Government Relations Insight: Primary Recap, Health Insurance Exchange Update and Latest Budget Developments

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[authors: Amber Backhaus and Paul Cassidy]

Tuesday's Primary Produces Few Surprises

This past Tuesday was Primary Election Day in Minnesota. Despite high-profile congressional contests in southern and northeastern Minnesota and primary battles in over 40 state legislative districts, only 9% of Minnesota voters—almost a record low—turned out to decide which candidates will appear on ballots in November.

Having the party endorsement carried the day for those candidates who had received it going into the primary. In the Eighth Congressional District, former congressman and DFL-endorsed Rick Nolan received 38% of the vote in a competitive three-way race, even though runner-up Tarryl Clark outspent him four-to-one. Without the party's nod, two incumbent state legislators, including Steve Smith, the longest-serving GOP member of the Minnesota House, lost their respective races. Representative Smith (R-Mound) was trounced by political newcomer Cindy Pugh, who not only had the GOP-endorsement but is also the founder of her local chapter of the Tea Party. Having "the most conservative credentials" also garnered Mound City Council member Dave Osmek the Republican endorsement and the primary victory in Senate District 33, where he faced off against Rep. Connie Doepke (R-Orono) for the open seat.

Senate Tax Chair Julianne Ortman (R-Chanhassen) may have lacked the party's endorsement going into Tuesday's primary, but she had also blocked her opponent, local GOP activist Bruce Schwichtenberg, from getting it. Ortman handily survived the primary, garnering over 58% of the vote. She is expected to easily win re-election in the general election, as her district touts the highest Republican index in the state.

Other primary victories of note:

Senator Lyle Koenen (DFL-Clara City) won his primary battle against Willmar businessmen Larry Rice with 57% of the vote. This sets up for an incumbent-on-incumbent general election contest, where Koenen will face Senate Transportation Chair Joe Gimse (R-Willmar) in the newly configured Senate District 17.

On the Iron Range in House District 6B, three candidates competed to be the DFL successor to Rep. Tom Rukavina (DFL-Virginia), who represented the area for 26 years. With 53% of the vote, DFL operative Jason Metsa overcame local economic development director Lorrie Janatopoulos.

In the heavily DFL Senate District 67 on St. Paul's east side, Foung Hawj will move onto the general election (and likely the Senate) after securing victory over two other well-known Democrats in the district, Robert Humphrey and Tom Dimond.

For complete primary results, check out the Secretary of State's website.

Now that the stage is set for November, expect the campaign season to become more shrill. After a dismal showing in the 2010 elections, state Democrats are hoping to regain control of both the House and the Senate. Meanwhile, Republicans are confident the new districts and lack of enthusiasm for President Obama will help them maintain, and even grow, their majorities.

Special interests and independent expenditure groups are lining up to assist their preferred parties in this endeavor. The 2012 Fund and WinMinnesota have already accumulated over $1.3 million to support DFL candidates while MN FORWARD and Minnesota's Future have raised several hundred thousand dollars from the business community to maintain GOP control of the legislature.

Affordable Care Act: Health Insurance Exchange Update

Minnesota continues to work on the design and implementation of its Health Insurance Exchange as part of its compliance with federal health care reform laws. The state Departments of Commerce and Health and Human Services, along with an advisory task force, have been working for over a year on the Exchange, which will provide an online marketplace for Minnesotans to purchase health insurance.

The state recently signed a $41 million contract with technology vendor MAXIMUS to "build" the new web-based portal, which could impact up to 1.5 million Minnesotans. The contract covers all technology-based aspects of the project, including customer service and assistance features. Several weeks ago, Minnesota successfully became just the second state nationally to undergo an initial federal design review heavily focused on IT infrastructure. The next federal checkup will be held on Nov. 16, when the state expects to receive conditional certification for the Exchange. While no state in the country is expected to be fully certified this fall, full certification for Minnesota is expected by the summer of 2013.

In terms of certifying various insurance products for sale within the Exchange, health plans will submit offers in January to the Department of Commerce for review. At the moment, agency staff is not sure what will become of MinnesotaCare within the new Exchange, as there are some uncertainties about that program's future past 2013.

Cost projections for final development and operation of the Exchange are somewhat unclear at the moment, but Department of Commerce staff predict the state will need another $40-$80 million to finish building the Exchange and then another $40-$80 million for annual operations. Right now, one possible financing plan seems to focus on a combination of using premium dollars and Medicaid administrative matching funds.

Go here to learn more about Minnesota's Health Insurance Exchange. 

Preliminary Budget Forecast and Update

In the weeks leading up to the 2012 legislative session, Minnesota Management & Budget (MMB) announced a surprising $876 million surplus. Minnesota's constitution requires a balanced budget, and with black ink in the books, legislators were not forced into budget negotiations with the Governor. They also were not able to spend the surplus because state law required the cash to be directed into the state's reserve and cash flow accounts. The news wasn't all good, though. MMB Commissioner Jim Showalter announced in February that despite current surplus revenue, the budget forecast for 2014-2015 remained $1.1 billion in deficit. Minnesota's biennial budget tops out at approximately $33 billion.

The first year of Minnesota's legislative biennium is known as the "budget" year, and the deficit will make 2013 a challenging budget year to resolve. Regardless of who controls the legislature, it won't be by enough to make the solution as simple as raising taxes or cutting spending. Fortunately, the July Economic Report issued by MMB contained some good news. State revenues are up 2.1%, or $336 million, and Minnesota's economic growth, ranked 15th best, continues to outpace the national average. Income and corporate tax revenues grew substantially more than predicted after years of little growth or decline. The extra revenue doesn't necessarily equate to a diminishing state budget deficit. We will not have a comprehensive budget analysis until the November MMB budget forecast. Then we will know if revenue continued growing, what state spending looked like and what became of February's predicted deficit.