Surplus

The state Republican Party has approved a “Give It All Back” ad campaign encouraging Gov. Dayton and the Legislature to return all of the projected $1.9 billion budget surplus to Minnesotans in the form of tax cuts.

After the budget forecast was announced last week, House Speaker Daudt (R-Crown) said he expected Republicans to propose returning at least half of the surplus to taxpayers but also said schools, nursing homes and roads and bridges would likely be recipients of more money.

House Republicans have not produced a budget yet, but are expected to release an outline by March 24. The Democratic governor wants to tap much of the surplus for education initiatives like statewide preschool and tuition freezes. He’s expected to release a revised budget early next week.

MNsure Reform

Two bills that would change how the state’s health insurance exchange operates have cleared initial hurdles in the Minnesota House.

One bill sponsored by Rep. Mack (R-Apple Valley) attempts to overhaul how federal subsidies are given out for people who can’t afford insurance. The bill would require Minnesota officials to seek federal waivers to allow anyone to access those subsidies, whether they buy insurance through MNsure or directly from an insurance company. She said that the legislation is meant to protect consumers from having to use what she called a “broken system.”

Democrats contend MNsure has improved dramatically since it launched in the fall of 2013. Rep. Liebling (DFL-Rochester) said that giving subsidies to buy insurance anywhere would undermine MNsure and the site allows consumers to do side-by-side comparisons.

Rep. Mack’s bill was amended to allow insurance brokers and county officials to sit on the MNsure board, and it would prevent MNsure from setting stricter standards for plans sold on the exchange than what is set out in the Affordable Care Act – a provision long supported by the business community.

Sen. Lourey (DFL-Kerrick) has a plan to make MNsure a state agency, accountable to the Legislature. And it’s unlikely Gov. Mark Dayton, who backs the exchange, would sign it.

Meanwhile, the House Government Operations Committee unanimously approved a bill that would strip MNsure’s exemptions from some state technology rules. The bill, sponsored by Rep. Kahn (DFL-Minneapolis) would require MN.IT to approve MNsure’s technology projects, and divide projects coming in at more than $1 million into phases, each of which would be reviewed by MN.IT. Last month, the state’s Legislative Auditor identified the exemptions as a critical flaw behind MNsure’s troubled roll out.

MN.IT Commissioner Baden predicted that there are two more solid years of build-out in order to achieve a “good base” for the exchange. He also mentioned he’s confident that the build-out could be achieved with the existing federal funds and that no new funds will be needed.

This week the MNsure board approved a three-year financial plan that cuts spending by more than $2.5 million over three years. Officials said the cuts were made necessary by lower than expected enrollment in private health plans. MNsure receives some of its funding from a percentage of premium payments made by people who enroll in private health plans through the state’s online insurance marketplace.

Board member Tom Forsythe said most of the cuts will come from administrative expenses, and another $700,000 will come from the agency’s budget for navigator services.

Managed Care Organizations

MN has relied on managed care organizations (MCOs) for decades to help administer its Medical Assistance (MA) program. Administrative spending by the four largest MCOs (Blue Plus, HealthPartners, Medica, UCare) totaled about $278 million in 2012. DHS determines how much to pay MCOs for these services, and relies primarily on MCO’s financial data to set the administrative portion of payment rates.

During 2013, DHS directives and requests to MCOs were too general to address data complexity and variation among MCOs allocation/accounting processes. DHS modified rate-setting for some programs to target savings, but did not execute some options to limit administrative costs.

OLA concluded that the Legislature and DHS should be more directly involved in oversight of managed care administrative spending for Minnesota’s public health care programs. They found that managed care organizations generally complied with certain financial reporting requirements, but also found exceptions. OLA recommends refining statutory language and DHS contracts to improve consistency in reporting.

Railroad Safety

DFL lawmakers are calling for new taxes on railroads to pay for safety improvements for oil transport.

Under Rep. Hornstein’s (DFL-Minneapolis) bill, the state would assess large railroads up to $32.5 million a year for grade crossing safety improvements. He said the occurrence of oil train derailments and explosions have prompted this. Rep. Hornstein said the railroads should pay their fair share to keep Minnesota communities safe.

Another bill, based on Gov. Mark Dayton’s proposal, introduced by Rep. Marquart (DFL-Dilworth) would expand railroads’ property tax liability. It would generate more than $20 million a year for the state and $40 million for local governments. Rep. Marquart said railroads have a responsibility to create safe conditions for cities.

Sen. Jensen (DFL-Owatonna) is also carrying a bill that would assess railroads for emergency personnel training.

GOP leaders strongly oppose the proposed property tax increase. House Tax Committee Chair Davids (R-Preston) has called it a nonstarter. Railroad officials have said the tax proposal appears to violate a federal law that precludes different treatment of railroads.

Transportation

A bipartisan group of state Senators said this week that they support raising new revenue to fund transportation needs. DFL and Republican members of the self-described “Purple Caucus” announced their list of shared legislative priorities. Without naming a source for the funding, they said additional dedicated funding is needed for roads and bridges first, and then for transit.

The group also wants to increase the basic K-12 education funding formula, and reduce unfunded mandates for public schools.

The other members of the purple caucus are Sen. Bonoff, DFL-Minnetonka; Sen. Clausen, DFL-Apple Valley; Sen. Miller, R-Winona; Sen. Nelson, R-Rochester; Sen. Pratt, R-Prior Lake; Sen. Reinert, DFL-Duluth; Sen. Rosen, R-Vernon Center; and Sen. Sheran, DFL-Mankato.

Rep. Erhardt (DFL-Edina) broke with fellow DFLers to suggest that money from the state general fund should be used to repair roads and bridges. In the 2013-14 session he chaired the House Transportation Committee. While Minnesota’s transportation budget is funded entirely by the state gas tax and other transportation-related taxes and fees, Rep. Erhardt produced a document showing that 33 U.S. states fund transportation at least to a small degree from the general fund.

Re-dedicating those to highway funds would provide between $221 million and $327 million additional for roads and bridges, Rep. Erhardt said. Another $200 million a year could come by way of shifting transportation costs currently covered by dedicated sources onto the general fund. His proposal lays out a total transportation investment of $12.7 billion in the next decade.

Those proposals put him at odds with most other DFLers, including Gov. Dayton and Senate Majority Leader Bakk, who have been firmly against spending from the general treasury on roads. Democrats have repeatedly warned that would pit road-building interests against other recipients of general fund dollars: schools and college, health and assistance programs, and general aid to local governments.

However, some Republicans in the House have been more open to using general fund dollars for roads. House Republicans have plans to release their own comprehensive transportation funding proposal next week.

Education Testing

Gov. Dayton wants to cut the number of standardized tests that Minnesota students take by a third and says he will seek the federal authority to do so.

The Senate education committee’s chair Wiger (DFL-Maplewood) said he supports the proposal as long as state education leaders continue to emphasize students’ literacy skills and teachers can intervene with struggling pupils.

The House education committee’s chair Erickson (R-Princeton) said she supports making some tests, such as the ACT, optional. However, she said she believes annual proficiency tests are an essential tool for both measuring student academic growth and the performance of schools and teachers.

Education Minnesota, the state teachers union, has long supported efforts to reduce standardized testing and released a statement of support.

The governor’s education policy bill will include eliminating seven of the 21 assessments students are required to take. That will likely require federal approval to comply with the No Child Left Behind law.

Minnesota is one of 45 states to apply for a waiver from the 2002 No Child Left Behind law. Minnesota’s waiver was extended in 2014 and it is up for renewal this year.

School Trust Lands

School trust lands were set aside to generate income for schools, primarily through logging or mining. This week, the U.S. Forest Service is holding meetings on the latest attempt to get access to those school trust lands by swapping some national forest land for state-owned land within the Boundary Waters (BWCA).

The Forest Service would acquire about 30,000 acres of the state school trust land that’s basically trapped within the Boundary Waters. The DNR would obtain an equal value of land scattered throughout the Superior National Forest, outside the BWCA.

The state Constitution requires the DNR to manage the lands on behalf of the Permanent School Trust Fund. The state can’t use the school trust lands inside for mining or logging because the BWCA is protected as wilderness, the activities that would generate the most money. By swapping some land, the state hopes to get land that could be developed.

The federal government supports this because it would allow them to consolidate ownership of their land within the Boundary Waters. Conservation groups have long supported selling the school trust lands inside the BWCA to the feds. They don’t want to shrink the size of the Superior National Forest outside the Boundary Waters and worry about the mining and logging that might follow on the newly acquired land.

On the other side, Iron Range legislators have long supported a land exchange rather than a sale. They argue that maintaining ownership of the land would return more revenue in the long term.

A few years ago the two sides agreed to a hybrid plan. Roughly one-third of the land would be exchanged, and the rest sold to the federal government. But so far the Superior National Forest hasn’t been able to get the feds to put up the cash — about $60 million.

The Forest Service is holding meetings around the state this month. The comments the agency receives will help determine the level of environmental analysis the proposal will require.