A weekly message from your Senator

Dear Constituents and Friends,

After a marathon two weeks of session taking up all the omnibus bills to be considered this session, the legislature is adjourned for the Passover/Easter break.  We now move into negotiations with the Governor and both the House and Senate through conference committees. The highlights of the session so far are summarized below. Please continue to contact me with your questions or concerns on the budget and bills moving through the Senate as we wrap up the 2017 legislative session in May.

Enjoy the Spring weather!

Sincerely,

Melisa

Tax bill spends too much, delivers too little

The Senate's tax bill passed in early April and contains many priorities that have received bipartisan support in the past. However, the bill spends $900 million of the state’s one-time budget surplus on ongoing tax expenditures that balloon in future years. It leaves little room to invest in education, health care, and other priorities important to Minnesota, and it gives away too much tax relief to wealthy businesses and individuals.

Similar concerns exist with the House version of the bill, which spends $1.35 billion – nearly all of the state’s existing one-time surplus. The conference committee will begin meeting after the recess to negotiate a compromise with the Governor, whose tax proposal invests $280 million in tax relief that is much more targeted to average, working Minnesotans. (SF 2255)

Federal tax conformity

Congress typically makes several changes to federal tax code toward the end of most tax years. Until states take action to update their tax codes to match federal law, taxpayers face confusion and, often times, higher tax bills. This year, early in January, the Senate passed a conformity bill that delivered $21 million in tax relief to at least 220,000 Minnesotans.

Some of the groups most likely to see additional refunds include taxpayers with tuition costs, educators with classroom expenses, homeowners paying mortgage insurance premiums, business owners, and taxpayers receiving the Working Family Credit.  (HF 2)

Concerns with the Senate bill:

• Future spending: The bill has $1.1 billion in ongoing costs, which grows even larger by 2022-2023. Freezing the statewide business property tax rate alone will cost the state $1.2 billion over the next 10 years, and 53% of that relief goes to out-of-state building owners, not Minnesota businesses.

• Little bang for the buck: The signature piece – a first-bracket rate cut – spends $400 million but only amounts to an average savings of $2.15/paycheck. The estate tax cut only affects about 1,000 taxpayers and amounts to about $116,000 savings per taxpayer once fully phased in.

  What’s missing from the tax bill:

  The bill is silent on several middle-class priorities that are proven tools to lift up working families. Key items missing from the bill include:

• Working Family Credit increase: This tax credit is a proven tool to lift low-income working families into the middle class. At least 346,000 households receive the credit. In Greater Minnesota, 13.8% of tax-filing households receive the credit, compared to 11.8% in the seven-county metro area. Of the total credits paid out, 52% go to greater Minnesota taxpayers.

• State aid to cities and counties: The bill adds $6 million to County Aid and $12 million to Local Government Aid to cities but actually may do more harm than good, since it is a one-time payment that may penalize some municipalities when it is rescinded one year later. Also, 50 counties have fallen off the county aid formula since 2005, and this bill does nothing to address that need.

Transportation

This bill maintains base funding for many of the agencies under the committee’s purview. The bill shifts about $400 million away from the general fund through rededicating a portion of the sales tax revenues from vehicle repairs and auto parts, rededicating the sales tax on short term car rentals (6.5%), rededicating the rental car tax (9.2%), and rededicating portions of the motor vehicle lease sales taxes. The tails target increases to $500 million. The bill adopts a few of the Governor’s smaller recommendations for the Department of Transportation (MnDOT), but none from the Department of Public Safety (DPS). There are also many policy provisions included. (SF 1060)

Governor's concerns:

• The additional funding that would be provided if this bill were enacted is insufficient to adequately address the needs of the state and local systems. In addition, the exclusive reliance on funding from sources that history has proven to be unreliable makes it questionable whether the funding amounts will be available in future years.  
• Facing this shortfall, Metro Transit will be forced to cut service and increase fares. Even with a fare increase of 25 cents, The Met Council estimates that the bill will force Metro Transit to cut regular route service by nearly 17% by 2018.
• Eliminating the commitment to fund 50% of light rail operation expenses jeopardizes projects’ future, and has real impacts on the state. For Southwest Light Rail, a $700 million civil construction package has been put out for bid on the project. This investment will bring federal dollars back into the state, and help the region remain competitive with peer regions in attracting talent.

Other concerns:

• This budget is another example of shifts. The transportation budget bill takes $400 million from the general fund, which would otherwise go to fund schools, senior services, and veterans.
• Minnesota needs sustainable, ongoing, and dedicated funding for roads, bridges, and transit.This is not a reliable or sustainable transportation plan.
• Transit is an integral part of Minnesota’s success as a state. Workers, students, and families use transit to get to work, school, and doctors’ offices. The legislature needs to fund transportation and transit in order for Minnesota to grow and attract workers and help older Minnesotans stay in their communities.

Neutral REAL ID passes Senate

The Minnesota Senate passed a neutral REAL ID bill that would allow Minnesotans to board flights and visit their loved ones on military bases without unrelated and controversial language that stymied the bill earlier this session.

An earlier version of the REAL ID bill failed to pass the Senate with a strong bipartisan vote against it. Senators have been asking for a neutral REAL ID bill since the first compliance bill passed in 2016. The controversial and unnecessary rulemaking language was removed. The bill is now neutral and has bipartisan support. If passed into law, the legislation will bring Minnesota into federal compliance with REAL ID requirements.

After more than a decade of back and forth with the federal government and years of fighting at the Legislature, lawmakers got together not as Democrats and Republicans, but as Minnesotans who understood the need to compromise to pass this important bill.(SF 166)

Education 

The E-12 education omnibus bill provides a $300 million investment for Minnesota’s public school system, falling far short of the Governor’s $709 million budget proposal and short of what the leadership promised throughout the legislative session. The money provides a 1.5% formula increase each year to fund education programs for Minnesota students. The bill also cuts funding from successful programs to meet the low target and the budget “tails” in FY2020-2021.

This bill does not provide the necessary funding to meet the goals of a 2% per year increase in the Basic Education Funding formula, a promise that was reiterated by the chair and other education leaders during the session. It provides a 1.5% increase on the formula each year of the biennium.

The bill funds some small grant proposals from bills heard throughout the session. It does make permanent a compensatory pilot grant project that spends $13 million over two years and over $14 million in FY20-21 and beyond. The Education Partnership Coalition funding is reallocated, cutting the funding for the Minneapolis Northside Achievement Zone and St. Paul Promise neighborhood programs by $1.2 million to provide funds to the Red Wing, Northfield, and St. Cloud programs. Two million dollars is provided for Early Learning Scholarships over the current $100 million appropriation, and $5 million is provided for the Tiered Licensure and Board of Teaching transition. (SF 718)

Governor’s concerns:

• The Senate’s bill is “slim” – the target is inadequate to meet the needs of Minnesota’s school districts.
• The 1.5% formula increase doesn’t match the Governor’s request and can’t meet the demands of educational program needs for students. Education advocates agree that at least a 2% increase – if not more – is essential for the biennium.
• There is no additional investment in voluntary pre-K funding. The lack of investment means that the 13,800 children in over 269 school districts will continue to wait for public pre-K openings.
• The Perpich Center for the Arts should continue to administer the arts integration grant.
• Teacher licensure provisions threaten teacher quality and preparation requirements by allowing Tier 1 teachers to be granted unlimited licenses with only school board support and little teacher preparation.
• Changes to alternative teacher preparation requirements also undermine teacher quality by eliminating student teaching, removes the partnership with a higher education institution, and makes approval of new programs by the Educator Licensing Board mandatory.
• Lack of funding for Minnesota Department of Education technology upgrades threaten staff’s ability to disseminate state funding to school districts in a timely fashion.

HHS omnibus budget bill

The Senate approved a bill to provide funding in FY 2018-19 for the Department of Human Services (DHS) and Department of Health (MDH) as well as many health-related boards, but the bill is predicated entirely on shifts and gimmicks. Through payment and policy delays the bill pushes over $454 million of HHS spending into the FY 2022-23 biennium, funding ongoing programs with one-time money and using budget tactics for a time when the state has a deficit not a $1.65 billion surplus.

With a general fund cut of $335 million in FY 2018-19, the bill cuts funding for child care assistance, reimbursement rates for hospitals and doctors, funding for the St. Peter Security Hospital, funding for assessment and support planning for long-term care services, and includes a 8.5% reduction for the Department of Human Services central office and a 7% base reduction for the Department of Health. The bill doesn’t include funding for child protection, foster care or permanency programs, funding for the St. Peter Security Hospital Staffing, and many of the proposals in the bill will take the state out of compliance with federal requirements. 

Reinsurance bill becomes law

A bill that spends nearly $543 million over two years on a proposal intended to stabilize Minnesota’s individual health insurance market has become law in Minnesota. The goal of the new reinsurance law is to remove high-cost, high-risk enrollees from the individual market to keep rates low for the remaining individual market enrollees. Under the new law for the 2018 insurance year when an enrollee reaches $50,000 in insurance claims, 80% of claims would be paid by the state’s reinsurance program until those claims hit $250,000. After 2018, the program board will set the payment parameters with an attachment point of at least $50,000, a coinsurance rate between 50% and 80%, and a reinsurance cap of $250,000 or less.

Minnesotans need health insurance reforms that will offer the state long-term stability. This costs $543 million and only provides temporary relief for two years. While the goal of the legislation is well-intentioned, this proposal takes over $400 million in funding from the Health Care Access Fund (HCAF), a fund intended to be spent on health care for low income Minnesotans, to help insurance companies. Under the bill, insurance companies get paid for high cost claims, but there is no assurance from insurance companies that they will make their rates more affordable or expand their provider networks across the state. (HF 5)

Health insurance premium assistance

Early this session, a bill was signed into law to provide immediate relief to Minnesotans who are struggling with increased health insurance premiums. The bill reduces 2017 health insurance premiums by 25% for Minnesotans, regardless of their income, who purchase their insurance on the individual market and do not receive federal tax credits. The new law is reducing the average premium increase facing Minnesotans in the individual market from 55% to 16%, and some families are saving as much as $594 per month on their premiums.

Under the law, the 25% subsidy is retroactive to January 2017. $312 million was appropriated for the premium relief from the budget reserve account and $157,000 was appropriated to the Office of the Legislative Auditor for the purposes of auditing the premium assistance program.

MinnesotaCare buy-in

A proposal included in the Governor’s budget would allow individuals and families buying insurance on the individual market of any income to buy in to the state’s MinnesotaCare program, offering them quality health care at a price they can afford.

Just like health insurance policies offered by commercial health plans, Minnesotans who want to take advantage of this program would purchase their policy and their premiums would pay for the cost of their insurance coverage. Other than a one-time startup cost of $12.9 million, the plan would require no extra ongoing costs for Minnesota taxpayers. MinnesotaCare has just 3% overhead, making it an efficient, competitive, and accountable alternative to commercial health plans.

Due to the rising premium increases and the limited number of participating health plans on the individual market, Minnesotans need more affordable and accessible health insurance options. This plan would increase choices, encourage competition in the marketplace, and ensure that all Minnesotans have access to affordable insurance with a comprehensive network of health care providers. Unfortunately, this proposal was not included in the HHS budget bill or the reinsurance bill, despite numerous attempts to include it as an amendment. (SF 781, Article 4, Section 63)