The 2018 Minnesota legislative session kicked off with the state’s budget administrators announcing a $329 million budget surplus. Looking back, there wasn't much more good news from this session.

Lawmakers and Governor Mark Dayton at the start of the session were focused on a capital investment bill, a federal tax conformity bill, and a handful of other issues including opioid abuse, MNLARS (the state’s drivers’ license, vehicle title and registration system), elder abuse and school safety. Per the Constitution, the legislature adjourned sine die at midnight on Sunday, May 20, with no agreement on any of the issues viewed optimistically by leaders at the beginning of session. Gov. Dayton subsequently vetoed both the tax bill and supplemental budget bill, though he did ultimately sign a bonding bill despite his concerns that it did not fund enough projects.

The cost of this gridlock has yet to be measured. That will occur in the November 2018 general election when all 134 seats of the Minnesota House and all constitutional offices, including governor, will be up for election.

Organizing and campaigning began this past weekend when both major political parties held their nominating conventions and chose their party nominee. The Democratic Farmer Labor Party (DFL) delegates chose State Representative Erin Murphy as their nominee and Republicans picked Hennepin County Commissioner Jeff Johnson, as they did in 2014. Both are heading to a primary for the right to be on the November general election ballot. Later in this update is a more comprehensive overview of the party conventions and 2018 elections.

2018 Legislature Issue Overview

Health Care

Similar to other policy areas, health care in 2018 was more about what did not pass at the end of the session. Addressing the opioid epidemic, proposals to reform regulations around nursing homes and assisted living, and payments to disability providers all began the year as bipartisan priorities and yet were not a part of the supplemental omnibus spending bill. Expect to see all of these revisited in some way next year.

Two major topics will likely dominate health care discussions for the 2019 legislature, regardless of how the November elections turn out:

1.) What to do with MinnesotaCare?

With the provider tax scheduled to sunset in 2019, the state will have a decision to make regarding how to fund the long-standing public health insurance program. The choices will be fraught with real-life and political challenges: reinstating taxes is never popular, but potentially impacting the health insurance of the working poor is far from ideal.

2.) Transparency, Transparency, Transparency.

Both parties continue to trend towards increased transparency around health care pricing, whether that be how much a particular medical procedure will cost, or what charges go into the prices of prescription drugs. This past session did see some tension between the desire to know everything about prices and the private nature of certain health care contracts, but it is certain these conversations will continue next year.

Transportation

In 2006, the legislature passed a proposed constitutional amendment asking voters if proceeds from motor vehicle sales taxes should be used for transportation purposes, rather than deposited into the state’s general fund. In November of 2006, voters said yes, and that funding stream is now an integral part of the highway and transit system funding. Similarly, in the final days of session this year, the Minnesota House passed a proposed constitutional amendment allocating all sales tax revenues from motor vehicle parts and repairs to the state’s highway construction fund. A portion of these sales taxes were statutorily dedicated last session. Prior to 2017, they were funneled into the state’s general fund. The proposed amendment, contained in HF4437 and authored by Rep. Paul Torkelson (R-Hanska), passed off the House floor 76-54.

In the last few years, a broader acceptance of a funding inadequacy has replaced a view largely held by GOP members that existing funds, used more wisely, could meet the state’s transportation needs. Differences remain, however, concerning the best funding approach. Republicans believe using general fund resources is the best approach because those funds are supposed to reflect the state’s evolving needs landscape. Minnesota sets a new budget every two years, and Republicans say that now is the time to set these funds aside. Democrats maintain that the proposed auto parts sales tax transfer is not enough to meet the needs, and siphons money away from other crucial needs. Despite not doing so when the DFL held legislative majorities during Dayton’s first term, most leaders on the left believe a fuel tax increase is the best way to fund roads and bridges.

While the bill passed a number of Senate committees, it was not brought up for a vote on the Senate floor and, as a result, will not be on the ballot this fall. Additionally, all of the other transportation policy and finance proposals failed to become law and were vetoed along with everything else in the supplemental budget bill.

Capital Investment

The even-numbered year of the biennium is traditionally the year the legislature passes a bonding bill. Although the legislature passed a bonding bill last year, Gov. Dayton proposed a $1.5 billion public works bill this January. In the bill, Dayton focused on infrastructure at state colleges and universities, clean water, and state buildings. Leaders of his own administration at Minnesota Management and Budget said that based on the budget forecast, the state could afford a roughly $800 million bonding bill this session.

House and Senate bonding committees met throughout the session but had yet to pass a bonding bill as the clock was winding down. The Senate, in fact, took up and failed to pass a version of the bonding bill with 10 days to go in session. Bonding bills require a supermajority of each body, not a simple majority like most bills. During the final weekend of session, negotiations began in earnest and the legislature passed and sent to the Governor a $1.43 billion bonding bill. Of the $1.43 billion, $825 million is general obligation bonding. The remaining comes from trunk highway bonds, the Minnesota Rail Service Improvement Fund, the general fund and the Environment National Resources Trust Fund.

The bonding bill funded transportation to the tune of $543 million for state roads and bridges, but none of it went for transit expansion (read: Southwest Light Rail). It also includes about $180 million for higher education, $32 million for new veterans’ homes in three communities, $28 million for mental health crisis centers, and $90 million for water and wastewater needs across the state.

The governor signed the bonding bill into law after line-item vetoing a $1 million grant for a new regulation on the Minnesota Pollution Control Agency. The bill this year, is in addition to a significant bonding bill that was passed and signed last year, totaling $990 million in general obligation bonds.

State Convention and August Primary Contests

GOP State Convention

The State Republican Party held their convention this past weekend in Duluth to endorse constitutional officers and U.S. Senate candidates for the election cycle. The threshold for securing endorsement is 60 percent. On the first night of the convention, the electronic voting system experienced difficulties and the party resorted to paper ballots for the remainder of the weekend. Three-term State Representative Jim Newberger secured the endorsement on the first ballot with 79 percent of the vote to run against U.S. Senator Amy Klobuchar. State Senator Karin Housely, currently serving her second term, won the endorsement with 74 percent to run against U.S. Senator Tina Smith. Housley, however, will face a primary challenge in August.

The constitutional officers were all endorsed by acclimation:

• State Auditor—Pam Myhra
• Attorney General—Doug Wardlow
• Secretary of State—John Howe

The contested gubernatorial race started its endorsement process early Saturday afternoon. Hennepin County Commissioner Jeff Johnson secured the endorsement four years ago and was a favorite going into the weekend. Former Governor Tim Pawlenty entered the race late this spring and declined to participate in the endorsement process, opting to go straight for the August Primary. Each candidate took the opportunity to take a shot at Pawlenty bucking the endorsement process during their time at the microphone.

First ballot results

• Jeff Johnson 819 (45.6 percent)
• Mary Guiliani Stephens 467 (26.2 percent)
• Phillip Parrish 365 (20 percent)
• No Endorsement 125 (7 percent)

Second ballot results

• Jeff Johnson 892 (50.2 percent)
• Mary Guiliani Stephens 455 (25.6 percent)
• Phillip Parrish 289 (16.3 percent)
• No Endorsement 74 (4.2 percent)

The third ballot was cast, but results were not shared. Both Guiliani Stephens and Parrish took the stage to drop out of the race without fully endorsing Johnson's campaign, rather talked about a "united party" going into August. Johnson was ultimately endorsed by acclimation.

DFL State Convention

Ideally, politicians and delegates emerge from state party conventions united behind a single slate of candidates headed into an election cycle — this past weekend in Rochester proved to be anything but ideal for the state DFL party. A number of surprises, primarily in the endorsement contests for attorney general and governor, have caused waves that reshaped everyone's political scorecards heading into the summer.

It began when Matt Pelikan, a progressive activist and former Robins Kaplan attorney who also clerked for two MN Supreme Court justices, was endorsed over three-term incumbent Lori Swanson. Pelikan attacked Swanson from the left, challenging her record on gun violence and pharmaceutical price issues in particular. Early speculation that Swanson would simply run against Pelikan in the August 14 primary proved to be half true — she decided to run in a primary for governor instead. This decision unleashed an avalanche of entrants into the AG primary race against Pelikan, including Congressman Keith Ellison, State Representative Deb Hilstrom, and former Commerce Commissioner Mike Rothman.

Swanson's entry into the gubernatorial primary pits her against Congressman Tim Walz and DFL-endorsed Rep. Erin Murphy. Walz had previously indicated he intended to run in a primary should he not be endorsed, so this was not a surprise. However, Swanson joining the fray adds a significant wrinkle — conventional wisdom would say that she and her running mate, retiring 8th District Congressman Rick Nolan, would siphon votes from Walz supporters to the benefit of Murphy.

The prevailing questions for candidates during the DFL convention seemed to focus on how progressive they were. In the run-up to a very crowded August 14 primary, we will see whether the party embraces that progressive messaging or if more moderate perspectives still hold any sway.