May 1, 2016

Finance Deadline Week: One Month and Counting

Midnight Thursday marked the deadline for all finance bills to make their way through their respective chambers before today’s Passover Break.

Omnibus Budget Bills

By the end of the week, the House combined eight omnibus finance bills into three as laid out in a plan presented Monday to the House Ways and Means Committee by Chair Jim Knoblach (R-St. Cloud). Still to be reconciled are the 2015 omnibus taxes and omnibus transportation finance bills, which remain in conference committees.

The House omnibus bills were grouped as follows:

  • K-12 education and higher education;
  • jobs, agriculture and environment and natural resources; and
  • health and human services, public safety and state government.

    Rep. Knoblach said that the Senate will have only one supplemental budget bill, but thinks it would be nice to have the bills somewhat narrower than just one big bill. In past supplemental budget years, it has been common for the House to end up with a single omnibus finance bill.

    Though the House will have three omnibus bills, there will still be only one conference committee with the Senate. Knoblach said he will probably introduce a small “overarching” bill for conference committee in addition to the three omnibus bills.

    In the Senate, Finance Chair Richard Cohen (DFL-St. Paul) also took up their respective articles throughout the week, and rolled them into one omnibus finance package late Thursday. The respective budget bills will now move to the Senate and House floors for consideration.

    Water Quality

    Hoping to rally public support for his clean water initiatives and pressure the Legislature to do more this session, Gov. Mark Dayton on Monday declared it “Water Action Week.”

    Dayton said he wants to make Minnesotans more aware of the quality of their drinking water and get them involved in efforts to protect it. The Governor has been pushing hard for improvements since state studies found troubling levels of nitrates, phosphorus and other chemicals in some drinking water supplies.

    Last session, he championed a buffer requirement to prevent runoff. This year, he hosted a statewide summit on water quality and proposed a $220 million state investment in water projects and programs.

    Dayton said the House Republicans’ proposal for a $600 million bonding bill is “woefully inadequate” to make needed water infrastructure improvements. His bonding bill proposal totals $1.4 billion, including $167 million to help small communities replace aging drinking water and waste water facilities.

    House Capital Investment Committee Chair Paul Torkelson (R-Hanska) said he shares the Governor’s interest in water quality projects, but isn’t ready to say how many of those projects might fit into the House bonding bill.

    Fair Tax

    In its last meeting, the House Taxes Committee held an informational hearing on implementation of a “Fair Tax.” The concept is being heard in several states, and Rep. Steve Drazkowski (R-Mazeppa) is the House sponsor of a bill that would put the framework in place for “Fair Tax” implementation in Minnesota. The bill’s companion, sponsored by Sen. Dave Thompson (R-Lakeville), has not had a hearing in the Senate Taxes Committee.

    The bill would eliminate most taxes, including alcohol and tobacco taxes, and establish a framework for replacing them with a very broad state sales tax. Based on a formula, a monthly credit would be paid to people living at the poverty level based on household size. If implemented, sales taxes would not only be expanded to most consumer items, but also most services.

    Supporters say a “Fair Tax” would do away with tax deductions and carve outs, including mortgage interest deductions. Drazkowski said it is a simple idea that would incentivize people to work and save.

    Critics say implementation of the tax would create an inordinately high consumer tax that would most likely mean less revenue to the state’s General Fund. Rep. Greg Davids (R-Preston), the Taxes Committee Chair, said the concept “is most likely a federal issue. I’m not quite sure mechanically how it would work if one state did it and no other states did. This is a concept bill. We’re not laying it over; we’re not voting on it; this is certainly not the position of the House GOP.”

    Racial Disparity

    Rep. Rena Moran (DFL-St. Paul) sent a letter to Speaker Kurt Daudt (R-Crown) Tuesday asking him to target at least $50 million to the issue of racial disparities. Thirty of her DFL colleagues, including Minority Leader Paul Thissen (DFL-Minneapolis), co-signed the letter.

    Moran, who is the only African American member of the House, noted that the median income of black Minnesotans fell by 14 percent between 2013 and 2014. Gov. Mark Dayton proposed $100 million this session to tackle racial disparities. The DFL-controlled state Senate proposed $90 million.

    Moran is critical of House GOP leaders for not including a specific allocation for economic disparities in their budget targets. Daudt said the requests for more money do not do enough to address academic achievement gaps he believes are at the root of the economic disparities.

    House Republicans included some funding initiatives related to economic disparities in their recently released finance bills. They point out 11 items totaling $6.4 million in this year’s jobs bill and 13 education bill provisions totaling $19.3 million. House Ways and Means Chair Jim Knoblach (R-St. Cloud) stressed that Republicans still want the disparity discussion to include an expansion of tax credits for private school tuition.

    Patent Trolling

    Minnesota legislators are trying to fix a growing problem hitting businesses around the country: “patent trolls.”

    Legislation sponsored by Rep. Joe Hoppe (R-Chaska), would allow an attorney general to bring civil action against someone who has made a “bad faith claim” against another for infringement on any potentially patented product. A penalty of up to $50,000 per violation could be imposed on any individual or business. Currently, 27 states have passed legislation to help prevent patent trolling.

    The bill has the intent of targeting patent assertion entities — businesses that acquire patents with no intention of using the technology itself, but rather suing for alleged infringement. Businesses have found the cost of fighting a frivolous claim in court prohibitive, forcing many businesses to simply settle.

    The House approved the legislation unanimously, 129-0. It’s expected to be brought up for a vote on the Senate floor next week, where it is sponsored by Sen. Kari Dziedzic (DFL-Minneapolis).

    The legislation has broad support from trade groups, including real estate agents, restaurants and insurance agents. Proponents say the bill would offer consumers and businesses stronger safeguards. Attorney General Swanson said she welcomed the legislation, partly because it could help curb legal costs.


    The House and Senate have each held an informational hearing with Commissioner Mona Dohman, Department of Public Safety (DPS). Both hearings included a review of the report requested in the first REAL ID bill and many questions were raised by members.

    There continues to be discussion of whether a second REAL ID bill, for implementation, is needed this session. DPS was not able to answer all the timing questions and indicated they will do more research and get back to the respective chairs.  The Governor has sent a letter to the federal Department of Homeland Security requesting an extension for Minnesota. The big question from legislators, whether Minnesota will obtain the extension from Homeland Security based solely on lifting the prohibition on DPS’s ability to prepare for implementation of Real ID (first bill), is not yet answerable.

    The second House REAL ID bill was introduced Thursday, and is scheduled for a hearing in the House Civil Law and Data Practices for Monday.