The Minnesota legislature concluded its business last evening with Governor Mark Dayton threatening to veto a $17 billion public education funding bill – a threat he carried through with earlier today. The governor issued the threat almost hourly since last Friday when legislative leaders announced that they had reached a deal on the overall state budget.

The governor claimed he was not in agreement with the deal because it did not include his hallmark proposal to fund statewide universal day care for 4 year olds. Legislative leaders rebuffed the governor and adjourned for the year last evening without further addressing the issue. A veto sets the likelihood of a special legislative session sometime before July 1.

With almost $2 billion in surplus funds coming into the 2015 legislative session, most pundits agreed that the legislature and governor would easily come to terms on a budget, with all sides getting a portion of the surplus to do as they please. The outcome could not have turned out more differently:

• After proposing a massive transportation funding plan that included an increase in fuel taxes, DFLers walked away with next to nothing other than a small “lights on” transportation funding package;
• A House Republican proposal to cut almost $2 billion in taxes never made it out of a House and Senate Tax Conference Committee because legislators agreed to NOT adopt any tax legislation this year — an historic development unprecedented in recent legislative history;
• Governor Dayton walked away with few notable victories other than a provision to create “buffer zones” next to Minnesota waterways that are adjacent to farm land; and
• Legislators went home today and left over $1 billion in the bank to spend as they please next year — a rare show of restraint by a legislature that had the opportunity to spend the surplus ten times over.

All of this sets up for yet another standoff with Governor Dayton over remaining legislation that he needs to either sign or veto in the coming days. In the aftermath of that action, the governor will have to negotiate new legislation and attempt to leverage legislative leadership into accepting his early education proposal—a $160 million proposition.

Both House Republican and Senate DFL leaders want to sock that money away for next year when the state is expected to have an even bigger surplus. And guess what? It is an election year. Transportation funding and tax cuts will be front and center when we return to the Capitol for the 2016 legislative session.

Key Areas Addressed in the 2015 Legislative Session 

K-12 Education  

A $17 billion plan to fund Minnesota's schools was passed and presented to the governor early Monday morning. This plan increases K-12 and early education funding by $400 million over the next two years, with the bulk of that being dedicated to a per-pupil formula increase of 1.5 percent in 2016 and 2 percent in 2017. A notable provision that was not included in the final bill was the governor's initiative to fund all day pre-K programming statewide, and because of this, Governor Dayton vetoed the bill this afternoon.

State Government  

The state government finance conference committee reached an agreement on a nearly $974 million biennial funding package. The bill calls for a two-year repeal of the state's political contribution refund program, which allows individuals to get a $50 refund for political contributions. The agreement also calls for a $36 million one-time reduction in the state contribution to the Public Employees Retirement Association for Minneapolis pension reimbursement.

Judiciary and Public Safety  

An investment of $2.21 billion in general fund spending was dedicated to judiciary and public safety for the 2016-2017 biennium. This is an increase of $111 million over current spending. The bill calls for a 4 percent annual compensation increase for judges and court staff. The agreement also includes an additional $6.48 million for the Board of Public Defense, which should equate to 36 more public defenders to help reduce caseloads, and $700,000 to expand specialty courts.

Beyond funding key agency functions for courts and law enforcement, the public safety bill also allowed for the legal use of firearm suppressors, or “silencers.” That provision came with new, steep penalties for anyone found guilty of committing a crime while using one. Additionally, the bill repealed a mandate requiring scrap metal recycling businesses to participate in and pay for a controversial database designed to track transactions. While good intentioned, it became clear that the barriers to implementation were complicated and costly, and it was unclear that law enforcement or prosecutors would obtain tangible benefits. Notably absent from the bill was a key Senate provision restoring voting rights to felons who have served their sentences and remained free from new convictions.

Jobs  

Each year, a the omnibus jobs bill contains provisions funding three state agencies in large part, but funding dozens of governmental functions spanning many others. This year was no different, except that energy generation and power supply issues were piled on top of that. Negotiating compromise between the House, Senate and governor is very difficult with so many pieces in play. Ultimately, this bill, like taxes and transportation, did little more than keep agencies funded at current levels.
A handful of new policy provisions, including important consumer insurance reforms and major workers’ compensation cost savings reform were part of the bill, but the bill became a political football in the last minutes of session. It passed the Senate at 11:53 p.m., giving the House very little time to pass the bill and neither body wanted the responsibility of failing to pass legislation required to keep state agencies running. We expect that some of the provisions cut from negotiations will resurface during the likely special session.

Higher Education  

The higher education bill increased spending by $166 million over the next biennium. The bill does not provide all of the funding that the University of Minnesota and MNSCU requested to freeze tuition. However, it does include a $30 million boost to the University of Minnesota's medical school and $22 million in tuition relief to students attending all of its five university campuses.

Health and Human Services  

After initially facing a $1.5 billion difference between their two proposals, the House and Senate agreed to a final package that cut a little over $300 million from the forecasted budget for health care and related services. Major pieces of the final package include over $130 million in new spending for nursing homes, new funding for child protection services, and the continuation of MnCare, whose repeal had been discussed. The negotiated bill also expanded the state's telemedicine program, added new funding for long term supportive housing, created new outreach programs for organ donation in minority communities, and in the end did not include two pharmaceutical provisions that would have dramatically increased prescription drug costs for consumers.

Environment and Natural Resources  

A number of changes to Minnesota's environmental regulations and the Pollution Control Agency itself were included in this year's omnibus environment finance bill. The bill includes new provisions for independent review of proposed water quality standards, inclusion of nonferrous mining in certain solid waste permit regulations, clarification around the state's current sulfate standard for wild rice waters, and the elimination of the MPCA's Citizens' Advisory Board. A number of these provisions were controversial as they moved through the legislative process. It is possible that Gov. Dayton will veto the bill despite inclusion of new language for one of his priorities: enhanced rules around waterway buffers.

Transportation  

As the 2015 Legislative Session began, no one anticipated a bare bones transportation finance bill. Legislative leaders and the governor, regardless of political stripes, all made transportation infrastructure a high priority – promising to do something about congestion and crumbling roads and bridges. Despite that, none of them agreed in advance to a specific way of accomplishing their goal.

Early on, the governor and Senate Democrats advocated very significant tax increases – on fuel at the pump for roads and bridges, and an increase in the metro area sales tax rate (as much as a ¾ percent increase) to fund transit operations and growth. House Republicans, barely acknowledging their legislative counterparts’ plans, assembled a significant funding package focused on roads and bridges using existing revenue sources. All told, the DFL plan would have generated roughly $11 billion for roads and transit by increasing various taxes and fees. The House plan would have raised around $7 billion for roads by redirecting existing revenue sources into the Trunk Highway Fund.

By March, it was becoming obvious that compromise in the traditional sense, each side moving toward the other in small steps, was an unlikely outcome for transportation funding. Lobbying efforts on each side became more entrenched and the public overwhelmingly supported the House plan. Ultimately, the House and Senate Transportation Committee chairs agreed to disagree and pass what amounts to a continuation of existing funding levels for roads and transit. They also agreed to keep the conversation going about how to address transportation funding needs through the interim break and move forward quickly when the Legislature reconvenes in 2016.