At the beginning of the session, we issued our Guide, and we made some prognostications and assertions about how the 2018 Minnesota Session might go. So this is where we are.
We said that we’d have three major bills attempted this session, A tax conformity bill, a bonding bill and a supplemental budget bill. So far this session we can see that both houses have the makings of those bills underway. The Governor, of course, has his proposals.
The Senate did not release budget targets and probably won’t. The House Budget Targets look like this:
- $107.45 million in tax relief, including tax simplification;
- $101 million for road and bridge repairs;
- $50.6 million to bolster the underfunded pensions and other fiscal transfers
- $30.23 million for student safety through school safety improvements and mental health programming;
- $15 million for expanded broadband internet across the state;
- $10 million to prevent a scheduled 7 percent cut to the Disability Waiver Rate System;
- $7.12 million for public safety;
- $5 million for higher education;
- $750,000 to address chronic wasting disease in cattle; and
- $250,000 to support mental health counseling for farmers.
- State Government Finance got a negative target. They are cutting $7 million from their budget.
- $30.82 million will also be taken out of the stadium reserve balance and used for funding 3 veterans homes (see below).
Since we are in a budget surplus, all of this extra spending comes from the surplus left over after the required amount of money has already gone into the short-term cash reserve and long-term “rainy day fund.” So yes, yet again we are spending the surplus in Dayton and the Legislature's supplemental budget plans, although about one-third of the spending is set aside for tax relief in a tax conformity bill.
Tax Conformity—The Governor and the House have each released their omnibus bills as of April 22. They match up in very few areas. As previously mentioned, the Governor wants to take back a few provisions from last year’s tax bill. For our take on the House bill click here.
Bonding— The House has a bonding target of $825M. So far, the two bodies’ committees are hearing lots of bonding bills for different projects. Which will fit under the House and Senate numbers? Recall that the Governor has a $1.5B proposal. Lots of horse-trading before this is done. One thing not in the House bonding proposal are three veterans homes, in Bemidji, Preston, and Montevideo. The House is proposing to fund them from excess funds in the Stadium account.
Supplemental Spending—There are omnibus bills for each of the main budget areas. Each of the bills will be heard by the Ways and Means and Finance Committees this week and will head to the floor of each body.
Legislature held hostage: Last year’s legislative funding line-item veto was not overturned by the courts. The Governor decided to restore it himself in the first bill of the session. HF 399 now Chapter 100. Of the five conditions he wanted before he would approve funding, three of the provisions are in his tax proposal. These are replacing the accelerator on tobacco products, restoring the lower estate tax threshold (so that more estates would be subject to the tax) and undoing the freeze on the commercial-industrial property tax
Who is the Lt. Governor: Aside from some snarky DFL Senators calling Senate President Michelle Fischbach, the Lt. Governor, a lawsuit about whether Sen. Fischbach could hold both offices was dismissed. However, there is another Lawsuit pending. Also, there are rumors that Senator Bakk, the minority leader has a few cards up his sleeve on this subject and may wait until things get dicey toward the end of the session. Recall the context that the Senate GOP has a one-vote majority. It’s too late to call a special election. The House DFL is already down one seat due to the resignation of Rep. Paul Theisen for his MN Supreme Court appointment. No special election will be held there either. In the case of the House, it does not matter since the DFL was already down 20 votes, but the Senate’s majority is on a razor’s edge. That means every omnibus bill they try to pass will potentially be at risk, forcing Fischbach to step aside could create a virtual deadlock.
Regulation: This session has seen a lot of regulatory and re-regulatory bills. Some have been industry endorsed like a bill attempting to regulate ridesharing in exchange for pre-empting local jurisdictions from creating their own regulations and changes to the regulation and fee structures of various professions. In agriculture, there is a standoff between the governor and the legislature on nitrate fertilizers and a continuing struggle over the Governor’s buffer strip regulations enacted over the past several years. The Governor’s attempt at unilaterally imposing water quality standards has run into problems. The House has passed a bill deregulating water quality standards for wild rice and required the MPCA to come up with new standards.
Also related to regulation, there is still a lot of discussion about the “Opioid Stewardship” issue. Who should pay for the increase in opioid addiction and how should they pay? We suggested that this would be a hot topic of the session and we were correct – and it still hasn’t been resolved. Governor Dayton and some legislators want to “make the drug companies pay” for what some argue are overproduction, advertising and other actions taken in the past. As long as that mechanism is a tax on pills, the cost of which will be passed on to lawfully prescribed pain patients, we’ll continue to oppose it. We also find the insistence on government interference in medical judgment and the invasion of privacy and potential for abuse by creating yet another information registry, troubling.
MNSURE: We’re still treading water on MNSure. No new bailouts to individuals suffering under the cost escalation of the individual market this year, however, the money set aside for that program turned out to be underutilized. The Dayton Administration was about to sweep that money back into the General Fund for other purposes, but the budget resolution passed by the House indicates that that money will be put back in the Budget Reserve where it came from. Also in the HHS omnibus bill, we see that there are more limits being placed on MNSure’s spending and activity, more management of the federal waiver process and Dayton’s proposals go in the opposite direction.
MNLARS: An early tussle between the “I’ll take the blame” Dayton Administration and the Legislature resulted in about $10M going to try to fix the dangerously flawed new Auto Registration and Licensing system. The Legislature is still trying to gain control over the oversight, and there were some mechanisms built into the bill that gave them the money. However, we all know that it’s going to cost more than that eventually. Another $9M has already gone to the Deputy Registrars who lost business over the fiasco. Why? Well, for one thing, they pay to be deputy registrars and amortize that cost by the business they get. The state saves money over not having to open government offices all over the state staffed with State employees. It’s a good system that has worked well for the most part until the MNLARS fiasco.
Pensions: Your lack of planning doesn’t constitute an emergency on ours, Governor Dayton. The legislature passed two earlier versions of this bill, and the Governor Vetoed them.
We wrote extensively about the Pension bill already. Yes, there are good reasons to pass a pension bill that contains some adjustments to the assumptions and increases in funding that will come from both employers (government) and employees (state and municipal workers, teachers) but the idea that it needs to happen this session is only because it’s Dayton’s last year. The Senate has already passed it, but that’s mainly because Sen. Julie Rosen, the Pension Commission chair likes to shepherd big bipartisan bills, such as stadium funding and the opioid crisis—and she’s good at it. To us, however, this year’s bill is just a bigger band-aid on a festering wound.
How about we revisit this next year with a new Governor?
The Endgame. With the Senate’s slender majority and a Governor who has signaled that he’s not interested in an overtime session, the House is looking like it may try to go for a “minimum” agreement bill –putting items that the Governor might agree to in one giant omnibus bill. The first merger has already taken place with the E-12 Education and Higher Ed bills. We might be seeing a mammoth “garbage” bill or multi-part omnibus bill out of this session, whose single subject is “supplemental spending.”
Update: Ways and Means Chair Knoblach announces the "roadmap" to the end of the session which pretty much conforms to this merger of bills, into 4 major finance bills plus a few bills falling outside the four, like the Legacy supplemental bill. There is a possibility that all the bills will link up into one big bill and Knoblach intimates that one big bill may be the way it links up on the Senate floor, to make it easier to pass.