Vikings Stadium, Bonding, and Taxes Dominate Session

The 2012 Legislature adjourned on May 10 with the Vikings stadium, bonding bill, and omnibus tax bill dominating the debate during the final few weeks. Governor Dayton and the Legislature reached agreement on the Vikings stadium legislation and the bonding bill. An agreement could not be reached on the tax bill, and the Governor Dayton vetoed two versions of the omnibus tax bill passed by the Legislature. The House and Senate now turn their attention to the fall election, when all 201 legislative seats will be on the ballot under the new reapportionment plan adopted by the courts.

Budget Surplus Projected

The 2011 session and special session were focused on solving a projected budget deficit of $5 billion that led to the longest shutdown in state history. In November, Commissioner of the Minnesota Management and Budget Jim Schowalter announced an unexpected budget surplus of $876 million, and in February 2012, the Commissioner announced an additional $323 million surplus. State law requires budget surpluses to be deposited in the state cash-flow account and budget reserves. Once these accounts are replenished, the money begins to pay back the K-12 school funding shift (which was increased during the 2011 special session to resolve the $5 billion budget deficit). The forecasted budget surplus allowed the Governor and Legislature to focus on other issues in 2012.

Vikings Stadium Approved

After ten years of debate, the Legislature passed a bill that provides for the construction of a new Vikings stadium in Minneapolis. The controversial bill benefited from support from the Governor, a bipartisan effort in the Legislature, and grassroots support from the public. The price tag on the stadium is $975 million: $477 million from the Vikings; $348 million from the state, and $150 million from existing taxes in Minneapolis. The state share will be funded via revenue from electronic pull-tabs and electronically linked bingo. If gaming revenue falls short, the bill provides for back-up funding from a sports-themed lottery game and a 10% admission tax on luxury seats. The Minneapolis funding will come from the redirection of existing sales and entertainment taxes presently supporting debt service on the Convention Center when the bonds are retired in 2020.

The bill waives the voter referendum requirement of the Minneapolis charter and permits the city to also use some of the existing taxes to remodel the Target Center. The City of St. Paul will receive $2.7 million per year for 20 years for operating or capital costs of new or existing sports facilities.

Governor Dayton signed the stadium bill on May 14. The Minneapolis City Council must also approve the legislation. They are expected to vote on the measure on May 25.

Bonding Bill Adopted

Early in the session, the Governor set forth $775 million plan for capital budget projects. His proposal included funding for the Minnesota Zoo, civic center projects in Rochester, St. Cloud and Mankato, a ballpark in St. Paul, the Southwest Light Rail Corridor, MnSCU, the University of Minnesota, and refurbishment of the State Capitol.

The House and Senate favored smaller bonding packages. The House pursued two bonding bills that separated the repair of the State Capitol from other projects. The Capitol restoration bill failed in the House by one vote: a supermajority of 3/5 of the members is needed to issue bonds for public projects.

In the end, the House and Senate agreed, and passed, a modest $496 million bill which included partial funding for the Capitol restoration project but did not include funding for civic centers, Southwest Corridor or a Saints ballpark. 

The Governor signed the package although the bill left out many of his requests. The final bonding bill included $496 million in general obligation bonding to fund road and bridge projects, maintenance of University of Minnesota and MnSCU facilities, asset preservation projects at various state-owned facilities, and design work for State Capitol repairs. An important piece of the bonding bill is a $50 million pool of funds set aside for economic development that will be allocated through a grant application process through the DEED. It appears several civic centers, the Saints ballpark and the Southwest corridor light rail project could be funded out of this pool of funds. 

Last session, the Governor signed a $500 million bonding bill, bringing the total capital budget for the biennium to $996 million.

Omnibus Tax Bills Vetoed

The House and Senate Republican leadership began the 2012 legislative session by establishing a reduction in the business property tax as a top legislative priority. The Legislature approved two omnibus tax bills, labeled as jobs bills. The first contained a phase-out of the statewide tax on business property, the elimination of the monthly sales tax provision, an up-front capital equipment exemption for small businesses, and increases in the angel tax credit and the research and development tax credit. A significant provision implemented tax increment financing (TIF) for the expansion of the Mall of America. The Republicans claimed that the provision would have created more than 10,000 jobs, and that the tax bill would create more jobs than the Vikings stadium and bonding bill combined. The Governor vetoed this bill primarily because there was not a payment method for the $145 million budget impact projected for the next biennium.

The second omnibus tax bill was a slimmed-down version of the first tax bill with an impact of $72 million in the next biennium. It included a one-year freeze of the statewide property tax, an increase in the second tier of the research and development credit, and a one-time increase of the angel investment credit of $4.5 million. There was also an upfront exemption for capital equipment purchases for employers with 50 or fewer employees. In addition, the bill contained numerous economic development incentives, including tax increment financing for the Mall of America. The Governor vetoed this bill due to the $72 million budget impact.

An E-Fairness tax provision gained traction in the Senate, where it was amended on to the Vikings Stadium bill. The provision was later removed by the Conference Committee.

Voter ID Constitutional Amendment on the Ballot

The Legislature approved a voter ID constitutional amendment after the Governor vetoed similar legislation last session. At the 2012 election, voters will decide whether to permanently amend the state constitution to require voters to show valid photographic identification at the polls. In 2011, the Legislature approved a constitutional amendment prohibiting same sex marriage, which will also be on the 2012 ballot. These controversial issues will be hotly contested in the 2012 election.

Education Reform Advances

Significant progress was made for education policy reform by the passage and signing of an education policy bill. The bill expands postsecondary enrollment options (PSEO) participation to include tenth grade students and permits students to participate in career or technical education courses offered by eligible institutions. The bill also reforms the principal evaluation system by providing for the use of longitudinal data on student academic growth as 35% of the evaluation. It incorporates district achievement goals and targets into principal evaluation.

The bill also authorizes a charter school collaborative, which allows a charter school board to voluntarily enter into a two-year, renewable agreement with a school district to enhance student achievement. The agreement may include collaboration relating to facilities, transportation, training, student achievement, assessments, performance standards, and other areas of mutual agreement.

Health Insurance Exchange Proposal Vetoed

A bill that dealt with various health and human services issues included a provision regarding a health insurance exchange. A section of the bill defined the types of insurance products that could be sold in Minnesota if an exchange existed and gave the state the authority to create a uniform type of account that consumers could use regardless of the insurer. The measure was vetoed by Governor Dayton, who believed that the language restricted the ability of the state to implement the Affordable Care Act.

The Minnesota Health Care Exchange Advisory Task Force provided the Legislature advice from the Governor on how to move forward to establish an exchange in the state. However, neither the Legislature nor State of Minnesota has taken formal actions on those recommendations. Other provisions from the federal health reform law have allowed Minnesota to expand Medicaid coverage to more categories of individuals, and they are currently being examined to determine how to build an accountable care organization (ACO) within Medicaid to improve quality. The goal of the ACO model is to allow large and small providers to share care and build on the foundation of a health care home, which was a part of the state health care reform laws passed in 2008.

Pension Bill Approved

Governor Dayton signed a bipartisan compromise on a number of provisions in the 2012 Omnibus Pension bill. The law lowered the pension systems' investment assumed return from 8.5 to 8% for five years to allow a study period to further analyze and determine a long-term rate.

Governor Vetoes

Governor Dayton vetoed 31 bills during the legislative session.   The following are highlights of several bills the Governor vetoed:

  • Four tort reform bills paved the way for the first vetoes of the legislative session. Governor Dayton believed that much of the tort reform provisions promulgated in the bills would best be left up to the courts.
  • A bill allowing school boards to base unrequested leave-of-absence and discharge decisions on teacher evaluation outcomes was proposed. After significant negotiation, Governor Dayton ultimately disagreed with abandoning the traditional "last-in, first out" method of layoffs.
  • The "Castle Doctrine" legislation was introduced, proposing to change state law governing the use of force in self-defense cases where an individual is presumed to have a reasonable belief that there is an imminent threat of substantial bodily harm or death. Governor Dayton stated he would not sign legislation that may place the safety of law enforcement officers at risk.
  • Legislation was proposed  requiring that an annuity product recommended to a consumer by an insurance agent be suitable for that consumer and adding a requirement that the insurance company independently review the agent's suitability determination. Governor Dayton stated that the bill did not provide the necessary protections for senior citizens and did not provide accountability for insurance companies.

Looking Ahead to the 2012 Elections

In the November election, all 201 legislative seats will be on the ballot. With all candidates running in newly reapportioned districts, control of the Legislature will be up for grabs. Legislative races will be influenced by the national campaigns, the state of the economy, congressional and senate elections and the controversial marriage and voter ID ballot questions.

Most observers expect significant turnover in the Legislature given the volatility of the electorate, a large number of retirements by incumbent legislators and the large number of legislators standing for reelection for the first time following the 2010 elections.

Numerous legislative retirements have been announced, including 22 House members and 11 Senate members. Ten of the House members and three of the Senate members are seeking other offices.

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