Minnesota Legislative Update: Session Enters the Home Stretch

Faegre Baker Daniels

Lawmakers returned from the Easter/Passover Break on Tuesday and immediately got to work moving omnibus finance bills off the House and Senate floor and into conference committees. Several omnibus bills were passed off the House and Senate floors this week, but not without extensive debate, resulting in floor sessions lasting late into the evenings.

Session is nearing the final stretch and legislators are literally working around the clock to ensure they meet leadership imposed deadlines. The House and Senate must pass all major finance bills off the House and Senate floors by next Wednesday. Leadership hopes to have conferees for most conference committees by then.

Senate Floor Action on Omnibus Finance Bills

Five omnibus finance bills were passed off the Senate floor this week. These include:

  • Omnibus Agriculture and Housing Finance Bill: SF 2226, authored by Sen. Torrey Westrom (R-Elbow Lake), prioritizes value-added agriculture, farm family mental health, rural broadband and added housing infrastructure. Notably, the bill appropriates $30 million for deposit in the border-to-border broadband fund account in FY2020. It also contains an additional $125,000 appropriation to fund a second mental health counselor for farm families. Further, it funds the Dairy Producer Margin Coverage Premium Assistance program, which helps dairy farmers maintain profitability. The bill passed as amended on Tuesday on a vote of 35-32.
  • Omnibus Environment Finance Bill: SF 2314, authored by Sen. Bill Ingebrigtsen (R-Alexandria), appropriates $276 million out of the General Fund for the 20-21 biennium to fund a number of initiatives. The bill allocates approximately $1 million to the Minnesota Aquatic Invasive Species Research Center, aiming to develop research-based solutions and reduce the effects of aquatic invasive species. The legislation also increases funding to combat Chronic Wasting Disease and preserve and protect Minnesota’s parks and trails. In addition, the bill provides Minnesota residents with free admission to the Minnesota Zoo and state parks on state holidays. The bill passed as amended on Tuesday on a vote of 43-24.
  • Omnibus Higher Education Finance Bill: SF 2415, authored by Sen. Paul Anderson (R-Plymouth), seeks to protect students and families from increased costs, limit tuition increases, and prepare students for a rapidly changing economy. The bill invests over $3.3 billion into Minnesota’s higher education system, which is an increase of $65.7 million over the last biennium. Included in the bill is a $15 million-dollar investment increase in the Workforce Scholarship Program, promoting the use of the two-year system as a path to employment. The budget also expands eligibility to more students and provides emergency grants to students in need. The bill passed on Wednesday with a vote of 38-29.
  • Omnibus Judiciary and Public Safety Finance Bill: SF 802, authored by Sen. Warren Limmer (R-Maple Grove), appropriates $2.39 billion dollars for the Department of Public Safety, the Department of Corrections, and the Judiciary Branch. It increases spending by a little over $38 million, including $9.5 million in new funding for the hiring of correction officers and security upgrades at state prisons and correctional facilities. It also provides funding to toughen penalties for sex offenders and repeals the marital rape defense. The bill passed on Wednesday with a vote of 44-23.
  • Omnibus State Government Finance Bill: SF 2227, authored by Sen. Mary Kiffmeyer (R-Big Lake), focuses on cybersecurity and accountability within state programs. The bill appropriates $20.5 million for the creation of a legislative commission on cybersecurity and other cybersecurity initiatives. To increase accountability, the bill has a zero-based budgeting requirement that ensures careful reviews of state programs before continued funding. The bill passed on Thursday with a vote of 37-28.

House Floor Action on Omnibus Finance Bills

Four omnibus finance bills were passed off the House floor this week. These include:

  • Omnibus Jobs & Energy Bill: HF 2208, authored by Rep. Tim Mahoney (DFL-St. Paul), includes a few of the House DFL members top 10 priorities for the current session: punishing wage theft, expanding rural broadband, and mandating paid family and medical leave statewide. The paid family and medical leave program is expected to cost approximately $32 million, which includes outreach and education costs. The bill also appropriates $75.88 million for vocational rehabilitation services and $70 million for the Border to Border Broadband Development Grant Program. The bill was passed on Wednesday with a vote of 74-59.
  • Education Omnibus Bill: HF 2400, authored by Rep. Jim Davnie (DFL-Minneapolis), was passed after an 11-hour debate on the House floor. The bill provides $900 million for a number of new public education investments. Notably, the bill increases the general education formula by 3 percent in FY20 and 2 percent in FY21, totaling a $520 million increase over the base budget. The bill also includes provisions to support special education and increases school safety. The bill passed on Wednesday with a vote of 78-55.
  • Omnibus Health and Human Services Bill: HF 2414, authored by Rep. Tina Liebling (DFL-Rochester), spends $15 billion over the 20-21 biennium, aiming to increase healthcare affordability and accessibility. The bill creates a public buy-in option to lower costs for those purchasing insurance on MNsure. It also continues the 2% tax on medical providers, which is allocated to the Health Care Access Fund. In addition, it raises the minimum age for buying cigarettes to 21. Finally, after a lengthy debate on the House floor, an amendment was adopted that prohibits conversion therapy for minors and vulnerable adults. The bill passed on Thursday with a vote of 74-55.
  • Omnibus Tax Bill: HF 2125, authored by Rep. Paul Marquart (DFL-Dilworth), raises revenues to fund investments while provide tax relief for farmers, working families and seniors. The bill would simplify tax filings by conforming to many of the provisions contained in the Tax Cuts and Jobs Act (TCJA) of 2017. The majority of the new revenues come from a 3% tax increase to capital gains over $500,000 and capturing money hidden by corporations in foreign tax havens through global intangible low taxed income (GILTI). Some of the key tax relief provisions in the bill include conforming to the federal standard deduction, increasing the Working Family Credit, increasing the social security subtraction, and returning LGA and CPA to the 2003 levels. The bill passed 74-55.

Senate Tax Proposal Released

Senate Republicans released their omnibus tax bill addressing federal tax conformity and providing tax relief for Minnesotans. SF 5, authored by Sen. Roger Chamberlain (R-Lino Lakes), would change Minnesota taxpayers starting position for filing taxes from Federal Taxable Income (FTI) to Federal Adjusted Gross Income (FAGI) to simplify tax filings. The bill would provide tax relief or hold Minnesotans harmless from many corporate tax base broadeners. The following are a few of the key provisions:

  • Section 179: Creates full conformity with the Tax Cuts and Jobs Act (TCJA) and eliminates the 80% add back starting TY19 which would provide $174 million for FY20-21 and $95 million for FY22-23.
  • Income Tax Rate: Reduces second-tier rate from 7.05% to 6.8% for TY19 and then to 6.67% for TY22, resulting in tax reductions of $379 million for FY20-21 and $463 million for FY22-23.
  • Social Security: Increases the subtraction for social security reducing taxes $43 million over the next two years and $49 million for FY22-23.
  • Business Property Taxes: Reduces the statewide general levy by $47.5 million.

Department of Revenue Commissioner Cynthia Bauerly expressed concerns that the priorities in the Senate bill do not align with Governor Walz’s. There are no increases to local governments via LGA, CPA, or sales tax exemptions for construction materials. It also doesn’t provide enough relief for lower income individuals.

Proponents supported the provisions providing full conformity for Section 179, reducing business property taxes, and not conforming to many of the foreign income provisions of the TCJA. The bill passed as amended and was referred to the Senate floor.

Important Dates

  • May 1, 2019 – All Finance Bills Passed Off House/Senate Floor
  • May 6, 2019 – Fiscal Targets Given to Finance Bill Conference Committees
  • May 13, 2019 – Conference Committee Reports Due to Original Body
  • May 20, 2019 – Last Day of the Legislative Session

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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