other public health care programs.

Legislators are debating bills that would change how MNsure is governed, including one that would move the state to the federal exchange.

Gov. Dayton said he supports the recommendations from the Office of the Legislative Auditor that would make the agency accountable directly to his office.

House Speaker Kurt Daudt (R-Crown) said more time and money won’t fix MNsure’s problems. He said he wants the existing MNsure Legislative Oversight Committee to start meeting to address problems with the exchange. The panel has not met since last November.

MNCare

Rep. Matt Dean (R-Dellwood) who chairs the House Health Care Finance Committee, authored a bill to move the 95,000 people currently participating in MinnesotaCare coverage to MNsure, where they would buy a private plan. Rep. Dean estimates the shift would save about $900 million over two years, cash that could be used for Republican priorities that include nursing home funding, and mental and dental health programs.

When MinnesotaCare was created more than two decades ago, state lawmakers aimed to make sure people who made too much money to tap Medicaid, but didn’t make enough to buy their own insurance, had access to health care coverage.

Rep. Dean thinks private plans will offer consumers more choice, but in the House Health and Human Services Reform Committee hearing on the bills this week, Democratic members criticized the bill saying it punishes low income consumers. Rep. Jennifer Schultz (DFL-Duluth) argued that plan choice is still limited in the private market, because of the limited number of providers. She said real choice would mean giving people access to more health care providers not to more plan choice.

Ms. Doyle with TakeAction Minnesota, a non-profit group that supports public health care programs, said Rep. Dean’s plan would be bad for MinnesotaCare participants. It would land them in more expensive and potentially less comprehensive coverage, she said. She said the bill would hit Greater Minnesota the hardest because that’s where enrollment is the highest.

UCare, one of the state’s leading health insurance companies, also opposes Dean’s proposal. UCare, which covers about 30 percent of MinnesotaCare’s participants, said the company’s analysis of the bill points to higher costs for MinnesotaCare participants.

Rep. Dean has another bill that would abolish MNsure and move Minnesota to the federal exchange in 2017.  That bill was passed out of committee along party lines.

His bills face challenges in the DFL-controlled Senate, where legislators say they’re hesitant to dismantle MinnesotaCare or MNsure.

Railroads

Gov. Dayton says railroads need to pay a proportionate share of the cost of safety improvements along the tracks used by oil trains. He held a news conference with local government officials and state lawmakers to highlight his proposal to impose new fees and property tax increases on the railroads to help pay for those projects.

He also released a list of 75 grade crossing improvements recommended by MNDOT. The Governor said grade separation projects in Coon Rapids, Moorhead, Prairie Island and Willmar are particularly urgent. He said he’ll include $76 million for those projects in his bonding bill proposal later this month.

Another bonding bill proposal would provide $3.1 million for a new training facility at Camp Ripley to prepare emergency personnel to respond to oil train derailments. The training was mandated in state law last year.

House Transportation Committee Chair Tim Kelly (R-Red Wing) said in a written statement that he appreciated the Governor bringing the issue forward and has indicated that railroad crossing upgrades will be addressed in his upcoming transportation funding proposal.

Officials with the Minnesota Regional Railroad Association have said the proposed tax increases would hurt consumers and businesses that ship by rail. They also contend the tax would violate federal law.

Transportation

Gov. Dayton and Senate Democrats say Minnesota needs to raise taxes to pay for $10 billion worth of road, bridge and transit projects over the next 10 years.

House Republicans have been working on a plan that doesn’t raise taxes, but would dedicate the revenue from several existing taxes to fix road and bridges. Chair Kelly isn’t ready to say how much it will cost. Even though his plan would spend less than Gov. Dayton and Senate Democrats, he said the Republican proposal is more popular, according to recent polls from KSTP-TV and Survey USA.

Senate Majority Leader Tom Bakk said he doesn’t support dedicating tax revenue that now goes to the general fund to transportation. Sen. Bakk said using general fund revenue for transportation projects is a bad idea because lawmakers will always put a higher priority on education and health care than on roads and bridges. Senate Democrats favor a gas tax hike of at least 16 cents a gallon and a Twin Cities-wide sales tax increase for transit.

One House Democrat, Rep. Ron Erhardt (DFL-Edina) is proposing a compromise that relies on Rep. Kelly’s proposal to dedicate some existing taxes and a gas tax and sales tax hike that doesn’t raise as much as Gov. Dayton’s plan.

Sunday Sales

In an effort to bring publicity to their issue, about 40 cars adorned with flags calling for alcohol to be sold in Minnesota on Sundays went to Hudson, Wisconsin to buy alcohol last Sunday.

Senate Commerce Committee Chair Jim Metzen (DFL-South St. Paul) says he isn’t sure he’ll hold a hearing on a bill that would allow the state’s liquor stores to open on Sundays. House Commerce Committee Chair Rep. Joe Hoppe (R-Chaska) said he’s going to meet with Rep.Jenifer Loon (R-Eden Prairie) to discuss how they should proceed with her bill, including possibly holding an informational hearing that doesn’t include a vote.

Rep. Hoppe said he won’t include Sunday sales in a broader omnibus liquor bill, but expects supporters of Sunday sales to propose it as an amendment when his liquor bill is debated on the House floor. He has voted against allowing Sunday sales in the past, but said he’s trying to remain neutral on the issue this year.

The House has repeatedly defeated efforts to expand liquor sales to Sunday. Independent and municipal liquor stores oppose the measure because they don’t want to open their stores on Sundays.

The Teamsters Union also opposes it because they worry it could reopen their labor contracts with liquor distributors.

Supporters of Sunday sales were hopeful that they could pass the measure this year after Republican House Speaker Daudt said he supported it. Gov. Dayton said he would sign the bill if it reaches his desk. DFL Senate Majority Leader Bakk, however, said he does not support the initiative.

Poison Control Center

The Poison Control Center is part of the Minnesota Poison Control System, which evolved from a few hospital-based poison centers in the 1970s and ’80s to one emergency call center located at Hennepin County Medical Center. The Poison Center’s toxicology specialists take an average of 132 calls a day, handling everything from household poisonings to drug overdoses.

The Legislature mandated the creation of a single, integrated poison-control system, but it never fully funded the program. Now, the Poison Center says it needs more state support or it will scale back its 24-hour emergency call center.

The Poison Center received more than 48,000 calls last year. Sixty percent involved drug overdoses. Health care providers make almost a quarter of the calls to the Poison Center.

The Center’s funding problems started a few years ago when its federal grants were cut by more than 30 percent. Now, Hennepin County Medical Center says its contributions to the Poison Center will end on July 1. HCMC says it can no longer afford to be the only hospital that helps subsidize the statewide program.

Minnesota currently provides half the money needed to run the Poison Center. The center has a $800,000 request to restore the program’s budget for FY 2016-2017.

Energy Update

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This week marked the first policy deadline for policy bills. The Senate Energy and Environment Committee spent considerable time this week working through policy measures, including SF 1431 (Marty-D), the Senate Omnibus Energy Policy bill. The committee adopted a delete-everything amendment to insert the language of the omnibus bill, which included several significant policy measures including:

  • Raising Minnesota’s Renewable Energy Standard (RES) to 40 percent renewable energy by 2030;
  • Raising the energy conservation policy to 2 percent of annual retail sales of electricity and natural gas;
  • Raising energy savings goal for electric utilities to 2 percent and natural gas utilities to 1.5 percent;
  • Requires long-term emergency planning by the Minnesota Department of Commerce and provides emergency powers to the Governor in the event of an energy shortage;
  • Provides emergency powers to the Commissioner of Commerce in the event of a shortage of motor gasoline, middle distillates, and propane; and
  • Allows local units of government to act as the Public Utilities Commission for purposes of approving permits for large electric power generating plants solely within their jurisdiction that are solar energy generating systems up to 25,000 kilowatts.

Xcel Energy, Missouri River Energy, and the Minnesota Chamber of Commerce testified in opposition to several portions of the delete-everything amendment. Republicans on the committee also expressed opposition to many aspects of the bill.

There were a number of technical amendments adopted and there were a number of controversial amendments that were not adopted. The Republican members sought unsuccessfully to include large hydroelectric power as a qualifying resource for purposes of satisfying the RES, lift the ban on the nuclear moratorium, and require legislative approval of any state plan that would conform with the Environmental Protection Agency’s Clean Power Plan 111(d). The committee chair opposed each of these and they failed on a voice vote.

SF 1431 passed to General Orders on a voice vote following more than two hours of debate.

The House Job Growth and Energy Affordability Committee did not take any action on a policy omnibus bill this week. The expectation is that omnibus policy language will be made public at some point prior to the Easter/Passover break, which begins on March 28 and returning on April 7. The committee will then mark up an omnibus bill after the break. This is possible due to a nuance in House rules which affords any finance committee the ability to act on policy measures outside of the normal policy deadlines that would apply to policy-only committees.

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Surplus

The state Republican Party has approved a “Give It All Back” ad campaign encouraging Gov. Dayton and the Legislature to return all of the projected $1.9 billion budget surplus to Minnesotans in the form of tax cuts.

After the budget forecast was announced last week, House Speaker Daudt (R-Crown) said he expected Republicans to propose returning at least half of the surplus to taxpayers but also said schools, nursing homes and roads and bridges would likely be recipients of more money.

House Republicans have not produced a budget yet, but are expected to release an outline by March 24. The Democratic governor wants to tap much of the surplus for education initiatives like statewide preschool and tuition freezes. He’s expected to release a revised budget early next week.

MNsure Reform

Two bills that would change how the state’s health insurance exchange operates have cleared initial hurdles in the Minnesota House.

One bill sponsored by Rep. Mack (R-Apple Valley) attempts to overhaul how federal subsidies are given out for people who can’t afford insurance. The bill would require Minnesota officials to seek federal waivers to allow anyone to access those subsidies, whether they buy insurance through MNsure or directly from an insurance company. She said that the legislation is meant to protect consumers from having to use what she called a “broken system.”

Democrats contend MNsure has improved dramatically since it launched in the fall of 2013. Rep. Liebling (DFL-Rochester) said that giving subsidies to buy insurance anywhere would undermine MNsure and the site allows consumers to do side-by-side comparisons.

Rep. Mack’s bill was amended to allow insurance brokers and county officials to sit on the MNsure board, and it would prevent MNsure from setting stricter standards for plans sold on the exchange than what is set out in the Affordable Care Act – a provision long supported by the business community.

Sen. Lourey (DFL-Kerrick) has a plan to make MNsure a state agency, accountable to the Legislature. And it’s unlikely Gov. Mark Dayton, who backs the exchange, would sign it.

Meanwhile, the House Government Operations Committee unanimously approved a bill that would strip MNsure’s exemptions from some state technology rules. The bill, sponsored by Rep. Kahn (DFL-Minneapolis) would require MN.IT to approve MNsure’s technology projects, and divide projects coming in at more than $1 million into phases, each of which would be reviewed by MN.IT. Last month, the state’s Legislative Auditor identified the exemptions as a critical flaw behind MNsure’s troubled roll out.

MN.IT Commissioner Baden predicted that there are two more solid years of build-out in order to achieve a “good base” for the exchange. He also mentioned he’s confident that the build-out could be achieved with the existing federal funds and that no new funds will be needed.

This week the MNsure board approved a three-year financial plan that cuts spending by more than $2.5 million over three years. Officials said the cuts were made necessary by lower than expected enrollment in private health plans. MNsure receives some of its funding from a percentage of premium payments made by people who enroll in private health plans through the state’s online insurance marketplace.

Board member Tom Forsythe said most of the cuts will come from administrative expenses, and another $700,000 will come from the agency’s budget for navigator services.

Managed Care Organizations

MN has relied on managed care organizations (MCOs) for decades to help administer its Medical Assistance (MA) program. Administrative spending by the four largest MCOs (Blue Plus, HealthPartners, Medica, UCare) totaled about $278 million in 2012. DHS determines how much to pay MCOs for these services, and relies primarily on MCO’s financial data to set the administrative portion of payment rates.

During 2013, DHS directives and requests to MCOs were too general to address data complexity and variation among MCOs allocation/accounting processes. DHS modified rate-setting for some programs to target savings, but did not execute some options to limit administrative costs.

OLA concluded that the Legislature and DHS should be more directly involved in oversight of managed care administrative spending for Minnesota’s public health care programs. They found that managed care organizations generally complied with certain financial reporting requirements, but also found exceptions. OLA recommends refining statutory language and DHS contracts to improve consistency in reporting.

Railroad Safety

DFL lawmakers are calling for new taxes on railroads to pay for safety improvements for oil transport.

Under Rep. Hornstein’s (DFL-Minneapolis) bill, the state would assess large railroads up to $32.5 million a year for grade crossing safety improvements. He said the occurrence of oil train derailments and explosions have prompted this. Rep. Hornstein said the railroads should pay their fair share to keep Minnesota communities safe.

Another bill, based on Gov. Mark Dayton’s proposal, introduced by Rep. Marquart (DFL-Dilworth) would expand railroads’ property tax liability. It would generate more than $20 million a year for the state and $40 million for local governments. Rep. Marquart said railroads have a responsibility to create safe conditions for cities.

Sen. Jensen (DFL-Owatonna) is also carrying a bill that would assess railroads for emergency personnel training.

GOP leaders strongly oppose the proposed property tax increase. House Tax Committee Chair Davids (R-Preston) has called it a nonstarter. Railroad officials have said the tax proposal appears to violate a federal law that precludes different treatment of railroads.

Transportation

A bipartisan group of state Senators said this week that they support raising new revenue to fund transportation needs. DFL and Republican members of the self-described “Purple Caucus” announced their list of shared legislative priorities. Without naming a source for the funding, they said additional dedicated funding is needed for roads and bridges first, and then for transit.

The group also wants to increase the basic K-12 education funding formula, and reduce unfunded mandates for public schools.

The other members of the purple caucus are Sen. Bonoff, DFL-Minnetonka; Sen. Clausen, DFL-Apple Valley; Sen. Miller, R-Winona; Sen. Nelson, R-Rochester; Sen. Pratt, R-Prior Lake; Sen. Reinert, DFL-Duluth; Sen. Rosen, R-Vernon Center; and Sen. Sheran, DFL-Mankato.

Rep. Erhardt (DFL-Edina) broke with fellow DFLers to suggest that money from the state general fund should be used to repair roads and bridges. In the 2013-14 session he chaired the House Transportation Committee. While Minnesota’s transportation budget is funded entirely by the state gas tax and other transportation-related taxes and fees, Rep. Erhardt produced a document showing that 33 U.S. states fund transportation at least to a small degree from the general fund.

Re-dedicating those to highway funds would provide between $221 million and $327 million additional for roads and bridges, Rep. Erhardt said. Another $200 million a year could come by way of shifting transportation costs currently covered by dedicated sources onto the general fund. His proposal lays out a total transportation investment of $12.7 billion in the next decade.

Those proposals put him at odds with most other DFLers, including Gov. Dayton and Senate Majority Leader Bakk, who have been firmly against spending from the general treasury on roads. Democrats have repeatedly warned that would pit road-building interests against other recipients of general fund dollars: schools and college, health and assistance programs, and general aid to local governments.

However, some Republicans in the House have been more open to using general fund dollars for roads. House Republicans have plans to release their own comprehensive transportation funding proposal next week.

Education Testing

Gov. Dayton wants to cut the number of standardized tests that Minnesota students take by a third and says he will seek the federal authority to do so.

The Senate education committee’s chair Wiger (DFL-Maplewood) said he supports the proposal as long as state education leaders continue to emphasize students’ literacy skills and teachers can intervene with struggling pupils.

The House education committee’s chair Erickson (R-Princeton) said she supports making some tests, such as the ACT, optional. However, she said she believes annual proficiency tests are an essential tool for both measuring student academic growth and the performance of schools and teachers.

Education Minnesota, the state teachers union, has long supported efforts to reduce standardized testing and released a statement of support.

The governor’s education policy bill will include eliminating seven of the 21 assessments students are required to take. That will likely require federal approval to comply with the No Child Left Behind law.

Minnesota is one of 45 states to apply for a waiver from the 2002 No Child Left Behind law. Minnesota’s waiver was extended in 2014 and it is up for renewal this year.

School Trust Lands

School trust lands were set aside to generate income for schools, primarily through logging or mining. This week, the U.S. Forest Service is holding meetings on the latest attempt to get access to those school trust lands by swapping some national forest land for state-owned land within the Boundary Waters (BWCA).

The Forest Service would acquire about 30,000 acres of the state school trust land that’s basically trapped within the Boundary Waters. The DNR would obtain an equal value of land scattered throughout the Superior National Forest, outside the BWCA.

The state Constitution requires the DNR to manage the lands on behalf of the Permanent School Trust Fund. The state can’t use the school trust lands inside for mining or logging because the BWCA is protected as wilderness, the activities that would generate the most money. By swapping some land, the state hopes to get land that could be developed.

The federal government supports this because it would allow them to consolidate ownership of their land within the Boundary Waters. Conservation groups have long supported selling the school trust lands inside the BWCA to the feds. They don’t want to shrink the size of the Superior National Forest outside the Boundary Waters and worry about the mining and logging that might follow on the newly acquired land.

On the other side, Iron Range legislators have long supported a land exchange rather than a sale. They argue that maintaining ownership of the land would return more revenue in the long term.

A few years ago the two sides agreed to a hybrid plan. Roughly one-third of the land would be exchanged, and the rest sold to the federal government. But so far the Superior National Forest hasn’t been able to get the feds to put up the cash — about $60 million.

The Forest Service is holding meetings around the state this month. The comments the agency receives will help determine the level of environmental analysis the proposal will require.

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Minnesota Budget Forecast/Surplus

Management and Budget shows the State’s previously forecast $1.038 billion surplus for the next biennium has grown to $1.87 billion. Governor Mark Dayton said he will propose using about half of the additional funds for higher education and early education. That put him at odds with Republicans who want to cut taxes with the additional surplus.

Transportation

MnDOT officials estimated the cost of the full list of the Governor’s transportation package would be $4.1 billion to $7.8 billion. They said projects would have to be cut from their list if the Legislature doesn’t approve the full $6 billion over the next ten years. However, they also suggested that some of the road and bridge projects could be done more cheaply.

Now that the State’s projected budget surplus has expanded to nearly $1.9 billion, it has taken some of the urgency out of Gov. Dayton’s argument that Minnesota needs a 16-cent per gallon tax increase on fuel to pay for an array of new road projects. House Speaker Kurt Daudt (R-Crown) says Democrats should back off their plan to raise the gas tax. Senate Majority Leader Tom Bakk (DFL-Cook) maintains that a 6.5 percent wholesale tax on gas is necessary because the State needs a long-term transportation funding solution and doesn’t want transportation to have to compete with education and health care for dollars. Senate Transportation Chair Scott Dibble (DFL-Minneapolis) concurs.

In January, House Republican leaders proposed a $750 million four-year plan that would spend roughly $200 million of the budget surplus. House Transportation Chair Tim Kelly (R-Red Wing) says he will release a revised Republican plan in a few weeks. The funding options he’s considering include using a portion of the State’s $1.9 billion surplus; and bonding and dedicating existing tax revenue from rental cars, auto parts sales and leased vehicles. The House Republicans will not raise taxes to fund their transportation plan. House Minority Leader Paul Thissen (DFL-Minneapolis) said if Republicans propose a comprehensive plan that focuses on the whole state, House Democrats will put up nearly half of the support needed to pass the bill.

Saving the Surplus

Senate Majority Leader Bakk says he wants to hold back a big chunk of the budget surplus as protection against a pending tax lawsuit against the State. He expressed concerns about the lawsuit the Kimberly-Clark Corporation filed over State corporate income tax liability calculations. He said if the State loses that case and other companies can make the same case, it could end up costing Minnesota $700 million. The Minnesota Tax Court is expected to take up the case later this month.

Legislative Budget Office

Legislation was introduced this week in the House and Senate to create a new nonpartisan legislative office to analyze financial matters. The proposed Legislative Budget Office would work with State departments to provide lawmakers with nonpartisan information on the fiscal impact of proposed bills. That role is currently performed by Minnesota Management and Budget (MMB).

House Speaker Daudt and Senate Majority Leader Bakk are sponsoring the measure. Speaker Daudt said the Legislature should take care of its own fiscal notes and not depend on the executive branch.

House Minority Leader Thissen said he thinks the current system works well. He said he is concerned that lawmakers could end up arguing over competing sets of financial numbers.

Governor Dayton said there’s no reason to duplicate the efforts of the professional analysts at MMB.

Social Security Tax Cuts

Members of the House Tax Committee heard several GOP-backed bills to exempt Social Security income from State taxes. Rep. Kathy Lohmer (R-Stillwater) said her bill would help keep retirees from leaving Minnesota. The bill would reduce the Social Security tax by 10 percent each year until the full exemption is reached. Rep. Dale Lueck (R-Aitkin) is proposing a faster, five-year phase out.

Social Security benefits are already exempt from state and federal taxes if an individual’s annual income is under $25,000. The threshold is $32,000 for married couples filing jointly.
Rep. Ann Lenczewski (DFL-Bloomington) said she’s open to considering the tax break. But she cautioned that its price tag will eventually reach $500 million per year.

All of the bills were laid over for possible inclusion in the House Omnibus Tax bill.

Sunday Sales

The House Commerce Committee held a hearing on legislation to overturn the ban on Sunday sales of growlers by craft brewers. Rep. Sarah Anderson (R-Plymouth) believes it is a huge opportunity for tourism in Minnesota. Craft brewers have been lobbying for passage of the law for two years. They say that the Sunday sales would be a natural extension of their business, since tap rooms are open on Sunday and they already sell beer that they make on the premises.

The Teamsters Union said changing the law to allow growlers to be sold on Sundays could reopen the labor contracts for 850 of its members who work in the liquor industry.

Committee chair Rep. Joe Hoppe (R-Chaska) said he may include the issue in a larger liquor bill.
The growler bill faces a tougher test in the Minnesota Senate, especially since it died there last year. Senate Majority Leader Bakk said the Senate will consider the bill. He said, however, that he doesn’t support allowing the sale of alcohol on Sundays because it could hurt liquor store owners who say they don’t want to be open on Sunday.

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MNsure Reform
Minnesota’s already low rate of people without health insurance fell even more over the past year, a survey from Gallup finds. At the beginning of 2014, just 9.5 percent of Minnesotans lacked health insurance, the fourth-best rate in the country. As of the start of 2015, that uninsured rate is now 7.4 percent, 2.1 percentage points lower.

Senate HHS Budget Chair, Tony Lourey’s (D-Kerrick) bill, SF139, went through a second committee this week. The bill seeks to eliminate the Board of Directors, and designates MNsure as a separate state agency. It also provides parity for MNCare and Medicaid with respect to compensation paid by MNsure to navigators and brokers to align with private insurers. Addressing the technology concerns, it requires MNsure to establish and maintain an agreement with MN.IT for IT services.

Sen. Lourey noted that the bill encompasses the three key recommendations included in the Office of Legislative Auditor report: governance structure, bring IT under MN.IT, and parity of pay to brokers for public and Qualified Health Plan (QHP) programs.

This year’s MNsure enrollment period was a technological success, but MNsure’s software still has major problems. The software meant to handle low-income people who qualify for public health programs is missing key features, wreaking havoc for counties as they try to manage their public assistance caseloads.

However, Board member Tom Forsythe reacted negatively to the idea saying, making MNsure a state agency would make the exchange less accountable than a board that makes decisions in meetings open to the public. He thought MNsure could concentrate solely on helping Minnesotans easily shop for and enroll in private health insurance plans (QHPs). Forsythe went as far as to suggest separating MNsure and DHS, allowing MNsure to have a much narrower vision. Sen. Sen. Lourey responded that this would contradict the one-stop-shopping premise of the Affordable Care Act. DHS Commissioner Jesson agreed with Sen. Sen. Lourey, saying that more than 90 percent of the people going through MNsure enroll in public programs.

Next stop Senate Commerce Committee.

Ebola Deficiency Funding/Pay Raises
Deficiency funding, usually a non-controversial measure, was held hostage for several weeks by the debate over the Governor’s recent pay raises for his Commissioners. Gov. Dayton maintained that they were a long time coming and the Republicans pushed back saying they were too large of a jump and thought the Governor should have notified them.

The agreed language includes the following one time appropriation from the General Fund.

  • $10.68 million to the Department of Human Services for the Minnesota Food Assistance Program ($246,000) and the Minnesota Security Hospital in St. Peter ($10.44 million);
  • $2.89 million to the Department of Health for costs of statewide Ebola activities and for grants to certain hospitals for Ebola-related expenditures; (Unity $221,000; Children’s $710,000; Mayo $413,000; and UMN $508,000; and $148,000 to EMS Board);
  • $1.35 million for Minnesota Zoo operations; and
  • $568,000 to the Department of Natural Resources for enforcement.

With respect to the salary issue, the language reduces the budgets of DHS, MDH and DNR for FY 2015 by the following: $16,000 for MDH, $6,000 for DHS, and $18,000 for DNR. It freezes salaries at 2014 levels through June 30, 2015 and then allows the Governor to authorize an increase on July 1 before oversight by the Legislative Coordinating Committees kicks in on July 2. There was some question about whether the raises would be automatic or require action by the Governor, so MMB requested clarification that Dayton would have the authority on July 1 to reinstate the increases.

The House and Senate appointed conferees on Monday. The conference committee met on Wednesday and adopted mostly House language with respect to the salary controversy. Votes and final passage on the conference committee report came Thursday in both chambers. The Senate held a lengthier debate over the salary issue with a vote of 35-29 and the House was quick to dispense with the report by a vote of 108-20. Gov. Dayton is expected to sign the bill.

Lottery

Legislation placing new restrictions on the state lottery is heading for another vote in the Minnesota Senate. The Senate Tax Committee passed the bill Monday. It now heads to the Senate floor. The measure bans the lottery from selling games at gas pumps and ATMs, as well as the online sale of instant win tickets.

During the committee hearing, Sen. Julianne Ortman, R-Chanhassen, told Minnesota Lottery Director Ed Van Petten that she thought the ATM sales were particularly “outrageous.” “I definitely draw the distinction between offering lottery tickets for sale, versus shoving them in your face and targeting certain individuals to buy them,” Ortman said. “It’s a very clear distinction, and when you made that leap I think you absolutely needed to come back and ask for authority through the legislative process and through statute.” Van Petten warned that a ban would put the lottery in violation of its contracts with vendors.

The House is also poised to vote on the lottery ban legislation. Lawmakers overwhelmingly passed the same bill at the end of the 2014 session, but DFL Gov. Mark Dayton vetoed it. He said earlier this month that he would veto the measure again but there is some indication the issue may have come up in negotiations over the deficiency bill.

Transportation

In making his case for higher state transportation taxes, Gov. Dayton points to a slowing flow of money from Washington for highway construction as a reason that he needs to call on Minnesota taxpayers.

As costs increase for building and repairing roads, Minnesota officials and transportation planners face a choice: scale back their annual construction programs or turn inward for money to narrow the gap.
Dayton is pressing for a new 6.5 percent wholesale tax on gas, which would be on top of the current 28-cent-per-gallon charge. That, along with higher vehicle registration fees and the sale of more bonds, would generate about $6 billion in the next decade to repair or replace 2,200 miles of roadway and 330 bridges.

Rep. Tim Kelly (R-Red Wing), House Transportation Chair, is not convinced raising taxes is the right course. House Republicans plan to seek a quick shot of new transportation funding this session, with a sizable amount drawn from a projected state budget surplus. Rep. Kelly has inferred that GOP members will wait until the 2016 session to figure out a long-term finance plan.

Minnesota’s transportation system is the fifth largest in the nation, the network of entities that care for the system is complex, and the funding streams are unpredictable.

SurveyUSA interviewed 600 Minnesota adults between Feb. 20 through Feb. 24. They answered questions about Gov. Dayton’s performance, transportation, commissioner pay raises and sports.  On the transportation question:

Governor Dayton proposes a sales tax on gasoline, higher driver’s license registration fees. and a higher general sales tax in the 7-county Minneapolis metro area to raise $6 billion over 10 years for new highways, bridges and mass transit. Do you approve or disapprove?

43% Approve
51% Disapprove
6% Not Sure

House Republicans propose spending $750-million on highways and bridges over four years by using some of the state’s budget surplus and other existing funds without raising taxes. Do you approve or disapprove?

75% Approve
17% Disapprove
8% Not Sure

February Forecast Projects Larger Surplus

Posted in Uncategorized

Minnesota Management and Budget (MMB) announced a short time ago that the surplus for FY 2017-2017 has ballooned to $1.869 billion. This $832 million increase is mostly the result of additional revenue collections. Here is the statement released earlier this morning:

“February Forecast Projects FY 2016-17 Balance To Be $1.869 Billion

Increase in Balance due to Higher Revenues, Lower Spending
FY 2016-17 revenues are now forecast to be $42.497 billion, a $616 million (1.5 percent) increase over November estimates. Current law spending is forecast to be $41.128 billion, $115 million (0.3 percent) below previous projections. Changes to revenue and spending in the current biennium add $107 million to the FY 2016-17 beginning balance. As a result, the projected forecast balance in the next biennium is now $1.869 billion, an increase of $832 million over the November forecast.”

Week in Review

Posted in Uncategorized

Pay Raises/Ebola Funding

Reacting to the firestorm over the Governor’s recent salary increases for his Commissioners, the House had inserted language to cut the funding for one year for the Departments of Health, HHS and DNR. In response, the Senate took up the bill late last week and in an effort to preempt the Republicans offering an amendment regarding the recent pay raises, Senate Majority Leader Tom Bakk (DFL-Cook) offered his own amendment to the deficiency bill last week, which includes Ebola deficiency funding, to suspend the Governor’s salary increases until July 1 to give the legislature time to assess the increases. Governor Dayton made his displeasure known saying he’d veto the emergency spending bill if it cuts the pay of his commissioners, delaying emergency money for the departments of Health, Human Services, and Natural Resources, and for the Minnesota Zoo.

The House passed the bill on Thursday and settled on an agreement worked out by the Governor and legislators to rescind the Commissioner pay raises until July 1, 2015, and return authority for future salary increases to the Legislative Coordinating Committee beginning July 2, 2015. The Governor would have one day, July 1, to decide to reinstate the salary increases without review.

The Senate and House bills must now be reconciled in conference committee. Sen. Bakk has indicated that the final version will be ready for floor action next Thursday.

MNsure Audit Report

According to the much anticipated Office of Legislative Auditor report on MNsure, in its first year of operations, MNsure’s failures outweighed its achievements. Several committees are holding oversight hearings on the report.

MNsure missed its enrollment target again this year. Just over 60,000 people signed up during open enrollment. That was below the target of 67,000 that the Board set in December, and far below the original target of 100,000 enrollees. Although many low-income residents have successfully signed on for public health programs, it’s failed to attract many middle-income customers to use the site to sign up for commercial coverage offered by private insurers.

Privacy

Privacy advocates are pushing to allow Minnesota voters to decide whether their electronic communication should be protected from unreasonable search and seizure, encouraging the Legislature to put the question on the 2016 ballot. Rep. Peggy Scott (R-Andover) responded by introducing HF327. Rep. Scott worries that law enforcement is overstepping its authority in acquiring data like financial and telecommunications records without getting search warrants.

A House committee held a hearing on the bill this week. No committee hearing is scheduled in the Senate and DFL Senate Majority Leader Tom Bakk said he’s reluctant to put any measures on the ballot next year.

Privacy issues are a major theme at the Capitol this year. There are also discussions about the privacy implications of police body cameras, police use of automated license plate readers, and electronic health records.

Transportation

In an attempt to increase public support for his $6 billion transportation proposal, Gov. Mark Dayton released a list of 600 state road and bridge projects Tuesday that he says won’t happen unless his plan is passed into law. Transportation Commissioner Charlie Zelle said about 72 percent of the projects on the list are in rural Minnesota and Twenty-eight percent are in the seven county metropolitan area.

The Governor is proposing to raise the wholesale tax on gasoline by at least 16 cents per gallon and to hike vehicle registration fees to pay for the road and bridge projects in his plan. He also wants to increase the sales tax in the metro area by a half cent to pay for transit projects.

House Transportation Chair Tim Kelly’s (R-Redwing) plan is to spend $187 million a year over the next four years by tapping the state’s budget surplus and by trimming other spending in the transportation department. He said he expects to announce a broader package in a few weeks.
Senate Democrats have backed a plan that resembles Dayton’s proposal but is more generous.

MNsure Audit Released

Posted in Uncategorized

The Office of the Legislative Auditor (OLA) released its much-anticipated review of MNsure’s first year of operations. MNsure is Minnesota’s online health insurance marketplace that was established in accordance with the Affordable Care Act, also known as Obamacare. Overall, the OLA concluded that “MNsure’s failures outweighed its achievements in its first year of operations. There were widespread problems with MNsure’s online enrollment system and customer service, causing difficulties for consumers, insurers, counties, and the Department of Human Services.” The report also made key recommendations for the Legislature:

  • The Legislature should amend State law to give the Governor, rather than the MNsure Board, authority to appoint the MNsure Chief Executive Officer. In addition, the Legislature should consider whether to retain the MNsure Board as a governing body or to make it purely advisory.
  • The Legislature should amend statutes to formally create a governance structure for MNsure’s enrollment system and ensure that MNsure’s future information technology work is subject to oversight from the Office of MN.IT Services.
  • MNsure and DHS should ensure that insurance brokers are fairly compensated for enrolling consumers through MNsure.
  • MNsure should improve its ability to access and analyze the applicant and enrollee data it collects.

Several committee hearings were held on the report immediately after it was released. There were predictable partisan attacks and defenses of the MNsure program. The Republicans focused on the overall cost of the program, IT glitches, and the lack of customer service. The Democrats highlighted the gains Minnesota has made in reducing the uninsured and that the program continues to improve. To a degree, there did seem to be some bipartisan appetite to pursue legislation to improve MNsure based on the OLA’s recommendations. One bill, SF 139, authored by Senator Tony Lourey, would eliminate the MNsure Board of Directors and make MNsure a cabinet-level State agency. It has passed one committee in the Senate.

While much of the report focuses on MNsure’s shortcomings in its first year, the report did contain a few bright spots for MNsure. The report concluded that 67 percent of individuals surveyed who purchased private coverage through MNsure would purchase the same coverage again and 43 percent of respondents indicated that MNsure lowered their insurance costs.

In any event, the report and the interest around it seem to indicate that this issue is not likely to fade into the background anytime soon.

Week in Review

Posted in Uncategorized

Pay Raises

Gov. Mark Dayton and the Republican House are sparring over state agency commissioner pay. Last month, Dayton increased pay for 26 commissioners and department heads by a total of $802,000. Republicans say the raises are outrageous. But Dayton said the salary hikes were necessary to attract and retain top talent to state government. He says it also puts state pay in line with other units of government. During a House Ways and Means Committee hearing on Monday to consider the deficiency bill, Rep. Drazkowski (R-Mazeppa) offered an amendment, which was adopted, for a one time reduction in the budgets of the agencies impacted by the deficiency bill to send a message over the raises.

Rep. Roz Peterson (R-Lakeville) has introduced a bill, HF666, which would give the Legislature the authority to approve the salary of certain executive branch officials.

Ebola Funding

On Monday, the House Ways and Means Committee passed, as amended, HF264, the deficiency bill which included money for the four hospitals that stepped in to assist with the Ebola crisis. The bill was amended to appropriate $2 million for Fiscal Year 2015 to the General Fund for the Commissioner of Health to provide grants to eligible hospitals and the EMS regulatory board. It breaks the funding down by each of the four hospitals and EMS board. (This language is also in Senate bill). The bill was placed on the General Register for floor consideration where it also lies in the Senate.

Lottery

Gov. Mark Dayton made it clear this week he will again veto legislation that tries to limit Minnesota Lottery sales. He criticized the bills that would ban lottery sales at gas pumps, ATMs and online. Lawmakers passed a similar bill at the end of the 2014 session, and Dayton issued a pocket veto.

Dayton outlined a possible new proposal for lottery proceeds, dedicating some of the money to a special state fund for school construction and college campus improvements. Dayton said it would help remind Minnesotans of the importance of lottery funds.

Transportation

In an effort to offset the projected cost of improvements, Gov. Mark Dayton wants railroads to pay significantly higher property taxes. Dayton’s plan would generate more than $20 million a year for the state and $45 million for local governments. It would expand the taxable property of railroads to include train cars, locomotives, bridges and other structures and update the method for determining the value of railroad property.

State officials identified $240 million in rail improvements that are needed statewide. Minnesota Revenue Commissioner Cynthia Bauerly said that much of the new tax money collected from railroads would go to cities, counties and townships along rail lines.

BNSF Railway spokeswoman Amy McBeth said there are questions about the legality of the proposal, saying it appears to be a violation of a federal law that precludes different treatment of railroads.

House Tax Committee Chair Greg Davids (R-Preston) called the proposed tax regressive, punitive and a non-starter. Senate Tax Committee Chair Rod Skoe (D-Clearbrook) said he wants to learn more. His panel will take a close look at the proposal later this month.