Sen. Melisa Franzen Update: May 5, 2017

A weekly message from your Senator

Dear Constituents and Friends,

We are short of two weeks remaining in the 2017 legislative session and time for reaching compromise on a state budget for the biennium is running out. Below I outline the latest on taxes, education, the environment, and healthcare. I am hopeful we will reach agreement on a sensible tax bill that balances relief to Minnesotans and business owners. I am also optimistic on funding for education and healthcare priorities. I look forward to finishing our work on time by the adjournment date of May 22nd.

Please continue to send me your thoughts, questions, and concerns.

Sincerely,

Melisa

Tax agreement overspends; sends most relief to business allies

The Tax Conference Committee met for about seven total hours during the past two weeks to discuss policy – not items that impacted the state’s budget – and did not accept public testimony on items included in the bills. Still, the committee approved $1.13 billion of spending in about an hour on Monday evening, including several provisions Governor Dayton has promised to veto.

While there are ideas in this bill that I support, the irresponsible spending and inclusion of controversial policy makes it difficult to see this proposal as an honest attempt to negotiate a final budget agreement. Spending $1.13 billion on tax changes leaves a fraction of the state’s $1.5 billion surplus for other priorities, such as education or transportation. It also burdens future state budgets by committing at least $1.45 billion in ongoing spending to tax cuts that most average Minnesotans will never see.

  • Social Security spending: $8,250 tax subtraction ($6,500 single filers) for seniors earning between $32,000-$115,000/year. Cost: $265 million
    • Nearly half of current Social Security recipients do not pay taxes on their benefits. This change benefits seniors earning up to $115,000 a year but does nothing for the thousands of seniors struggling to stay in their homes and pay their bills.
    • For $265 million, we should be able to help all of our senior citizens, not just the ones who are already financially stable.
  • Doubled down on vouchers: Against the Governor’s recommendations, the bill includes $35 million/year for controversial scholarship tax credits and allows tuition to be used as an eligible expense to claim the K-12 credit (this has previously been ruled unconstitutional).
  • Estate tax: Full federal conformity beginning this tax year, which costs $161.7 million this biennium.
    • About 1,000 estates in Minnesota are subject to the estate tax. Once again, 1,000 of the wealthiest estates will receive more than $160 million in tax benefits at the expense of middle-class families.
  • Student loan debt tax credit and 529 college savings plan contributions: About $80 million for credits and subtractions related to these purposes. These provisions were crafted by the Senate DFL last session.
  • Statewide business property tax: Freezes levy at 2018 levels and exempts the first $150,000 of value. This cost expands dramatically in the future. Cost: $125.98 million.
  • Virtually nothing for property tax relief, aside from the School Building Bond Tax Credit for farmers. Only $6 million one-time for Local Government Aid and County Program Aid, each.
    • At least 621 cities actually lose LGA funding in 2019 and the County Aid is not enough to prevent more counties from losing aid. This will cause property tax increases.
  • Tobacco tax indexing repealed: Removing the annual inflation on the cigarette and tobacco taxes costs the state about $30 million by 2020-2021.
  • Several restrictions on local governments, including a prohibition on local bag fees or taxes.
  • The bill commits $1.45 billion of spending in 2020-2021.

Transportation bill bottoms out our roads and bridges

This bill hardly begins to scratch the surface of the needs of our transportation system. Republicans, DFLers, and the Governor all agree we need $600 million per year for the next 10 years to maintain our current roads and make strategic expansions, and $400 million per year just to maintain and modernize our current assets. This proposal falls far short – about $639 million dollars short for the biennium of what is needed just to maintain and modernize our current roads and bridges. This low amount leaves many Minnesotans and businesses in no better shape than they are in today.

This proposal makes transit cuts that would hurt many Minnesotans. The budget proposal continues to neglect transit funding across Minnesota. Without additional funding, transit options for students and the elderly will be reduced by 10% leaving many Minnesotans without a way to get to work, school, or medical appointments. This flies in the face of the efforts of many area chambers of commerce who have been advocating to increase funding for transit since the original proposals were introduced.

Many components of the proposal are aimed at stopping the expansion of LRT in the Metro, going so far as to limit the ability to raise local revenue and the ability to spend it on what their constituents want. The bill specifically cuts operations support for future LRT lines; prohibits cities, counties, and MnDOT or the Met Council from investing in light rail without legislative approval; and eliminates local Metro authorities’ ability to impose more than a ¼ cent transportation tax without a referendum, unlike other Minnesota counties. Despite several objections, LRT is one of the most efficient forms of transit and has been the impetus for billions of dollars of investment along the lines. If we do not build the LRT line the over $900 million in federal funding will go to another region, and they will get these construction jobs added to their local economies.

This bill shifts money away from other priorities in order to fix our failing infrastructure. The bill moves money away from children’s schools, the elderly, and public safety in order to fund Minnesota’s roads and bridges. The bill takes $372 million from the general fund in this biennium, and $566 million in the next. This leaves Minnesota’s roads and bridges vulnerable to budgetary conditions, meaning in the next budget crunch the legislature can raid these funds to make up for a future shortfall.

The transportation proposal has new language that reforms Met Council governance. This proposal was never vetted on the Senate or House floor, but it somehow appeared in the bill without public input. The Met Council reform proposal increases the size of the Met Council, changes the definition of the area under the council’s authority, and includes locally elected officials as Met Council officials. This bill is highly controversial and creates many conflicts of interest as many of the new members would have two incompatible positions, the regulator and the regulated.

This bill added a new step and dissolves the Counties Transit Improvement Board (CTIB), rather than allowing the local governments in the board to make the decision themselves.This controversial provision that takes away local control was never even heard in a single committee in the House or Senate, which leaves the public and local stakeholders completely out of this decision. This provision would eliminate CTIB, the existing quarter cent sales tax in five metro counties, and then would restrict the former CTIB counties from using new local transportation revenues for a fixed guideway projects not already in operation. This would fly in the face of local control and allowing local communities to choose how their local tax dollars are spent.

E-12 bill short-changes schools, cuts pre-K funding

The E-12 education funding and policy agreement proposed by the House and Senate majorities went through conference committee this week. The $300 million budget target lacks the necessary funding to increase by 2% the basic education formula, cuts voluntary free pre-kindergarten funding, and closes the Perpich Center for Arts Education.

Even though the Senate’s E-12 education chair strongly supported a larger budget proposal to fund schools over the next two years, the hopes of it being realized fell short, providing about $100 million less for the per student funding formula than the Governor. The basic formula provides the bulk of the funding districts use to provide classroom programs for students. This proposal provides about $30 less per student than the Governor recommended in January.

The bill also cuts the Governor’s signature voluntary pre-K program, although the program has provided pre-k opportunities for more than 3,300 students since the appropriation passed in 2016. If more funding had been available, 6,800 four-year-old children across Minnesota would have had the opportunity to attend pre-k programs.

The Perpich Center for Arts Education would also close in 2018 if this bill were to become law. Instead, the majority would plan on funding arts education outreach programs through the Department of Education. The Perpich Center was supported by former Gov. Rudy Perpich. The school has served art students from all parts of Minnesota and provides residence options for those who live outside the metro area. (Delete-All Amendment)

Environment and Natural Resources Finance conferees find agreement on controversial bill

The Environment and Natural Resources Conference Committee agreement released this week makes substantial cuts in environment and natural resources budgets and includes many controversial policy changes that environmental advocates say will push the state significantly backward in its ability to protect air, land, and water. Some of these provisions include:

  • EQB – Changes the makeup of the state’s Environmental Quality Board and eliminates responsibilities, removing jurisdiction to consider and investigate environmental issues of community interest.
  • Environmental Review – Allows project proposers to draft Environmental Impact State (EIS) date, which critics have called “putting the fox in charge of the hen house.”
  • Buffers – Imposes a two-year delay for buffer implementation and imposes other limitations.  Governor Dayton has said he will veto legislation that includes a roll-back of his buffer initiative.
  • Clean Air Act Settlement – Directs that the Clean Air Act settlement money be deposited into a state account and cannot be spent until it is appropriated by law.
  • Agency Rules – Imposes new rulemaking requirements that critics say will create redundancy, bog down decision-making, taken the science out of agency work, and hobble the Minnesota Pollution Control Agency and the Department of Natural Resources from being able to carry out their duties.
  • Merchant Bags – Prohibits local governments from banning or placing fees on plastic bags.  Opponents say this pre-emption erodes local control and overrides the will of citizens.
  • Lead Shot Rules – Prevents the DNR from adopting rules that further restrict the use of lead shot.  Lead-shot foes argue that steel shot is readily available, performs similarly, costs the same or less, and is non-toxic to birds and wildlife that ingest it.

HHS conference committee agreement made up of budget shifts and gimmicks

This week the Health and Human Services Conference Committee approved a budget agreement for the Departments of Human Services and Health. The irresponsible budget agreement, put together behind closed doors then approved in three hours with no public testimony, is based on over $500 million in fake savings that cannot be proven and shifts and gimmicks. The agreement removes access to affordable health insurance by eliminating MinnesotaCare and makes the assumption that health care costs won’t increase.

Key provisions of the agreement include:

  • Irresponsible budgeting:
  • Eliminates MinnesotaCare: The agreement eliminates MNsure and transitions the state to a federal exchange. Moving to a federal exchange would cost Minnesota taxpayers millions of dollars, eliminate MinnesotaCare, and give all control to the federal government
  • HMO Conversions to for-profit: Today our HMOs are sitting on reserves of taxpayer dollars, funds they are tasked with carefully managing under the state law that prohibits for-profit insurance companies from selling insurance in Minnesota. But this bill allows for-profit insurance companies to join Minnesota’s health insurance marketplace. This change will allow nonprofit HMOs to keep our taxpayer dollars if they decide to convert to for-profit HMOs. That money should be returned to us, not quietly transferred to a for-profit insurance company. There was a bipartisan solution worked out that would have created a process for non-profits to become for-profits and protected our taxpayer dollars, but that provision has been replaced by language that benefits insurance company CEOs and shareholders. (SF 800)

House finally releases bonding bill

The House majority released their bonding proposal this week. The bill would appropriate $600 million in General Obligations (GO) bonds to fund the repair and replacement of government assets across the state. The House bill falls extremely short of what the Senate majority and Governor Dayton have released in their bonding proposals. The House author acknowledges the release of the bill is just part of the process and will grow as it moves through the legislative process.

A large portion of the GO bonds are used to maintain the state’s current buildings so our assets’ lifespans are maximized and we get the most value for the dollars Minnesotans have invested. Important users of these dollars are our higher education institutions which have buildings across the state that need to be maintained and improved when necessary. While a substantial portion of the money allocated to our higher education institutions is for repair, we also need to ensure that they have the assets needed to attract, train, and retain Minnesotans to fuel our economy.

A residual impact of maintaining and investing in the state’s assets and infrastructure is people across the state are employed to do this important work. Private contractors will bid on the repair and replacement of the state’s assets which will result in additional employment opportunities for Minnesotans. (HF 892)

In the last weeks of session, two divisive bills heard on the Senate floor

Two bills aimed at limiting access to abortions in Minnesota were on the Senate floor this week. Both bills have previously been determined as unconstitutional. Governor Dayton has vetoed similar legislation in the past and has indicted he will veto the legislation again if it reaches his desk.

With just a few weeks left of the 2017 Legislative Session, the legislature should be focused on finishing their work to balance the state’s budget, not wasting time on divisive social issues that have been ruled unconstitutional and are likely to be vetoed. These bills are just another example of wasteful politically-motivated attempts at restricting women’s access to abortion and are designed to shut out low-income women, shut down abortion providers, and endanger the lives of health care workers and women.

The first bill would prohibit state funding for abortions except in cases to save the life of a woman or in cases of rape or incest. State law in Minnesota already prohibits the use of state funding for abortions except in cases of rape or incest, for health or therapeutic reasons, and when a woman’s life is in danger. The bill discriminates against women based on the type of insurance they have and challenges current state law that ensures women have access to reproductive health care regardless of their financial situation. Additionally, based on a 1995 Minnesota Supreme Court decision, Doe v. Gomez, the bill is unconstitutional. In that case, the court established a broad right to privacy and required the state to pay for therapeutic abortion. Similar legislation has been ruled unconstitutional in other states and has cost millions of dollars in legal fees. Last year, Wisconsin paid $1.6 million in challengers’ legal fees when a district court ruled the law was an undue burden on women seeking abortion.

The second bill would subject abortion clinics to the licensure standards of the Outpatient Surgical Center Act, which essentially classifies them as small hospitals and is designed to shut down abortion providers in Minnesota. The evidence of unsafe practices within these clinics to warrant this type of heightened licensure is not present in the clinics that operate in Minnesota. The most recent report on induced abortions from the Minnesota Department of Health showed a complication rate of less than 01%. A similar law in Texas was ruled unconstitutional in the 2016 U.S. Supreme Court case Whole Woman’s Health v. Hellerstedt. The court’s 5-3 decision ruled that anti-abortion restrictions must be examined for the burdens they impose on women, not just their purported benefits.

There are much more important issues the legislature should be working in the last few weeks of the session rather than divisive social agenda bills. At the start of session, it was mentioned in the legislature that the majority  not intend to focus on social agenda legislation. These divisive abortion bills have already received more public hearing time than any legislation aimed at fixing the crisis Minnesota is facing in the health insurance market. It’s time for the divisive social issues to take a back seat to the legislature getting their work done and done on time. (SF 704, SF 702)

Legislators decry elimination of Minnesota’s campaign finance reforms

Many senators, alongside the Minnesota League of Women Voters and a former chair of the Minnesota Campaign Finance and Public Disclosure Board, raised serious concerns at a press conference this week about the proposal to eliminate Minnesota’s long-standing campaign finance reforms, including the public subsidy. The reforms in question were enacted 40 years ago in response to the Watergate scandal.

In 2016, virtually all candidates for legislature and constitutional offices agreed to abide by the spending limits in exchange for partial public funding. Some members have pointed out that repeal of these reforms will undermine Minnesota’s history of free and fair elections. The campaign finance reforms are scheduled for repeal in the Omnibus State Government Budget Bill.

Senators argue that spending limits keep our campaigns sane and allow for an even playing field that allows newcomers and the ordinary citizen to run for office. They also argue that without these limits, campaign spending will increase sharply, candidates who reject special interest money will have little chance of winning, and our political system will become even more beholden to the interests of the wealthy donors.