This week, committees heard commissioners give presentations on Governor Dayton's budget proposal. Each committee took time to ask specific questions to determine what differences the legislative branch has with the executive branch's plans for funding and reforming government. There was some bill activity in the Senate Tax Reform Division and the Health Insurance Exchange continued its trek through the committee process.

Correction from last week's update: The amount of the Governor's budget increase reported last week was incorrect. The total expenditure forecast for FY12-13 was $35.2B and the proposed expenditure for FY14-15 is $37.8B. This results in a total increase in expenditures of $2.67B.

Tax Reform

This week, the House and Senate Tax Committees heard a presentation from the Department of Revenue's Commissioner Myron Frans on Governor Dayton's tax reform proposal. Each committee asked the Commissioner to set out the reasons the reform proposal will benefit the economy and stabilize the state budget.

In the Senate Tax Reform Division, bills were heard on the elimination of the foreign royalty deduction and an upfront exemption on sales taxes for capital equipment. SF10, authored by Senator Ann Rest (DFL-New Hope), would repeal the subtraction for foreign royalty income. Current law states that 80% of royalties received from foreign corporations is allowed to be subtracted from federal taxable income. Under the bill, all royalties received from foreign corporations would be subject to tax. SF78 (Rest) seeks to allow businesses to receive a refund at the time of purchase or lease of capital equipment without going through the current refund process. The bill seeks to help businesses free up capital to make other investments to help promote economic activity. Both bills were laid over for possible inclusion in an omnibus tax bill.

Health Insurance Exchange

The Senate Commerce Committee held two hearings this week on SF1, sponsored by Sen. Lourey (DFL-Kerrick). SF1 creates the Minnesota Insurance Marketplace, an online tool for individuals and small businesses to shop for health plans. The Committee focused on the makeup of the board, accountability and transparency, and the funding mechanism. GOP members expressed concern that the bill is moving too fast through the committee process, while DFL members pointed out that the bill has had multiple hearings in each Committee. SF1 passed the committee on an 8-5 party line vote and will be heard next week in the Health, Human Services, and Housing Committee.

HF5, the companion to SF1, was heard on Wednesday in the House Government Operations Committee. Sponsored by Rep. Atkins (DFL-Inver Grove Heights), HF5 was met with similar concerns in the House as the Senate. The bill passed through the Committee on a party line vote and was heard in the Civil Law Committee today at 9:30 a.m.