[co-authors: Joey Novak, Stephanie Pinkalla]

The release of the Minnesota Legislative Auditor’s MNSure report this week dominated conversations at the Capitol. Commissioner pay raises were also in the spotlight while Governor Mark Dayton tried to direct attention toward the merits of his transportation proposal.

Deficiency Bill and Commissioner Salaries

Last week’s “quarrel” between Governor Dayton and Senate Majority Leader Tom Bakk over a delay in pay raises has quieted down. Speaker Kurt Daudt entered the talks and helped forge an agreement regarding the proposal previously added to the deficiency bill in the Senate. After negotiating directly with Senator Bakk and the Governor, Speaker Daudt and the GOP-controlled House passed a version of the deficiency legislation that reverts the commissioner salaries to pre-raise levels until June 30, 2015. The power to control these salaries will shift back to the Legislature on July 2, 2015, giving Governor Dayton the opportunity to determine commissioner pay raises for one day this summer. The bill passed by a vote of 106-21 and will head back to the Senate floor as amended next week.

MNSure

The long-awaited report from the Office of the Legislative Auditor regarding Minnesota’s online health care exchange was presented to House and Senate committees on Tuesday. The audit’s main finding was that MNSure’s “failures outweighed its achievements” in its first-year rollout. Among the issues cited in the report were insufficient testing prior to implementation, poor customer service and a lack of clear lines of accountability. MNSure CEO Scott Leitz pointed to the fact that many of the technical issues have been resolved in the second year of the program, as well as improved communication between staff and leadership. Finally, the audit recommended a change to the governance structure of MNSure as to be directly accountable to the Governor, a recommendation that is already starting to play out in the form of SF139 (Lourey, DFL), which would eliminate MNSure’s Board of Directors and designate MNSure as a state agency.

Education

Two bills containing Governor Dayton’s pre-kindergarten to 12th grade education package (HF844, SF811) were heard before House and Senate committees this week. The Commissioner of the Department of Education took criticism from members regarding funding toward the basic per-student formula and school facilities in a bill that provides for universal pre-kindergarten and eliminating the Head Start wait list. The week ended with a hearing in the House’s Education Finance Committee on the DFL universal pre-kindergarten bill authored by Rep. Erin Murphy (HF46) consisting primarily of testimony from a mix of supporters and opponents.

Taxes

The Senate Tax Committee heard a general overview on Governor Dayton’s tax bill (SF826, Skoe, DFL) from the Department of Revenue, which includes the proposed childcare tax credit, railroad property tax update provisions, various corporate tax changes and other provisions. Testimony on the bill from several organizations praised the childcare and research & development tax credit expansions. Concerns were expressed over corporate tax reforms such as changes in the definitions of “financial institution” and “insurance company” as well as a provision that would give the Department of Revenue authority on determining whether business transactions have “economic substance.” The bill is expected to be broken down and analyzed in depth in committee over the coming weeks.

Four different bills were heard in the House Property Tax division that would seek reductions and/or limitations on the statewide general property tax on commercial/industrial business and seasonal residential recreational property that was enacted as part of the 2001 tax reform. HF482 (Wills, R) would eliminate the tax’s inflator. HF664 (Erdhart, DFL) would also eliminate the inflator as well as phase out the seasonal recreational portion of the tax over the next five years. HF968 (Hertaus, R) would simultaneously reduce the tax and exempt the first-tier of business property value from the state general tax. Finally, HF984 (Drazkowski, R) would completely eliminate the state general property tax over the course of the next six years. All four bills were laid over for possible inclusion in the omnibus tax bill.

Upcoming Legislative Notes

The House and Senate will have a joint convention on Monday night to elect members of the Board of Regents for the University of Minnesota. MNSure will continue to be the subject of hearings throughout the week. Next Friday, Minnesota Management and Budget will release the February Forecast regarding the budget.