The legislature continued its unprecedented momentum this week with the long-anticipated override of Gov. Tim Pawlenty's veto of the transportation bill. After what many consider a historic feat, tensions between the Governor and the legislature escalated with the failed confirmation of Transportation Commissioner Carol Molnau. And while transportation issues were front and center in the public eye, health care and energy hearings were also meeting morning, noon and night as committees began to put together their bonding and omnibus bills. Despite the fast pace of the session, many legislators and lobbyists wonder what progress can be made with an increasing deficit, short deadlines and an increasingly tense relationship between DFL leadership and the Governor.

Legislature Overrides Governor Veto

The legislature began the week by successfully overriding Gov. Tim Pawlenty’s veto of the transportation funding bill. Transportation advocates filled the halls of the Capitol to witness what many have waited more than 15 years for. As the votes were called, cheering and chanting echoed through the Capitol Rotunda. The efforts of an unusual coalition of construction workers, truckers, transit advocates, farmers and the Minnesota Chamber of Commerce contributed to its final passage. In a largely historic move, six house Republicans voted with Democrats to override the veto on a 91 41 vote. The Senate passed the override on a vote of 47 20.

While not everyone was pleased with the outcome, Gov. Pawlenty called the plan “ridiculous” and promised a “tax revolt.” House Republican leadership immediately stripped the leadership positions and caucus support from those members who voted for the override and against the Governor’s position. The six Republicans are also likely to lose the endorsement of their party in the upcoming election.

The transportation bill, H.F. 2800/S.F. 2521, authored by the chairs of the transportation committees, Rep. Bernie Lieder (DFL-Crookston) and Sen. Steve Murphy (DFL-Red Wing), is estimated to bring in over $7 billion in new funding over the next 10 years and provide an estimated 300,000 jobs. The bill dedicates about $600 million to replace fractured critical trunk highway bridges and $132 million for I 35W bridge reconstruction.

The funding package finances the trunk highway system through a 5 cent gas tax increase, a 3½ cent tax surcharge to pay for debt service, tab fee increases and a $20 new-vehicle excise tax. It provides a $25 tax credit to low-income Minnesotans to help offset the gas-tax increase.

The bill also allows county boards in the seven-county metro area to impose a quarter-cent sales tax dedicated to transit funding. The metro-wide sales tax was reduced from a half-cent sales tax, thus gaining the support of the Minnesota Chamber of Commerce and providing support to a few Republican legislators. The bill also allows additional counties to impose an additional sales tax, subject to a voter referendum.

With the transportation funding bill behind them, the legislature will now be able to focus on the other priorities of the session: health-care reform, a capital investment bill, and new energy and economic development initiatives.

You can read more about the transportation funding bill and the override of the Governor’s veto on http://www.startribune.com/politics/state/15942557.html or http://www.twincities.com/politics/ci_8375652?nclick_check=1.

February Budget Outlook Bleak

The Department of Finance unveiled the latest economic forecast Thursday, estimating a $935 million deficit for the 2008-2009 biennium, including two quarters of a recession. The economic situation is projected to worsen for the 2010-2011 biennium with a deficit of approximately $1.01 billion, $2.1 billion when adjusted for inflation spending. 

Tom Hanson, State Finance Commissioner, said the deficit increase is partly due to the nationwide economic situation, falling home sales, high unemployment rates, increased energy prices and lack of job growth. Hanson also said that while the federal stimulus package will help, it is a temporary fix that will bring Minnesota only a limited amount of resources.

In response to the troubling forecast, Gov. Pawlenty said that though the budget deficit is serious, it is also solvable. He will be releasing the details of his modified budget proposal next week. Pawlenty reiterated his opposition to raising taxes for additional revenue, but would consider using some of the budget reserves and the Health Care Access Fund to lessen the budget cuts. He also anticipates there will need to be an overall 2% to 3% reduction in agency budgets, though K 12 education will be exempt from any cuts, and state agencies are currently on a hiring freeze. While he said state layoffs were not to be expected, there may be vacant positions that are not filled. The Governor will also be releasing details of his Tax Reform Commission, whose charge will be to produce new ideas and solutions for reforming the tax system.

DFL leaders held a press conference in response to the forecast projections. House Speaker Margaret Anderson-Kelliher (DFL-Minneapolis) and House Majority Leader Tony Sertich (DFL-Chisholm) were eager to hear Pawlenty’s solutions to balancing the budget and providing economic stability. Sertich felt the legislature should focus on job creation, saying “[t]he lack of jobs is evident in the state’s income tax collections. We have already taken steps early in this legislative session to create jobs and that will remain our focus.” They pointed to the passage of the transportation bill as a significant step forward. The bill is estimated to provide 30,000 new jobs a year for the next ten years. Senate and House DFL legislators are also working on an economic development and job growth package to help stimulate the economy.

For media coverage of the forecast, go to http://www.startribune.com/politics/state/16073292.html  

To read the complete February forecast or a comprehensive summary in narrative or PowerPoint form, go to the Department of Finance website at http://www.finance.state.mn.us/.

Senate Ousts Transportation Commissioner 

In a move many anticipated after the I 35W bridge collapse, the Senate removed Lt. Gov. Carol Molnau from her position as Transportation Commissioner. The 44 20 vote was split along party lines. It was only the third time in more than 50 years that the Senate unseated a state commissioner from the job.

Molnau has been under constant scrutiny since the bridge collapse for department mismanagement, delayed construction projects and cost overruns including the Wakota Bridge project. Despite being ousted from her job as Transportation Commissioner, Molnau will continue her job as Lieutenant Governor. In a prepared statement, Molnau said being commissioner was one of the best experiences in her life. “It has been my honor and privilege to serve the citizens of Minnesota alongside the dedicated professionals in the department. I am proud of the agency’s accomplishments in increasing infrastructure investment, improving efficiency and advancing innovation,” said Molnau.

Gov. Tim Pawlenty said that, while he wasn’t surprised by the vote, he was disappointed that the Senate decided to make transportation issues more about partisan politics than about the good of the state. He appointed Bob McFarlin, Molnau’s chief assistant, as acting transportation commissioner until a replacement can be made.

You can read more about the Senate confirmation hearing on http://www.startribune.com/politics/state/16077047.html and http://www.twincities.com/ci_8394323?nclick_check=1

Health Care Reform Debate Fires Up

Even before the 2008 legislative session began, drastic health-care reforms were being discussed by both the Legislature’s Health Care Access Commission and Gov. Tim Pawlenty’s Health Care Transformation Task Force. The two groups worked through the summer and fall on plans to increase the number of Minnesotans with health care coverage and reduce the overall cost of health care by 20% each.

This week, legislative proposals based on the two groups’ final reports received initial hearings in the House and Senate. Both proposals recommend the development of a Health Insurance Exchange, increased emphasis on wellness and primary care, and a shift in provider payments to reflect transparency and quality outcomes. However, S.F. 3099, authored by Sen. Linda Berglin (DFL-Minneapolis), and H.F. 3391, authored by Rep. Tom Huntley (DFL-Duluth), have dramatic differences in several areas, including new mechanisms for provider payments, affordability standards for health care, and whether or not to collect substantial revenue from hospitals to fund the state’s health improvement plan.

Rep. Huntley and Sen. Berglin both admit that almost everything in their proposals is controversial, but they contend that dramatic reform is needed soon to fix a system that many feel is on a downward trend. Debate on these reforms promises to be heated, as Democrats and Republicans alike have expressed concerns.

You can read the final reports of the Health Care Access Commission here, and the Transformation Task Force here. Online versions of H.F. 3391 and S.F. 3099 are not yet available.

Important Dates

March 14 First Policy Deadline

March 19 Second Policy Deadline

March 19-25 Easter Break

March 28 Third Policy Deadline