The 2014 legislative session begins on February 25, an unusually late start date. With Election Day looming in November for all statewide offices and all House seats, the Governor and House members will focus on a short session featuring a statewide bonding bill, minimum wage increase, repeal of business-to-business sales taxes enacted in 2013 and the Governor's reform agenda to remove outdated and unnecessary laws in his proposed "Unsession."
As legislators gear up for the session, the House has pre-filed 280 bills and a few committees have conducted public hearings. During those hearings, the committees were allowed to take testimony and discuss the merits of particular legislation but could not take official action. Once session begins, legislators will be working on a tight timetable to complete their work by May 19, 2014.
Minnesota Management and Budget (MMB) released the November forecast projecting a balance of $1.086 billion for the 2014-2015 biennium. Under current law, any forecast balance must be used to pay back accounting shifts from prior budget agreements. After reimbursing $246 million for the K-12 school shift and $15 million to the state airports fund, the state remaining projected surplus is $825 million.
On February 28, 2014, the next state budget and economic forecast will be released. If the positive trend holds, there will be many proposals on how to best utilize the predicted surplus. Currently, there are discussions to repeal "business-to-business" sales taxes that were enacted in 2013 — commercial and farm equipment repair, commercial warehousing and telecommunication supplies. Governor Dayton has indicated that nearly half of the remaining surplus could go to tax cuts, but he will not propose his supplemental budget until after the February forecast. Other proposals would use surplus dollars for education spending, which is always popular with legislators in an election year.
The second year of the biennial legislative session is traditionally known as the bonding year. Governor Dayton released a $986 million bonding proposal in the middle of January. The bulk of the Governor's proposal is spent on higher education projects for the University of Minnesota and Minnesota State Colleges and Universities and local government projects across the state. Republicans will likely focus on the overall size of the bill as the legislative leaders had agreed last session to only spend another $820 million this session. Because a supermajority is needed to pass a bonding bill, the Republicans hold some bargaining leverage to include their priority projects and policies.
Legislators are looking to modify or repeal some provisions that were signed into law in last session's omnibus tax bill. Changes were made to the estate and gift tax law providing that taxable gifts made within three years of death are to be considered when determining if an estate tax return should be filed, and there is a new 10 percent tax on lifetime gifts in excess of $1 million on any type of property. There will also be discussion on the repeal of business-to-business sales taxes, which include commercial and farm equipment repair, commercial warehousing and telecommunications equipment. Also under consideration will be conforming Minnesota's tax law to recent changes made in federal tax law.
Last session, significant new funding for quality early education and all-day kindergarten was proposed by Governor Dayton and passed with bipartisan support. With this year's projected budget surplus, look for E-12 education as an area likely to receive consideration for further expansion of programs and policy changes.
When Governor Dayton released his bonding proposal, a total of $233 million was directed to investments in the higher education systems equaling 27 percent of the overall bonding package. The MnSCU and University bonding projects would improve access to world-class laboratories, classrooms and job training. Legislators will also continue their discussions of rising student indebtedness and look for ways to help students and their families finance college education.
Minnesota's state-run health care exchange, MNsure, has been under scrutiny for months and will likely be debated at the legislature this session. Minnesota Legislative Auditor Jim Nobles is conducting an audit of MNsure, which is unlikely to be completed before session concludes.
The Legislature will again consider raising the minimum wage. The consensus opinion is that a minimum wage bill will be passed, but how large an increase and specific language will be debated at length during session. Last year, the Senate passed a bill raising the minimum wage to $7.75 and the House passed a version at $9.50. In the end, the conference committee could not strike a deal before time ran out in the session.
The supplemental draft of the environmental impact statement on the proposed Polymet mining project is about to complete a lengthy public hearing process where the controversy is intensifying over copper/nickel mining. Bills will be introduced and hearings will be held, although it is unclear that a change in mining regulations can pass this session.
Legislators have expressed interest in additional state funding for new investments in roads, bridges and light rail and the repair and maintenance of existing infrastructure. However, there is no agreement on how to fund new transportation investments. Likely funding sources include the gas tax and a metro area sales tax. Although industry, local governments and other interested constituencies have formed a large coalition to advocate for increased funding, the Governor and key legislators are still reluctant to increase the gas tax, and many key legislators oppose a metro sales tax increase.
Governor Dayton has been asking citizens to submit ideas to make state government better, faster and simpler. The Governor has proposed an "Unsession" to focus on eliminating unnecessary or redundant laws, rules and regulations. He has reviewed ideas from the general public and suggestions from more than 30,000 state employees. The Governor will release his proposals soon and has asked legislative leaders to make this a focus of the 2014 legislative session.
Given the short session, the Legislature is likely to focus on a limited number of important issues. This will likely include passing the bonding bill and deciding what to do with the projected budget surplus. The 2014 legislative session will focus on issues that have high public approval and set a positive tone heading into election season.