Minnesota lawmakers used every last minute available to them to try and complete their work prior to the deadline for the 2017 legislative session, but it was not enough time. At 12:01 a.m. early last Tuesday morning, Governor Mark Dayton declared a special session was needed to give lawmakers more time to complete their work. The " informal agreement" Dayton had with each of the four legislative caucus leaders called for a narrow special session and a self-imposed 7:00 a.m. Wednesday deadline to complete the legislature's unfinished business.

Wednesday passed and legislative leaders and the Governor still could not come to agreement on major spending and policy bills. Working and negotiating nearly around the clock, a deal was struck late Thursday evening on all of the outstanding issues. The final bills were processed over the course of about six hours, and the 2017 Special Session adjourned after 3:00 a.m. Friday.

The funding bills being sent to Dayton add up to a record $46 billion budget, a tax bill that includes $660 million in tax cuts and a host of policy provisions favored by the Republican-controlled legislature. One key bill that many will watch is statewide preemption language prohibiting cities from passing sick leave and minimum wage laws. This was a top priority for the Minnesota business community. Other provisions include environment, agriculture and economic development policies that could benefit rural Minnesota interests.

Dayton is expected to sign most, if not all, of the omnibus budget bills sent to him. On the bubble for possible vetoes include the preemption provision discussed above and, possibly, the omnibus tax bill. Dayton has three days to sign any bills presented to him that were passed during the regular session and 14 days to sign bills presented to him that were passed during the Special Session.

If you would like to follow the status of each of the chapters of law presented to the governor, go to MN Legislature - Chapter List.

Key Areas Addressed in the 2017 Legislative Session

K-12 Education

The Governor came out strong with his budget recommendation in January to increase the general education formula by 2 percent each year. This is a $330 million initiative. Through negotiations with the legislature, the final education bill includes the 2 percent increase along with additional funding of voluntary pre-kindergarten programs. The most significant policy provision included in the omnibus bill relates to updating the teacher licensure system in Minnesota.

The teacher licensure system currently in place in Minnesota has been under intense scrutiny over the last two years since the Office of Legislative Auditor released their investigative OLA Report. The OLA highlighted the licensure system, because the Minnesota Board of Teaching and the Department of Education share responsibility for licensing teachers in Minnesota, accountability and decision making is not transparent. Key recommendations from the OLA report include:

• Consolidation of all teacher licensure activities into one state entity.
• Clarification of statutes regarding teacher-licensure requirements.
• Restructuring of the teacher-licensure system to ensure consistency and transparency by establishing a tiered-licensure system.

Armed with this information, the 2016 legislature established a working group to address these concerns. The bipartisan group of representatives and senators met monthly with stakeholders to establish recommendations.

The culmination of the years' work resulted in the conference committee report for HF140 which is included in the omnibus education bill. The bill abolishes the current Board of Teaching and replaces it with the Professional Educator Licensing and Standards Board that would begin on January 1, 2018. This Board would be the sole licensing organization in the state and would remain separate from the Board of School Administrators.

Additionally, the bill updates the statutes related to teacher preparation programs. With the current teacher shortage in Minnesota, many new and innovative teacher preparation programs have started recruiting and retaining a more diverse teacher corps at the local level.

Lastly, the bill creates a tiered licensure system to encourage teacher candidates to continue to excel in their profession and recruit teachers from out of state. The licensure via portfolio is retained in the licensing process and all candidates are required to participate in the employing district or charter school's mentorship program and evaluation.

Health and Human Services

Controlling health care costs has been a bipartisan goal for years, and in 2017 the Republican-led legislature looked to put their stamp on those efforts. In addition to bills enacted earlier in the year to buy down premiums in the individual insurance market ($326 million) and re-establish a state reinsurance program ($542 million), a budget package cutting $463 million from the 2018-19 HHS budget was also passed.

The omnibus budget bill relies heavily on the Health Care Access Fund, almost completely draining it by the end of FY2021 to pay for Medical Assistance expenditures. Cost savings are also derived from payment delays and new direct contracting proposals. The omnibus bill passed with bipartisan votes as legislators continue to keep a close eye on the federal government; decisions made in Washington over the next several months could cause significant ripple effects in Minnesota.

Environment

The Environment and Natural Resources omnibus bill included a number of streamlining reforms to the state's permitting and regulatory processes. The final version saw a number of changes supported by business and industry, including those related to permit timeline requirements, contested case petitions for a permit to mine, wetland replacement, makeup and operation of the Environmental Quality Board, and implementation of Governor Dayton's signature buffer initiative.

Despite opposition from a number of environmental advocacy groups, the bill passed with significant bipartisan support.

Energy

In January, GOP leaders in the energy area committed themselves to ratepayer reductions across the board. Many of their ideas focused on reworking or removing archaic and inefficient mandates. Ultimately, two primary issue areas were addressed – both related to the Renewable Development Fund (RDF), which itself will get a makeover going forward.

The RDF originated as a fund, assessed as a surcharge on customers, related to nuclear waste casks. That money is then used to spur growth in other, more environmentally friendly energy sectors. It has been used to promote solar, wind, biomass and higher education research. As it stands, the RDF board accepts applications and makes recommendations for project funding to the Public Utilities Commission (PUC). Going forward, the PUC will still hear the RDF's recommendations, but the legislature will have the final word on approval of the slate of expenditures.

Additionally, the Made in Minnesota solar program was removed from the RDF funding stream. Some in the legislature made the claim that the fund has done what it can to promote competitive solar manufacturing in Minnesota, and that the industry must mature further in the marketplace. Two biomass plants were also set to be taken offline because of unfavorable economics. Pieces were put in place to buy out the Laurentian plant on the Iron Range and the plant known as FibroMinn in Benson, Minnesota.

Taxes

For the first time in three years, the Republican-controlled legislature passed an omnibus tax bill that includes $660 million dollars of tax relief during the 2018-2019 biennium and about $790 million during the 2020-2021 biennium. This is one of the largest tax cut packages ever passed by the Minnesota legislature and is a direct result of the Republicans running on returning Minnesota's approximately $1.6 billion budget surplus back to taxpayers during last fall's general election. The bill contains numerous deductions, including for Social Security income, student loans and first time homebuyers. The bill also contains an increase in the amount of assets that are excluded from the state's estate tax and a "first $100,000 of value" exemption from small business property taxes. Although the size of the tax cuts were hard for many DFL legislators to swallow, the bill passed easily in both bodies with bipartisan support.

Transportation

As part of the special session, chairs of their body's respective Transportation Committees, Representative Torkelson and Senator Newman brought forward HF3, a transportation bill that was nearly identical to the regular session transportation omnibus bill. Although vetoed by the governor a few weeks ago, HF861, the regular session omnibus bill, was largely agreed upon between the legislature and governor. HF3 did include several important changes that reflected the work of the Governor and Legislature to find compromise. Here’s a quick summary of the bill.

Roads and Bridges

• Invests roughly $2 billion from the General Fund into the state’s transportation system over the next 10 years, using:
  • $31.5 million/year in FY18 and FY19 and $145 million/year in FY19 and beyond from the sales tax on auto parts (this uses only a portion of the receipts from the sales tax on auto parts, which currently brings in approximately $250 million/year into the General Fund. Chairs Newman and Torkelson were not able to get to the “full take” because of the budget target they had to work within).
  • Roughly $50 million/year from the sales taxes on rental cars (this dedicates 100 percent of these sales tax receipts).
  • $32 million/year from the sales tax on leased vehicles (this completes the full dedicatation of these sales tax receipts. A portion of these receipts was dedicated to transportation as part of the 2008 transportation funding bill).
• Authorizes $940 million in Trunk Highway bonding, split as follows:
  • $300 million over four years for the Corridors of Commerce Program (the bill also appropriates $50M in cash for the Corridors of Commerce Program to allow for right of way purchase).
  • $640 million over four years for the regular State Road Construction Program.
• Authorizes MnDOT to spend approximately $650 million in federal funds flowing to Minnesota as part of the FAST Act, which was recently passed by Congress.
• Establishes a $75 annual fee on all electric vehicles.
• Requires MnDOT to meet a 15 percent efficiency standard in FY18 & 19, requiring the department to do $1.15 worth of expansion or maintenance work for every $1 in new investment as a result of this bill.

Transit

• Provides $70 million in FY18-19 to the Met Council to address the current budget deficit in bus service in the metro area.
• Allows the metro counties to use their own funds to continue the build out of the LRT and BRT system in the metro area. This bill did not include the various provisions carried in the original House bill that would have ended the build out of the LRT/BRT system in the metro area.
• Continues current law requiring the state to pay for 50 percent of the cost of operating LRT lines – both existing and future – with the exception of the Southwest Light Rail line. All of the funding for SWLRT operations must come from non-state sources.

HF3 is the largest infusion of money into Minnesota’s transportation system since 2008. The work of dozens of stakeholders and legislators is reflected in the bill. Although many in the DFL would have liked an increase in the fuel tax and GOP'ers wanted more robust Metropolitan Council reform, the end product reflected the best agreement that could be achieved by the two parties this session. 

Bonding

Usually the budget year at the legislature does not include a substantial bonding bill. However, since the last substantial bonding bill was passed in 2014 and there is a backlog of major public infrastructure projects statewide, the DFL minority caucuses in both bodies were able to leverage their power to get a nearly billion dollar package passed. A super majority of 60 percent is needed to pass a bonding bill. The package passed overwhelmingly in both the House and Senate. During the regular session, the House attempted to pass an $800 million bonding package that failed to garner the 81 votes needed.

The following is a brief compilation of omnibus bills that passed last week and are awaiting the governor's signature:

Omnibus K-12 Education

Omnibus Environment

Omnibus Health and Human Services

Omnibus Jobs & Energy Affordability

Omnibus State Government and Veterans Affairs

Omnibus Taxes

Omnibus Transportation

Omnibus Bonding

Heading Into 2018

The legislature will get back to work next February 20, 2018. We expect a lot of interim work will be taking place in preparation for what is expected to be a busy year to take up policy that was never under consideration this year due to leadership's insistence on staying focused on bread and butter issues like the budget, tax cuts and capital bonding.

To stay on top of the latest, follow the legislature's interim calendar and committee schedules by visiting the Minnesota State Legislature website.