The Minnesota Legislature reconvened this past Tuesday after a weeklong break. Committees have taken to task assembling omnibus bills to meet the third committee deadline of April 19. This deadline was set in January for committees to act favorably on major appropriation bills. The only committees not subject to this deadline are the tax committees.

Taxes

Since the February budget forecast, which estimated a reduction in the state's deficit from $1.1 billion to just over $600 million, Governor Dayton submitted a supplemental budget to the legislature updating his spending priorities. The Governor and leadership in both bodies have different spending targets. Now it is up to the tax committees to figure out how enough revenue will be raised to cover the proposed appropriations and the remaining deficit for the upcoming biennium.

As we return from the Easter-Passover break, taxing tools being discussed are heavily focused on income tax. A fourth tier income tax seems to have the broadest support in the majority parties, and there has been discussion of a temporary income tax surcharge on that fourth tier to cover previous bienniums' school shifts. The surcharge would place Minnesota just behind California as the state with the second highest marginal tax rate in the country. Along with the new fourth tier tax rate for those individuals with a taxable income exceeding $150,000 and married joint filers above $250,000, there are other taxes being considered—sales tax expansions as well as increased taxes on tobacco and alcohol.

After a massive outcry from the business community, the Governor dropped his business-to-business tax proposal in mid-March. Services consumed by businesses—like those provided by legal and accounting firms—would have been subject to sales taxes and would have generated a tremendous amount of revenue for the state. While those taxes have been eliminated from the Governor's proposal, Senator Thomas Bakk (DFL-Cook) has indicated he may support taxing certain business-to-business services. Dropping business-to-business sales taxes created a gap in the budget plan, forcing the Governor to drop his $500 per year property tax rebate for homeowners. The House and Senate are currently assembling their respective property tax packages that would provide property owners and renters with rebates; however, it would be based on property value and need rather than a set amount for homeowners across the board.

Health Insurance Exchange

Governor Dayton signed legislation creating a health insurance exchange for Minnesota, now called MnSure, on March 20. After a long journey through the legislature, MnSure staff now face the equally daunting task of preparing the online insurance marketplace for its public unveiling on October 1, 2013. In addition to naming a board of directors for MnSure and establishing internal operating policies, a substantial amount of technical infrastructure work remains. For more information on the insurance exchange, visit the MnSure website.

The insurance exchange consumed much of the health care community's bandwidth during the first half of the legislative session. With that legislation now enacted into law, attention is largely turning to the biennial budget proposal for fiscal year 2014-15. With the February budget forecast showing a smaller than expected deficit, Governor Dayton proposed a spending increase of $170 million for the Health and Human Services (HHS) budget. However, the House and Senate have both recently proposed cutting HHS by $150 million, while providing many other areas with larger dollar amounts. This budget target obviously has many stakeholders concerned and frustrated, especially given the overall size and scope of the House and Senate budget proposals. The HHS omnibus finance bill should be completed within the next two weeks, and stakeholders are anxiously awaiting details regarding how the $150 million reduction will be achieved. Previous solutions to similar situations have ranged from rate cuts to health care providers and HMOs to reductions in medical education appropriations.

Environment

Discussions around environmental policy over the last two years had largely focused on streamlining the administration of permit applications. With the new Democratic majorities, the common themes of conservation and reducing pollution have returned to the forefront. Three issues in particular have priority: water management, silica sand mining, and chemical regulation.

Amidst reports of the state's water usage trends reaching unsustainable levels, the Department of Natural Resources has put forward a proposal reforming how water permits are dealt with. House File 1679 and Senate File 1549 re-categorize water permits and the associated fees into several distinct categories, a change from current practice where the amount of water used was the biggest determining factor of cost. You can find the language of the proposal here.

Silica sand mining received a great deal of media attention leading up to the 2013 session and has continued to be a hot topic of discussion at the legislature. Several bills have been introduced dealing with the silica sand industry in southeastern Minnesota, with a wide range of local stakeholders weighing in on both sides of the issue. Options ranging from new regulatory oversight boards to a full moratorium are being discussed, and it remains to be seen what, if any, final decisions are made this year.

Highlighted by Governor Dayton's executive order banning soap containing the antibacterial chemical triclosan from state buildings, there have been several bills introduced to reduce the use of various chemicals such as triclosan and bisphenol-A from everyday products. A favorite topic of Democratic legislatures, chemical regulation promises to be a recurring issue through this session and the next.

Transportation Funding

The House and Senate Transportation Finance Committee Chairs, Representative Frank Hornstein (DFL-Minneapolis) and Senator Scott Dibble (DFL-Minneapolis), are both longtime transit advocates. Their commitment to the southwest light rail corridor will likely shift the typical transportation funding discussion in Minnesota. Historically, transportation funding has been not as much a partisan debate as it has been a geographic debate, and highway funding was king. In other words, a highway funding bill could only get enough votes if the highway funding was balanced between the Twin Cities and Greater Minnesota, and some money got thrown into the transit system. This year, there is sure to be a comprehensive transit funding bill, but in order for it to pass, a supplemental and fair highway bill will have to be a part of the mix.