February Budget & Economic Forecast
This week the Minnesota Management and Budget office (MMB) presented the state of Minnesota’s February 2019 economic forecast. The February forecast is one of two semiannual snapshots of the state’s fiscal stability (the other forecast comes in December of each year). The last forecast, completed in December 2018 projected the state had over a $1.5 billion surplus. But with widespread signals that the national economy is slowing, legislative leaders have urged their colleagues to proceed with caution as they awaited the February forecast, hoping the national economic trends would have less impact in Minnesota.
As expected, the projected budget surplus shrunk nearly $500 million to $1.05 billion. MMB pointed to slower economic growth and lower tax collections to account for the change. Democrats explained the change by pointing to federal tax law and trade policies that are hurting Minnesota’s economy. Republicans, however, seized on the change to argue that wealthier, higher taxed Minnesotans are leaving the state for more tax-friendly residences.
Despite the lower forecasted budget, the state’s unemployment rate remains well below the national average at 2.8 percent while job vacancy rates continue to increase providing Minnesotans with a healthy labor market for jobs.
For more on the February forecast visit MMB’s website here.
Governor’s Bonding Proposal
On Tuesday, Governor Tim Walz released a $1.27 billion capital budget proposal. The governor announced the details of his bonding bill from Fort Snelling’s Upper Post Veteran’s Community, a multi-unit complex that provides affordable housing to homeless veterans. The governor chose the location to feature his $150 million commitment to housing infrastructure.
Overall, the governor divided his first-ever bonding proposal into three themes: 1. Preserving and Renewing State Assets; 2. Grants to Minnesota Communities; and 3. Investing in Our Future.
Preserving and Renewing State Assets
Half ($631 million) of the governor’s bonding proposal is set aside for asset preservation of the state’s existing public buildings and infrastructure. This includes nearly $270 million in deferred maintenance projects on the University of Minnesota and Minnesota State campuses, $109 million to maintain state parks managed by the Department of Natural Resources, $25 million to update the Minnesota Zoo, $20 million for Minnesota’s correctional facilities, and $12.7 million to modernize Minnesota’s National Guard Readiness Centers.
Grants to Minnesota Communities
The governor’s capital proposal contains investments in transportation, recommending $100 million each in the Local Road Improvement Program and the Local Bridge Replacement Program, and $52 million in rail grade separation projects.
The governor emphasizes safe water by recommending $67 million to help communities across the state upgrade their water infrastructure through low-interest loans administered by the Public Facilities Authority. Finally, the governor continues to invest in various programs targeted at making Minnesota an economically competitive state such as the Business Development Public Infrastructure program, and the Greater Minnesota Business Development program.
Investing in Our Future
Other than the governor’s $150 million recommendation for housing, he proposes $20 million to expand bus rapid transit and $11 million to leverage federal funding for passenger rail.
Although not a formal bonding year at the legislature, the governor argued that low-interest rates, increasing construction costs, the large amount of need, and the state’s $3 billion capacity are all reasons to make these investments now. Republicans, however, have indicated their lack of support for such a large proposal in a non-bonding year, stating it would be more appropriate for the 2020 session.
Find more information on the governor’s bonding proposal here.
Other Issues
Gun Control Bills Receive Hearings in the House
On Thursday, the House Public Safety committee drew overflow crowds to a five-hour hearing on two bills that would expand background checks for gun purchases in Minnesota.
House File 8 (Pinto) would require private gun sales to include a background check and House File 9 (Richardson) establishes a procedure for family members, guardians, or law enforcement officers to petition for a protective order preventing a person to possess a firearm for a fixed period due to an extreme risk that person poses to the public.
Both supporters and opponents packed the Capitol to voice their opinions on the two proposals in the House Public Safety Committee that went past midnight.
Both bills passed out of the Public Safety Committee along party lines.
Hands Free Cell Phone Bill Moves in Both Houses
Senate File 91 would prohibit the use of a cellular device while driving and increase the penalty for doing so from $275 to $300. The bill has been moving quickly through several committees in the Senate and the House with leaders from both parties assuming it will become law this year.
Tobacco 21 Receives Bipartisan Support
An attempt to change the age for legal purchases of tobacco and e-cigarette products to 21 in Minnesota is moving forward in both legislative bodies. House File 331 passed the House Commerce Committee on Wednesday afternoon receiving support from both Republicans and Democrats. The bill is also moving forward in the Senate having passed the Senate Health and Human Services Committee on Wednesday.
Looking Ahead
March 15 is the first committee deadline. The first deadline is for committees to act favorably on bills in the house of origin. Committee hearing schedules are filling up and committees will begin meeting more frequently for longer in an attempt to meet this first deadline.
Please reach out to any of the Larkin Hoffman Government Relations team members with any questions.
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