April 30, 2009
Minnesota State Legislature: Racing Toward Deadline
Approaching a May 18 constitutionally mandated adjournment deadline, the Minnesota House and Senate are scrambling to pass bills in order to find solutions to a $4.6 billion budget deficit for the next biennium. Conference Committees on the major tax and budget bills have begun meeting with a deadline of May 7 to report these bills to the floor.
Comparing House-Senate Omnibus Bills:
Omnibus Tax Bill
The tax bills in both the House and the Senate are proving to be very controversial in both chambers of the Legislature. The Senate Omnibus Tax Bill is authored by Senator Tom Bakk (DFL-Cook). The bill passed last Friday off the Senate floor by a close 35-31 vote. The House bill, authored by Representative Ann Lenczewski (DFL-Bloomington), passed by only one vote, 68-67.
House Tax Bill, HF 2323 (Lenczewski): Raises $1.8 billion in revenue
- Reduces corporate income taxes
- Does not include the upfront exemption to the capital equipment tax
- Conforms Minnesota’s individual income tax and corporate franchise tax to most federal changes enacted in the 2009 federal stimulus law except for deductions for deferral of income from discharge of indebtedness, motor vehicle sales taxes, and unemployment compensation
- Imposes a 9% income tax rate at $300,000 for joint filers (new fourth tier)
- Disallows itemized deductions for mortgage interest, real and personal property taxes and charitable contributions and replaces them with credits
- Eliminates individual and corporate franchise tax preferences for JOBZ, Biotechnology and Health Science Industry Zones and International Economic Development Zones, with the exception of the JOBZ jobs credit
- Doubles R&D tax credit
- Raises the cigarette tax to a total of $1.77 (excluding the sales tax)
- Raises alcohol tax 3-5 cents per drink
Senate Tax Bill, SF 2074 (Bakk): Raises $2.2 billion in revenue
- Reduces corporate income tax
- Creates MN investment company tax credit
- Includes the capital equipment upfront exemption
- Adjusts the three tiers and adds a fourth tier for personal income taxes
- Senate bill does NOT raise sin taxes
The House needs to raise $1.5 billion to meet its budget target, and the Senate needs to raise $2 billion.
Health and Human Services Omnibus Bill
The Senate Health and Human Services Omnibus Bill, authored by Chair Linda Berglin (DFL-Minneapolis), passed the Senate floor on Monday, with a 40-23 vote. After nine hours of discussion, the House passed Representative Tom Huntley’s (DFL-Duluth) Health and Human Services Bill 85-49.
Both the House and the Senate versions of the bill depend on tax increases to keep thousands of Minnesotans on healthcare; albeit the Governors more controversial healthcare proposal which tightens eligibility standards for public healthcare plans that would throw more than 60,000 Minnesotans off the public health care rolls (without the federal stimulus money, that number would climb to 113,000).
Pawlenty also proposes to eliminate the Health Care Access Fund, the dedicated revenue stream used to underwrite the MinnesotaCare program for working Minnesotans who would otherwise lack health insurance while retaining the Fund’s health care provider tax and diverting the revenue into the general fund.
Both the House and the Senate retain the HCAF as a dedicated source for MinnesotaCare and not only resist reducing eligibility for the public health plans, but also seek to insure an additional 20,000 children by removing some requirements for enrollment.
The Senate and House bills both contain cuts; the Senate bill contains $600 million in spending reductions compared with $400 million in the House. Governor Pawlenty has proposed $1.7 billion in spending reductions in health and human services.
The Senate bill imposes higher fees and larger spending reductions on nursing homes than the House bill. Senator Linda Berglin, Chair of the Senate Health and Human Services Budget Division, stated that this was done to mitigate the cuts to hospitals. According to Berglin, hospitals are now in greater financial distress than nursing homes, with more uninsured and people with nothing left in their health savings accounts. The House cuts hospitals by three percent as compared to one percent in the Senate. However, the two percent difference is miniscule compared to the cuts towards hospitals proposed by the Governor. Data on 139 hospitals across the state shows that the impact of the Governors proposal on these facilities would amount to $763 million, compared with a $76 million impact from the cuts in the House bill.
Omnibus Public Safety Bill
The House bill, authored by Public Safety Policy and Oversight Chair Debra Hilstrom (DFL-Brooklyn Center), passed unanimously last week. The Senate bill, considered more controversial, authored by Judiciary Chair Mee Moua (DFL-St. Paul), passed 36-21. The bill makes policy changes related to criminal law, predatory offenders, courts, licensing of drivers, corrections and emergency communications.
The House bill creates a lime-green license plate for the cars or motorcycles of registered predatory offenders. The House also prohibits predatory offenders on intensive supervised release from enrolling in social networking sites or instant messaging programs that allow participation of children under the age of eighteen. The House and the Senate both expand current law to further prohibit the solicitation of children via electronic sources; the House expands language to include telecommunications, wire, or radio communications system that can store electronic data, and the Senate expands language to include any other electronic device capable of electronic data storage or transmission. Both the House and the Senate include provisions allowing peace officers twenty-four hours to make an arrest on suspicion of domestic abuse.
Omnibus Agriculture and Veterans Affairs Bills
Representative Al Juhnke (DFL-Willmar), Chair of the Agriculture, Rural Economies and Veterans Affairs Finance Committee, authored the House version of the bill, which passed the House on an 83-49 vote. The companion in the Senate, authored by Agriculture and Veterans Affairs Budget and Policy Division Chair Senator Jim Vickerman (DFL-Tracy), was passed 52-12 by the Senate. The House amended the bill to shift $2 million from the Department of Agriculture for use on veterans programs. The House bill appropriates $74 million to the Agriculture Department from the general fund, while the Senate appropriates $76 million.
Both the Senate and House versions reduce Minnesota's payments to ethanol producers. The Senate makes a one-time reduction of $2.2 million; paying $15.1 million in producer payments in FY2010 and $12.9 million in FY2011. The House version allocates $12.1 million in producer payments for each year of the biennium. During the floor debate, an amendment failed to pass on a 49-81 vote that would have canceled the producer payments altogether. Governor Pawlenty, in a letter to Chairs Juhnke and Vickerman, voiced his opposition to the ethanol producer payments.
Omnibus Capital Investment Bill
The Senate bill, authored by Capital Investment Chair Senator Keith Langseth (DFL-Glyndon), has $329 million worth of projects. The House bill, authored by Capital Investment Chair Alice Hausman (DFL-St. Paul), borrows $200 million. The conferees have reached an agreement on a roughly $275 million target. Governor Pawlenty, in a letter to Langseth and Hausman, said that amount is simply too large.
The Senate bill includes $24 million for a new Bell Museum of Natural History at the University of Minnesota's St. Paul campus. Both bills include about $13 million for a Center for Business and Technology at North Hennepin Community College. The Senate includes $26 million for flood-hazard mitigation grants. The House included $12.7 million for flood mitigation. Governor Pawlenty said $50 million is needed to pay for flood-mitigation projects. The Senate includes $5 million for the states share of environmental analysis of a high-speed rail line connecting Chicago, La Crescent, Winona, Red Wing and the Union Depot in downtown St. Paul. The House has $7.5 million for commuter and passenger rail corridor projects.
Omnibus Higher Education Bill
The Senate bill, authored by Higher Education Budget and Policy Division Chair Senator Sandra Pappas (DFL-St. Paul), passed 41-23. The House bill, authored by Higher Education and Workforce Development Finance and Policy Division Chair Tom Rukavina (DFL-Virginia), passed 86-46. The total size of the House bill is about $3.1 billion, which is about $80 million more than the Senate bill. The Senate appropriates more money from the general fund than the House, but the House provides more federal stimulus dollars. Of the $3.1 billion in the House proposal, $2.8 billion is from the general fund. The Senate spends $2.9 billion from the general fund.
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/.