Special Session – Not Yet

Governor Mark Dayton and House Republican leaders on Monday tentatively agreed to a two-year school spending budget, moving them one step closer to avoiding a partial government shutdown come July 1.

The Governor had vetoed education and other budget bills as the session closed in May. State officials have already sent layoff notices to more than 9,400 state employees warning of July 1 layoffs if there is no budget deal.

One of the major sticking points had been Dayton’s push for immediate spending on universal pre-kindergarten. Dayton conceded that demand but said he’ll still push for universal pre-K in the future.

He said he would agree to a Republican proposal to increase overall school spending by $525 million over the next two years instead of the $550 million he wanted. Although negotiations have been largely behind closed doors for the past few weeks, it was a public offer from Republican House Speaker Kurt Daudt (R-Crown) that Dayton ultimately accepted.

Daudt’s offer eliminates Republican proposals to change teacher tenure laws and their push to reverse a Minnesota State High School League policy that allows transgender athletes to play on the team of their choice.  The deal will add two percent to the per pupil funding formula for each of the next two years.

Dayton will need to call lawmakers back to St. Paul soon to revisit the three budget bills he vetoed last month. In addition to education, he rejected finance bills for agriculture/environment and jobs/energy. In the negotiations on the Agriculture/Environment bill, Dayton conceded on abolishment of Minnesota Pollution Control Agency Citizens’ Board. However, the Governor said he wants changes to clean water language. On another issue, the Governor signed the State Government Finance bill accepting a provision allowing counties’ use of private auditors. Now he wants lawmakers to retain the State Auditor’s exclusive oversight of county financial records.

Dayton said he will insist that all Minnesota legislative leaders sign off on the agreement before he calls a Special Session and Dayton late yesterday afternoon yielded no resolution on the budget. It is still not known when the Special Session will be called.

In the meantime, the Senate Finance and House Ways & Means Committees have scheduled a joint hearing for Friday afternoon to do a walk-through of the revised budget bills on which there is agreement. A large group of bipartisan rank and file members are urging Governor Dayton and legislative leaders to release the bills to the public at least 48 hours before acting on them.

Private vs. Public Audits

A provision in the State Government Finance bill, which Governor Dayton signed into law, would allow Minnesota counties to bypass the State Auditor and hire private-sector accountants to conduct annual financial reviews. Dayton, who once served as State Auditor, said this week that it is a Constitutional office and an unacceptable change. He wants lawmakers to repeal the provision as part of the anticipated Special Session.

Daudt, who once served as a county commissioner, said county government officials have been seeking this change for years as a way to trim costs. Cities and school districts already have the option of using private auditors. Julie Ring, Executive Director of the Association of Minnesota Counties, said members view it as an issue of fairness and competitiveness.

Rep. Sarah Anderson (R-Plymouth) notes that 28 of the State’s 87 counties are already permitted to use private auditors. She says allowing counties to contract with private firms will save taxpayer money to be used for road repair or to hold the line on property taxes.  Anderson also says Dayton effectively agreed to the provision when he signed her State Government Budget bill that included the Auditor language. Dayton countered that he signed it to protect the jobs of thousands of state workers who could be laid off on July 1 if a budget deal isn’t reached.

Speaker Daudt said House Republicans are inclined to make a technical fix to the bill but are not likely to eliminate the change entirely. He said giving counties an option is a priority for his caucus.

State Auditor Rebecca Otto said she’s considering filing a lawsuit to argue that the Legislature overstepped its authority by infringing on the rights of a Constitutional officer.

Bonding Bill

Legislative leaders have reached an agreement on a bonding bill to be considered during the upcoming Special Session. The bill would authorize $373 million in bonding for several projects, including transportation bonds for rerouting Highway 53 on the Iron Range. It includes nearly $180 million in general obligation bonding money for projects including finishing the state Capitol renovation and building animal testing labs in St. Paul and Willmar prompted by the recent outbreak of Avian flu. The bill also includes funding for disaster relief in Scott County and several other counties.

A 60% supermajority is needed to pass bonding bills. In the House, Republicans need at least nine Democratic votes to pass the bill, but Rep. Paul Torkelson (R-Hanska) said they may need additional DFL support because he doesn’t expect unanimous Republican support.

Senate Capital Investment Chair LeRoy Stumpf (DFL-Plummer) said the plan does not include a parking garage underneath the Capitol, a provision that had been included in the bill passed by the Senate on the final night of session.

Pipeline Concerns

This week, the Mille Lacs and White Earth Ojibwe bands are holding their own public hearings on plans for the Sandpiper line, a $2.6 billion pipeline that would pump North Dakota crude 300 miles across Minnesota to its terminal in Superior, Wis., and eventually to refineries around the Great Lakes. The Minnesota Public Utilities Commission (MPUC) is about to hand down a major ruling on the project.

While the route preferred by Canadian pipeline company Enbridge Energy does not cross any tribal reservations, it does cross a large area of lakes and forests in northern Minnesota where treaties give tribes the right to hunt, fish and gather. Tribal members say they are especially concerned about potential impacts on their right to gather wild rice.

Additionally, the Friends of the Headwaters group contend that the risk of a spill in those areas is too significant. The group suggested several alternative routes, one of which was endorsed by experts from the Minnesota Pollution Control Agency and the Department of Natural Resources. However, Enbridge argued the other routes were unworkable because they would not connect to its terminals in Clearbrook and Superior.

Public hearings on the need for Sandpiper were held in Duluth, Bemidji and other cities, but not on any reservations. The White Earth Band asked for one, but the MPUC declined saying the tribal voices have had a chance to be heard in written comments.

The MPUC is scheduled to decide on Sandpiper’s “certificate of need” today. Mille Lacs and White Earth leaders have asked the Commission to delay its decision until they submit reports from their hearings.

Even if the Commission rules the pipeline is needed, the MPUC would still have to approve a final route for the pipeline, a process that will require more public hearings, and according to the MPUC, more chances for tribal input.

Rate Hikes

Eight health insurance companies in Minnesota are proposing double-digit increases in average premiums, according to the federal Centers for Medicare & Medicaid Services. Gov. Mark Dayton called the proposed rate increases “outrageous” given that the cost of health care is currently increasing at just three percent.

In Minnesota, 56% of people receive insurance through their employer, 30% through public programs, and individual and family coverage makes up six percent of the State’s total health insurance market.

Blue Cross and Blue Shield (BCBS) of Minnesota, for example, wants to raise rates an average of 54% on nine plans. Officials at BCBS say the company needs higher premiums to account for rapidly rising medical costs for individual and family plans. The company lost $135 million on its portfolio of individual products in 2014 and is on track to lose significantly more on those plans this year, they said.

Of the six insurance companies that reported 2014 operating results as part of their rate request, all but one paid out more in individual claims in 2014 than they collected in premiums. Some said their health plan members were sicker and needed more care than expected.

The federal Affordable Care Act requires early disclosure of rate requests of 10% or more. Those that seek to increase rates below that threshold are not required to disclose their plans.

Rep. Greg Davids (R-Preston) called the news of the proposed rate increases “another disheartening sign that Obamacare and MNsure are not working for Minnesotans.”

Commerce Commissioner Mike Rothman promised a thorough review of the rate increase proposals to determine whether they are justified. The 2016 individual market rates will be finalized by October 1.