Retirements, an election year and economic forecasts will shape legislative session

Anticipation is growing for the March 8 start to the 2016 legislative session. This year there is an election looming and all 201 seats of the Minnesota legislature are up for re-election. The legislature will start unusually late this year and meet for only 10 weeks through late May. The late start has some key advantages: A $1.2 billion budget surplus should make the work of the legislature a lot easier, and the legislative leadership would like to narrow the number of issues the legislature takes up this year in order to avoid controversy heading into the 2016 general election.

The relatively quiet legislative session will likely come down to a few core issues. First, legislators will need to decide how to spend the budget surplus. A recent Minnesota Poll showed Minnesotans almost evenly divided over spending the surplus (31%), refunding it (30%), and saving it in the budget reserve account (30%). As is usually the case, legislators have their own ideas of how best to spend the budget reserve, including paying cash for transportation and traditional bonding projects, a whole host of tax relief proposals, and a laundry list of rural Minnesota initiatives. These rural spending initiatives address issues in crucial districts that may determine the outcome of the 2016 general elections and control of the Minnesota House and Senate. Republicans currently control the Minnesota House by a 72-62 seat margin. The Minnesota Senate is under the control of the DFL Senate caucus by a 39-28 seat margin. Therefore, a turnover of six seats could determine the next majority in either body.

What Will Be the Key to Legislators Getting Their Work Done and on Time?

The one factor that could have the most impact would be if legislative leadership and Governor Mark Dayton have already negotiated a plan before legislators return to St. Paul. Leaders and the governor continue to talk over tax relief, a transportation funding package and capital improvement, or bonding, proposals. A significant factor in coming to some type of agreement will be the late February budget forecast. A strong budget forecast could be the catalyst for getting things done on time. A weak budget outlook will only prolong the session, possibly sending it into overtime for a special session. No one wins if that is the outcome.

Finally, it appears that there is little to no chance of the governor calling a one-day special session to address extending unemployment benefits for workers on Minnesota's Iron Range. Legislators have been unable to come up with any workable compromise that is satisfactory to all parties. The disagreement and acrimony over how to best address this tough regional economic issue will likely spill over into the regular legislative session. 

Legislator Retirements Are Adding Up

Every two-year election cycle brings with it the anticipation of legislator retirements. Already this year, 15 legislators have announced their retirements before the session begins next month. This is somewhat unusual because most legislative retirements traditionally come toward the end of the legislative session, oftentimes on the last evening of the session before heading home to campaign for the general election. Not this year.

These legislators chose to announce their retirements early for various reasons ranging from new careers, family considerations or simply wishing to retire and wrap up their careers in public service.

The results of these retirements – and there are likely more to come – will be a legislature with many new faces being sworn into office in January 2017. Couple this with general election losses, and the changes in the Minnesota legislature are sure to be transformative given the institutional memory and experience of the legislators leaving.

The following is a list of legislators who have announced their retirements:

• State Senator David Thompson (R-Lakeville)
• State Senator Jim Metzen (DFL-South St. Paul)
• State Senator John Pederson (R-St. Cloud)
• State Senator Kathy Sheran (DFL-Mankato)
• State Senator Roger Reinert (DFL-Duluth)
• State Senator Julianne Ortman (R-Chanhassen)
• State Senator Barb Goodwin (DFL-Columbia Heights)
• State Senator Bev Scalze (DFL-Little Canada)
• State Senator Branden Petersen (R-Andover)
• State Senator Dave Brown (R-Becker)
• State Senator Katie Sieben (DFL-Newport)
• Representative Kim Norton (DFL-Rochester)
• Representative Ann Lenczewski (DFL-Bloomington)
• Representative Ryan Winkler (DFL-Golden Valley)
• Representative Carly Melin (DFL-Hibbing)

Representative Joe Atkins (DFL-Inver Grove Heights) 

 Transportation

This year’s Minnesota legislature stands a better chance than any legislature since 2008 of passing a transportation finance package. Legislatures before and after the historic 2008 bill that increased fuel taxes 8.5 cents, among other taxes, certainly wanted to fund transportation infrastructure at higher levels, but putting a complex, multifaceted transportation bill together takes patience, skill and perhaps a bit of luck. Those moving parts have good odds of converging in a bill the governor will sign before the start of summer.

In 2008, in response to the I-35W bridge collapse tragedy in August 2007, voters were open to a new fuel tax for the first time in two decades. That public sentiment helped to provide the momentum the bill needed to get over the finish line. Accountants had proven needs, engineers and road builders had demonstrated what could be done with the new money. It was only after the bridge collapse that legislative leaders found enough votes to turn the bill in to a law. Legislators in 2016 don’t have that kind of political tailwind, but they may not need it.

Over the summer, in the wake of a growing state budget surplus, Governor Dayton acceded to the House strategy, saying, “The gas tax is dead.” That little sentence is very important. It means the support for new fuel taxes and other fuel taxing mechanisms will likely be too politically difficult to move forward, and the way to put new money in transportation is by using general fund dollars as outlined in the House Republican plan. It means the road and bridge piece of a major transportation bill will not require major political lifting and massive headwinds. It also means legislators facing election this year won’t have to defend a fuel tax increase. In order to find enough votes, metro Democrats will want new transit funding as well. If a bill makes it to the governor's desk, there will likely be a sales tax increase of some kind to fund metro transit and transportation specific projects in the bonding bill. The path to a highway funding bill is not yet crystal clear, but key elements are lining up:

• A patient group of legislators and stakeholders who have (in some cases reluctantly) waited for a time when transportation is not getting drowned out by budget battles, government shutdowns or labor strikes; and
• A skillfully assembled transportation package that takes advantage of some new and some existing revenue sources that will have minimal impact on voters’ and businesses’ wallets; and
• The governor’s budget and fuel tax comments – may be the luck that is required to move a bill across the finish line in 2016. 

Health Care Finance Task Force

For the last several months, the health care community has been focused on the work of the Health Care Finance Task Force. The task force, created as part of the final deal on the 2015 HHS omnibus bill, spent the last several months examining Minnesota's health care system and looking for barriers to care and opportunities to improve the system. The 29-member group laid out a package of recommendations in mid-January that covered a wide range of topics related to care delivery.

The most substantial recommendation was the proposed expansion of eligibility for MNCare. After much discussion around financial difficulties some Minnesotans still have affording health insurance, the task force suggested raising eligibility for MNCare to 275 percent of the federal poverty guidelines. In order to pay for that expansion, the scheduled sunset of the provider tax would be repealed. The reinstated tax would be accompanied by stricter limits on usage to ensure the funds would be used solely to target lower-income health care issues.

Another topic was MNSure, the state's health insurance exchange. Some task force members were interested in the idea of exploring a possible transition away from a state-based exchange and into the federal system. In the end, the decision was made to continue with the current operational structure and evaluate further after the 2016 plan year. The uniqueness of MNCare was the main concern for MNSure advocates – the federal government could not guarantee a seamless assimilation for that program and its population.

The final report was approved by a large majority of task force members and will be sent to the legislature for consideration. Any recommendation will have to be introduced as a bill and passed, which causes observers to be skeptical of the chances for any big change in 2016.

Given the political atmosphere at the Capitol, with divided control of government and an election on the horizon, many expect the report to generate much discussion but little actual activity. View the full report of the group's recommendations. 

Bonding

On January 15, Governor Dayton released his bonding recommendations for the upcoming legislative session. The 2016 Minnesota Jobs Proposal leverages $1.4 billion in total state investment for $600 million in additional funding to create nearly 40,000 jobs. Much of the proposal would help address critical infrastructure needs statewide. Highlights of his bonding recommendations include investments in water quality infrastructure, rail and pipeline safety, economic development and higher education institutions.

With a modest bonding package being passed at the conclusion of special session in 2015, it is expected that the Republican controlled House will have a more pared down bonding proposal. In discussions with key members, the House is likely to release a capital investment bill that is closer to $850 million. The Senate is expected to release a bill somewhere between these two extremes, around $1 billion.

The February budget forecast, which will be released the first week in March, determines how much money the legislature has at its disposal to spend. Should the state continue to thrive financially, it is likely we could see a bonding bill supplemented with cash investment in much needed infrastructure repairs. The bonding bill is not subject to committee deadlines and will be negotiated through the final days of session, which concludes May 23, 2016.

View a complete spreadsheet of Governor Dayton's bonding proposal.