Dear Constituents and Friends,
Minnesota proved that divided government is not easy but can work. This legislative session was a compromise between a new DFL Governor, a DFL House and a GOP Senate. Despite a short special session to complete our work, we were able to make critical investments in our state. We passed a state budget of $48.3 billion over the next two years, no tax increase and a cut in the income tax rate. My biggest concern is that we tapped into our state reserves to the tune of $500 million, leaving only $491 million on the bottom line, to prop up spending in the next biennium. This shift could jeopardize Minnesota’s long-term fiscal health and the state’s AAA bond rating.
A significant compromise this session in health care was the repeal of the sunset of the 2% provider tax, set at a new, ongoing level of 1.8%. The additional revenue from the tax opened up opportunities in the budget to make investments in many programs that will improve the lives of Minnesotans, including help for low-income families, improving access to health care for people with disabilities, and investments that build out the state’s mental health system. We provided a 2% increase each year in the basic per pupil funding formula for schools and included $90 million for special education. We also froze tuition increases for the University of Minnesota and MinnState at 3% for the next two years.
The final tax bill contained federal tax conformity that will make the tax-filing process easier for all Minnesotans. Almost all individual filers are protected from tax increases and many could see tax relief. However, we fell short once again investing in our infrastructure. The transportation bill only provides $97 million in additional general fund resources of which $52 million is appropriated for the MNLARS replacement of the driver and vehicle services technology system. Lastly, we passed a $60 million bonding bill specifically to address the affordable housing crisis in our state.
I am pleased with our results and I continue to be humbled to represent you in the Minnesota Senate.
Sincerely,
Melisa
Senator Franzen Legislation
Chief Author
(SF 685) Edina TIF – Extends by two years the authority to establish housing tax increment financing districts pursuant to special legislation granted in 2014.
(SF 1740) Robotics grants – Competitive grant program for robotics practice fields in rural and metro areas ($100,000 general fund appropriation).
(SF 2025) Lower speed limits – Allows municipalities to lower speed limit below 25mph in some residential areas.
Co-Author
SF 551– Bloomington TIF – Provides a six-year extension of the five-year-rule (from 15 to 21 years) for the Bloomington Central Station TIF District.
(SF 442) Minnetonka tax exemption – Materials and supplies construction or remodeling public safety facilities in Minnetonka are exempt from sales and use tax.
(SF 234) Race 2 Reduce education program – Water conservation educational program in K-12 schools.
(SF 319) Medical cannabis manufacturer – Allows medical cannabis manufacturers to subtract state business tax.
(SF 515) Missing and murdered indigenous women – Establishes task force to provide data and analysis of the systemic causes behind the number of missing Native American women in the state.
(SF 808) Lake County lodging tax – Lake County may now impose a lodging tax.
(SF 1278) Open house days at state parks – DNR designates two additional free days for visitors.
(SF 1647) Parent-Child Home Program – Early childhood literacy and school readiness program for children ages 16 months to four years.
(SF 2524) Nonprofit health maintenance organizations – All earnings of a nonprofit health maintenance organization must be devoted to the nonprofit purposes of providing comprehensive health care.
Major Bipartisan Bills this Session
Opioids
(HF 400) Requires an increased annual registration fee from manufacturers and wholesale distributers operating in MN. The increased fees specific to manufacturers of opiates must be in effect for at least 5 years; they will be sunset when the state receives $250M or more from ongoing litigation against manufacturers. A 19-member Opiate Epidemic Response Advisory Council is created to implement a comprehensive statewide effort to address opioid addiction and the overdose epidemic in Minnesota.
Eldercare and Vulnerable Adult Protection Act of 2019
(HF 90) Creates two levels of licensure 1) assisted living and 2) assisted living with dementia care and a unified contract for housing and services. It includes an extensive and prescriptive licensing framework set to begin in 2021, regulated by the Department of Health and including survey requirements and new fines for licensing violations.
Hands Free driving
(SF 91) Makes it illegal to drive with a phone in your
hands. Drivers would be prohibited from talking or
listening on a cell phone, viewing or listening to video
content on a phone, or accessing a web page. The bill
allows a driver to use a cell phone if it is through a ‘handsfree mode’ or if the vehicle is legally pulled over to the side of the road and not obstructing traffic. Additional
exceptions to this prohibition include the ability to use GPS
or navigation systems (without typing while driving) and
the ability to listen to audio-based content.
PBM Licensure
SF 278 requires Pharmacy Benefit Managers (PBMs) to have a license to operate in Minnesota beginning Jan. 1, 2020, regulated by the Department of Commerce. PBMs “must exercise good faith and fair dealing in the performance of its contractual duties”. PBMs contract with health plans to administer their prescription drug benefits. They can decide which pharmacies are in a plan’s network, design formularies and preferred drug lists, determine patient co-pays, and pay pharmacy claims for the health plans. Three public PBMs- CVS Caremark, Express Scrips, and OptumRx- control over 70 percent of the US market. The authors of the bill have worked with PBMs, the pharmacists, the Chamber, and the Dept. of Commerce to develop the language in the bill.
Tax Information
Tax conformity
- Increases Minnesota’s standard deduction to $24,400 married-joint/$12,200 single (matching the federal amount), which will cut taxes by $134 million for over 1.9 million taxpayers. The average tax cut is $160 – about a 7% tax cut for the median household income.
- Permanently allows taxpayers to either select the standard deduction or itemize for Minnesota tax purposes, whichever is more beneficial.
- Eliminates Minnesota’s personal exemptions.
- Establishes a new state dependent exemption equal to $4,250 in tax year 2019—the amount allowed under prior federal law and current Minnesota law.
- Matches the federal government’s $10,000 State and Local Tax (SALT) deduction cap of $10,000.
- Retains the charitable contributions deduction but increases the threshold from contributions in excess of 50% of AGI to 60%.
- Retains Minnesota’s miscellaneous itemized deductions that the federal government eliminated, including union dues, work-related travel expenses, school supplies purchased for classroom use, etc.
- Tax extenders conformed to include tax deductions for disaster relief contributions, tuition expenses, discharged mortgage debt, and mortgage insurance premiums.
- Section 179 expensing limits increased from $500,000 to $1 million, with the phase-out limit increased from $2 million to $2.5 million, indexed for inflation.
Income Tax Cuts
Tax rate cut
• Reduces the second tax bracket rate from 7.05% to 6.8% beginning Tax Year 2019.
Working Family Credit
• Credit amounts and income eligibility thresholds are increased for taxpayers with 0 and 3+ children, and the phase out rate for all eligible taxpayers is reduced so more taxpayers will qualify.
Social Security tax subtraction
• Increases the current maximum Social Security tax subtraction for married-joint filers from $4,500 to $5,150; from $3,500 to $4,020 for single or head-of-household filers.
Business and cabin property tax cut
• Effective Tax Year 2020, the state general levy will be reduced by $47.5 million for commercial/industrial (business) property and $2.5 million for seasonal-recreational (cabin) property.
