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Minnesota Government Update


April 17, 2009


Minnesota State Legislature: Crunch Time
Legislators in the Minnesota House and Senate are scrambling to find solutions to Minnesota’s $4.6 billion deficit, while facing a constitutionally mandated adjournment on May 18.  The various House and Senate budget proposals are making their way through committee and should be on the floors of the respective bodies next week.
 
Budget and Taxes
The DFL-controlled Legislature and Republican Governor Tim Pawlenty still face a $4.6 billion hole in the 2010-11 budget and, so far, there's no agreement on how to fix it.  Pawlenty's approach inflicts the least short-term pain but could leave Minnesota with a larger deficit in the future.  Pawlenty’s plan would cut $1.3 billion in spending, borrow $1 billion through the sale of long-term bonds, and temporarily shift $1.3 billion by delaying state payments to schools.  He also would tap the state's Health Care Access Fund for $700 million.  His budget includes $3 billion in one-time money, not including $800 million in federal stimulus funds.
 
Committees in both the House and Senate are working on tax legislation to increase revenue to the state.  House Taxes Committee Chairwoman Ann Lenczewski said she will reveal her $1.5 billion proposal on Monday, while her counterpart, Senate Taxes Committee Chairman Tom Bakk, said his $2.2 billion bill will be revealed on Tuesday.
 
Representative Lenczewski’s bill will likely include a decrease or repeal of the corporate income tax, a series of tax hikes, including an unspecified income tax increase and possibly higher taxes on cigarettes, smokeless tobacco and alcohol.
 
In the Senate, Senator Bakk said his bill will raise approximately $2 billion in income taxes, most likely spread broadly among taxpayers.  He said he would like to avoid creating a new top income tax bracket for the wealthy, saying it could keep investors from bringing jobs to the state.  Senator Bakk implied that his bill will not significantly broaden the state sales tax or raise sin taxes saying the income tax is more progressive.  Bakk also said he aims to raise revenue to pay for job-creating tax breaks, such as spending on heavy equipment and renovating historic buildings.
 
Bills for the most complicated category of spending, the health and welfare programs that make up a third of the state budget, were delayed in both chambers as lawmakers waited for the Administration to produce detailed fiscal notes on these proposals. Those calculations are more complicated this year with budget cuts and the federal stimulus requirements.
 
But top Democrats on a stimulus oversight panel challenged Pawlenty through his top finance official, Management and Budget Commissioner Tom Hanson, to public budget negotiations instead of the usual closed-door talks.  Hanson wouldn't commit the Governor, but said he's open.  "I'll show up anywhere in any forum you want as the Governor's chief negotiator," he said.
 
Both bodies say they will present the nuts and bolts of their plans this month.  The timing will give DFLers just weeks to somehow build public support and round up enough votes to override an almost certain veto.
 
Bonding
Pawlenty has indicated an interest in working with DFL leaders in producing a bonding bill, a borrowing measure that funds construction and other capital improvement projects.  Some Republicans have raised concerns that in such a poor economic climate, now is not the time to spend.
 
The House has passed a $200 million bonding bill; the Senate version is $329 million.
Reconciling the two versions will happen in a joint conference committee.  The fist conference committee, chaired by Senator Langseth and Representative Hausman, Chairs of the Capital Investment Committees in the House and Senate respectively, met for the first time this week for an informational hearing.  The committee will decide on a compromise; however, Pawlenty has said he feels relatively comfortable with a $200 million ceiling.
 
Governor Pawlenty Requests Stimulus Funding for Rail
Governor Tim Pawlenty has signed on to an effort by eight Midwestern governors to apply for federal stimulus funds for high speed rail lines from Chicago.  Governor Pawlenty and the Governors of Wisconsin, Illinois, Missouri, Indiana, Iowa, Michigan, and Ohio formally signed a letter to U.S. Transportation Secretary Ray La Hood asking for his support in obtaining some of the $8 billion that has been earmarked for high speed rail projects.
 
Earlier this month, Pawlenty ordered a statewide study to determine the best rail projects for which Minnesota should pursue stimulus funding.
 
The Governors' letter outlined a first phase of a high-speed rail network that would connect Chicago to Madison, Wisconsin, the Detroit area and St. Louis.  Those rail lines could be operating by 2014 at an estimated cost of $3.4 billion, Extending the Chicago-Madison line to the Twin Cities would be part of the projects' second phase.
 
CapX 2020 Project Moves Forward
An initiative by Xcel Energy and Great River Energy to upgrade and expand the electric transmission grid has moved forward as Minnesota regulators ruled Thursday that there is a need for additional transmission capacity in the region.  The plan includes three 345-kilovolt power lines touching four different states.
 
The decision by the state Public Utilities Commission is the first major step in a regulatory process that's expected to take at least another 18 months.  A broad coalition of landowners, environmentalists and renewable energy advocates had pressured the PUC to deny a certificate of need.  Those who live near the proposed lines brought up concerns about property values and health risks including that the high-voltage lines could disrupt internal heart defibrillators and pacemakers. Environmentalists raised concerns about the lines, arguing that they are in conflict with the state's renewable energy and conservation goals.
 
The PUC did adopt wording that left some renewable energy advocates more supportive of the line between eastern South Dakota and near the Twin Cities.  The Brookings line will be required to carry 700 megawatts of renewable energy, mostly from wind power.

For up-to-date information about the Minnesota Legislature, tune into Almanac: At the Capitol. This lively and informative program is aired Wednesdays during the legislative session on Twin Cities Public Television at 7:00 PM on Channel 17 and at 10:00 PM on Channel 2.
 
Almanac: At the Capitol is seen on all public television stations throughout Minnesota and in Fargo. Winthrop & Weinstine is the exclusive law-firm partner and a sponsor of the program.
 
For more information and to see previous broadcasts, check out the Almanac: At the Capitol Web site at http://tpt.org/aatc/.
 
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