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May 26, 2017

Minnesota Legislature Works Past Deadline, Needs Special Session to Complete Budget

After five months and a final weekend of around-the-clock floor sessions, Governor Mark Dayton and Minnesota’s legislative leadership reached an “agreement” late Monday evening. As part of that agreement, leaders agreed to a one-day special legislative session to pass the remaining budget bills, the tax bill and a capital investment package. However, it wasn’t long after the Legislature gaveled in the special session at 12:01 am Tuesday morning that the agreement began to fall apart.

Legislative Democrats accused members of the Republican majorities of breaking the agreement when they announced their intention to attach public employee union contracts that Dayton wanted ratified to the Uniform Labor Standards Act (commonly known as the “preemption” bill), which he had promised to veto. Meanwhile, legislative Republicans accused Democrats of going back on the deal after a variety of progressive interest groups, including labor unions and faith organizations, began reacting strongly to some of the policy provisions included in various budget bills. Democrats responded by offering amendments to the remaining budget bills and the process ground to a halt.

In a special session that was supposed to adjourn by 7 a.m. Wednesday, the final gavel didn’t come down until 3 a.m. Friday. However, when it did, it closed the book on a special session that included the passage of the E-12 education, transportation, health and human services, and state government finance budget bills as well as the omnibus tax bill, the bonding bill, and the aforementioned preemption bill.

$660 Million Tax Relief Package Sent to Gov. Dayton‎
Touted by Republican lawmakers as the largest tax relief package in 20 years, the Minnesota Legislature passed an omnibus tax bill intended to provide approximately $660 million in tax relief over the 2018-19 biennium and approximately $790 million in FY 20-21. The bill contains a variety of provisions promoted by Republican Tax Committee chairman Rep. Greg Davids (R-Preston) and Sen. Roger Chamberlain (R-Lino Lakes). The provisions include deductions for Social Security income, student loan payments, and savings for first-time homebuyers as well as an increase in the assets excluded from the estate tax. Similarly, Gov. Dayton and leaders also negotiated compromise positions with respect to Dayton’s proposals to increase the Child and Dependent Care Credit and expand the working family tax credit. While many Democrats decried the size of the tax cuts and warned of the potential to create a budget deficit in the next biennium, the bill passed the House of Representatives 95-29 and the Senate 44-20 and now goes to the governor for his signature.

Legislature Passes Largest Transportation Bill Since 2009‎
In addition to tax relief, one of the primary objectives for Legislative Republicans was a comprehensive transportation infrastructure package. However, while Gov. Dayton and many DFL legislators sought new sources of revenue for roads, bridges, and transit – including an increase in the state’s gas tax or, alternatively, an increase in license tab fees – Republicans emphasized the need to make the investment within the confines of the current budget surplus and promoted a plan which would statutorily dedicate current tax revenues (such as the sales tax on auto parts) toward transportation projects. In the end, Dayton and the Legislature agreed to a $5.9 billion, two-year transportation funding package. Authored by Sen. Scott Newman (R-Hutchinson) and Rep. Paul Torkelson (R-Hanska), the omnibus transportation finance bill dedicates approximately $300 million in auto-related sales tax revenues toward road and bridge construction and authorizes $940 million in borrowing over four years.

In addition to road and bridge funding, public transportation, and light rail transit in particular, remained one of the main points of controversy. Democratic legislators have historically favored transit projects like the highly controversial Southwest Light Rail between downtown Minneapolis and Eden Prairie as a mechanism for driving economic redevelopment while taking thousands of cars off of the state’s highways. Republicans however, have argued that light rail projects are too expensive and require operating subsidies that greatly exceed their value. Early transportation proposals would have included deep cuts to Metro Transit (the Metropolitan Council’s public transportation operation) and prohibit the construction of future light rail projects prior to direct legislative approval. While those provisions were not included in the final legislation, the bill did repeal the state’s ongoing obligation to cover a portion of the cost of light rail operations and requires Metro Transit to cover those costs from non-state sources including a potential fare increase.

The omnibus transportation finance bill passed the House of Representatives 74-54 and the Senate 38-25.

Approximately $1 Billion Capital Investment Bill Passes Resoundingly‎
After having floundered in the waning moments of the 2016 legislative session, the biennial capital investment or “bonding” bill was passed just before the Legislature adjourned at 3 a.m. today. Authored by Sen. David Senjem (R-Rochester) and Rep. Dean Urdahl (R-Grove City), the bill includes funding for a significant number of infrastructure projects – including roads, bridges, rail lines, dams, and water treatment facilities – as well as significant investments in the state’s higher education institutions and natural resources.

The Minnesota Constitution requires a 60 percent majority for bills capital investment bills, making it one of the pieces of legislation that almost always needs to be passed with support from both parties. The House of Representatives had failed to secure enough votes to pass an $800 million bill earlier this month. The special session compromise bill passed the House of Representatives 119-11 and the Senate 60-2 and is expected to be signed by the governor.


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