March 12, 2015

Legislation Update of March 10th

Minnesota Budget Forecast/Surplus

Management and Budget shows the State’s previously forecast $1.038 billion surplus for the next biennium has grown to $1.87 billion. Governor Mark Dayton said he will propose using about half of the additional funds for higher education and early education. That put him at odds with Republicans who want to cut taxes with the additional surplus.


MnDOT officials estimated the cost of the full list of the Governor’s transportation package would be $4.1 billion to $7.8 billion. They said projects would have to be cut from their list if the Legislature doesn’t approve the full $6 billion over the next ten years. However, they also suggested that some of the road and bridge projects could be done more cheaply.

Now that the State’s projected budget surplus has expanded to nearly $1.9 billion, it has taken some of the urgency out of Gov. Dayton’s argument that Minnesota needs a 16-cent per gallon tax increase on fuel to pay for an array of new road projects. House Speaker Kurt Daudt (R-Crown) says Democrats should back off their plan to raise the gas tax. Senate Majority Leader Tom Bakk (DFL-Cook) maintains that a 6.5 percent wholesale tax on gas is necessary because the State needs a long-term transportation funding solution and doesn’t want transportation to have to compete with education and health care for dollars. Senate Transportation Chair Scott Dibble (DFL-Minneapolis) concurs.

In January, House Republican leaders proposed a $750 million four-year plan that would spend roughly $200 million of the budget surplus. House Transportation Chair Tim Kelly (R-Red Wing) says he will release a revised Republican plan in a few weeks. The funding options he’s considering include using a portion of the State’s $1.9 billion surplus; and bonding and dedicating existing tax revenue from rental cars, auto parts sales and leased vehicles. The House Republicans will not raise taxes to fund their transportation plan. House Minority Leader Paul Thissen (DFL-Minneapolis) said if Republicans propose a comprehensive plan that focuses on the whole state, House Democrats will put up nearly half of the support needed to pass the bill.

Saving the Surplus

Senate Majority Leader Bakk says he wants to hold back a big chunk of the budget surplus as protection against a pending tax lawsuit against the State. He expressed concerns about the lawsuit the Kimberly-Clark Corporation filed over State corporate income tax liability calculations. He said if the State loses that case and other companies can make the same case, it could end up costing Minnesota $700 million. The Minnesota Tax Court is expected to take up the case later this month.

Legislative Budget Office

Legislation was introduced this week in the House and Senate to create a new nonpartisan legislative office to analyze financial matters. The proposed Legislative Budget Office would work with State departments to provide lawmakers with nonpartisan information on the fiscal impact of proposed bills. That role is currently performed by Minnesota Management and Budget (MMB).

House Speaker Daudt and Senate Majority Leader Bakk are sponsoring the measure. Speaker Daudt said the Legislature should take care of its own fiscal notes and not depend on the executive branch.

House Minority Leader Thissen said he thinks the current system works well. He said he is concerned that lawmakers could end up arguing over competing sets of financial numbers.

Governor Dayton said there’s no reason to duplicate the efforts of the professional analysts at MMB.

Social Security Tax Cuts

Members of the House Tax Committee heard several GOP-backed bills to exempt Social Security income from State taxes. Rep. Kathy Lohmer (R-Stillwater) said her bill would help keep retirees from leaving Minnesota. The bill would reduce the Social Security tax by 10 percent each year until the full exemption is reached. Rep. Dale Lueck (R-Aitkin) is proposing a faster, five-year phase out.

Social Security benefits are already exempt from state and federal taxes if an individual’s annual income is under $25,000. The threshold is $32,000 for married couples filing jointly.
Rep. Ann Lenczewski (DFL-Bloomington) said she’s open to considering the tax break. But she cautioned that its price tag will eventually reach $500 million per year.

All of the bills were laid over for possible inclusion in the House Omnibus Tax bill.

Sunday Sales

The House Commerce Committee held a hearing on legislation to overturn the ban on Sunday sales of growlers by craft brewers. Rep. Sarah Anderson (R-Plymouth) believes it is a huge opportunity for tourism in Minnesota. Craft brewers have been lobbying for passage of the law for two years. They say that the Sunday sales would be a natural extension of their business, since tap rooms are open on Sunday and they already sell beer that they make on the premises.

The Teamsters Union said changing the law to allow growlers to be sold on Sundays could reopen the labor contracts for 850 of its members who work in the liquor industry.

Committee chair Rep. Joe Hoppe (R-Chaska) said he may include the issue in a larger liquor bill.
The growler bill faces a tougher test in the Minnesota Senate, especially since it died there last year. Senate Majority Leader Bakk said the Senate will consider the bill. He said, however, that he doesn’t support allowing the sale of alcohol on Sundays because it could hurt liquor store owners who say they don’t want to be open on Sunday.