Minnesota Weekly Legislative Update: 2014 Legislative Session Wrap-up

by Faegre Baker Daniels
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[co-authors: Sarah C. Clarke, Jonathan R. Fortner]

The 2014 Minnesota legislative session was historically unique for three reasons:

  • First, this was the second year of the biennium under the control of the Democrat-Farmer-Labor party. The DFL has not controlled the House, Senate and Governor's office since 1990.
  • Second, the state budget was forecast to have a $1.2 billion surplus, rather than the usual deficits of the past 15 years.
  • Third, the session began later than usual on February 25, which dictated a fast pace to meet the constitutional deadline for adjournment on May 19.  

Policy decisions, as well as fiscal decisions, influenced the direction of the session. Legislators passed a total of 165 bills that were signed into law by Governor Mark Dayton. Among them was the Women's Economic Security Act, an increase in the minimum wage, and the legalization of medical marijuana. There was also a push to eliminate redundant, outdated and unnecessary laws during the session in response to the Governor's call for an "unsession."

The news of a state budget surplus was the focus of the discussion at the beginning of the session. In late March, the legislature passed the omnibus tax relief bill. A second omnibus tax bill was passed on the last day of the session. Lawmakers agreed upon a roughly $1 billion bonding bill for capital improvements and passed a $283 million supplemental budget bill. For a complete list of laws enacted this session, visit the Minnesota Legislative Tracker web page.

State Budget Surplus

During the first week of the 2014 legislative session, Minnesota Management and Budget announced that the state had a forecasted budget surplus of $1.23 billion. Lawmakers came up with various proposals on how to utilize the extra funds, but ultimately the surplus was spent with $550 million of tax relief, $283 million in supplemental finance spending, $199 million for capital projects funded with cash, $150 million deposited in the budget reserve and the remaining $31 million to an assortment of unallocated funds. Looking forward to the next legislative session, lawmakers will have a projected general fund balance of $597 million for the 2016-17 biennium.

First Omnibus Tax Bill

One month into the legislative session, the first major piece of legislation was signed into law. HF1777, authored by Tax Committee Chairs Representative Ann Lenczewski (DFL-Bloomington) and Senator Rod Skoe (DFL-Clearbrook), included $447 million in tax relief. The bill was primarily designed to conform the state's individual and corporate franchise tax code to recent changes in the federal tax code retroactive to tax year 2013. The bill also repealed three business-to-business sales taxes that were enacted in the previous session, including the repair and maintenance of business equipment, telecommunications equipment purchases, and storage and warehousing services. 

Second Omnibus Tax Bill

On the last day of session, the House and Senate passed the second omnibus tax bill. HF3167, also authored by Representative Lenczewski and Senator Skoe, includes a total of $103 million for several property tax provisions and specific sales tax exemptions. It also adopted federal tax policies, various tax increment financing provisions for municipalities and "unsession" provisions to eliminate redundant or unnecessary laws and regulations currently in law. The bill includes $45 million to help fund the Lewis and Clark water pipeline in southern Minnesota. The pipeline was a late addition to the tax bill, which helped to secure Republican votes for passage of the bonding bill during the end of session negotiations. A House proposal to shift property tax burden from Commercial-Industrial (CI) properties valued under $1.1 million to CI properties valued over $1.1 million was not included in the final bill.

Bonding Bill

The second year of a legislative biennium is referred to as the bonding year. The bonding bill includes capital investment projects that are located across the state intended to stimulate the state's economy through the creation of thousands of construction jobs. The bill can prove to be difficult to pass because it requires a supermajority vote for passage. That requires bipartisan support.

The general obligation bonding bill, HF2490, authored by Representative Alice Hausman (DFL-St. Paul), is an $846 million capital investment bill that funds numerous projects, including $279 million for the University of Minnesota and Minnesota State Colleges and Universities, $126 million to continue the restoration of the State Capitol, $56 million for the Minnesota State Security Hospital in St. Peter and $21.5 million for the renovation of Nicollet Mall in downtown Minneapolis.

This year, there was an opportunity to have a second capital projects bill utilizing cash made available from the budget surplus. HF1068, also authored by Representative Hausman, spends a total of $199 million in cash for projects that include $35 million for the expansion of the Mayo Civic Center in Rochester, $30 million for local road improvement grants, $22 million for the Lewis and Clark water pipeline in southwest Minnesota, and $14 million for the Mankato Civic Center.

Medical Marijuana

Although this bill appeared to be dead, chief authors Representative Carly Melin (DFL-Hibbing) and Senator Scott Dibble (DFL-Minneapolis) held a news conference days before adjournment to announce a compromise that Governor Dayton could sign into law. The compromise was a narrow bill allowing for the medical use of cannabis in pill and oil form for certain qualifying medical conditions. The Department of Health will also start a patient registry for people with these conditions to create an observational study on the impact of medical marijuana. Patients will start to receive treatment in the summer of 2015.

Women's Economic Security Act

The legislature passed the Women's Economic Security Act (WESA) and Governor Dayton signed the bill into law on Mother's Day. The bill, authored by Representative Carly Melin (DFL-Hibbing) and Senator Sandy Pappas (DFL-St. Paul), expands a broad range of employment and labor protections for women. The law increases unpaid leave from six to 12 weeks and expands family leave and reasonable accommodations for pregnant and nursing mothers. Additionally, WESA allows victims of domestic violence to qualify for unemployment and requires state contractors with more than 40 employees and contracts larger than $500,000 to comply with new equal pay requirements. Concerns raised by the business community resulted in the elimination of several provisions from the bill as introduced and modifications to other provisions in the final package. Many of the provisions are complex and have varying effective dates. Faegre Baker Daniels attorneys Kyle Fogt and Daniel Prokott provided a detailed analysis in the firm's May 13 legal update.

Minimum Wage Increase

Minnesota's minimum wage will increase under a bill the House and Senate finalized in late April. The agreement, authored by Representative Ryan Winkler (DFL-Golden Valley) and Senator Jeff Hayden (DFL-Minneapolis), sets a new Minnesota minimum wage at $9.50 an hour for business over $500,000 in gross receipts and $7.75 an hour for businesses under $500,000 in gross receipts that will be phased in by 2016. The House and Senate disagreed on many issues, including the minimum wage rate, an appropriate training wage and youth wage, and the size of a small business. The sharpest point of contention was whether to provide for increases tied to the consumer price index. Ultimately, the new law tied minimum wage increases to the implicit price deflator beginning in 2018. The bill also allows the Commissioner of Labor and Industry to suspend and/or accelerate the inflator. The debate about this bill will certainly continue during the fall elections.

Supplemental Budget

The supplemental budget, HF3172, was the final major piece of legislation to pass this session. The $283 million spending package, authored by Representative Lyndon Carlson (DFL-Crystal) and Senator Richard Cohen (DFL-St. Paul), includes funding for education, home- and community-based health workers and rural broadband. The bill will also provide debt service for the renovation of the Bell Museum of Natural History at the University of Minnesota.

The bill provided for a $105 million funding increase in Health and Human Services. Home health care workers received a 5 percent pay increase totaling $80.3 million. The supplemental budget bill allocated $54 million in additional spending on E-12 education. Legislators appropriated $4.6 million in additional funding for the early learning scholarships and are removing the $5,000 scholarship cap in 2016. Legislators also allocated additional funding for English language learners programs and school lunches, and permanently increased the per-pupil funding formula by $25. Efforts to remove the postsecondary enrollment options (PSEO) "gag rule" led to an amendment to the budget bill that allows higher education institutions to advertise the financial benefits of PSEO to students in school districts with more than 700 students in grades 7-10 through the 2019-20 school year. The bill allocates more than $22 million for higher education with $17 million going to cover compensation costs for Minnesota State Colleges and Universities faculty.

The "Unsession"

Governor Mark Dayton named the 2014 legislative session the "Unsession" in an effort to streamline and improve state government. State agencies reviewed Minnesota statute and rules to search for redundant, outdated and unnecessary laws. The Governor's office has reported that more than 1,100 Unsession provisions have been enacted.

Legislative Retirements

Several legislators announced their retirement from the Minnesota House of Representatives. The retiring legislators are:

  • Representative Jim Abeler (R-Anoka) — Abeler is running for the U.S. Senate
  • Representative Michael Beard (R-Shakopee) — Beard is running for Scott County Commissioner
  • Representative Mike Benson (R-Rochester)
  • Representative John Benson (DFL-Minnetonka)
  • Representative Kathy Brynaert (DFL-Mankato)
  • Representative David FitzSimmons (R-Albertville)
  • Representative Mary Liz Holberg (R-Lakeville) — Holberg is running for Dakota County Commissioner
  • Representative Thomas Huntley (DFL-Duluth)
  • Representative Andrea Kieffer (R-Woodbury)
  • Representative Ernie Leidiger (R-Mayer)
  • Representative Pam Myhra (R-Burnsville) — Myhra is running for Lieutenant Governor with former State Representative Marty Seifert
  • Representative Michael Paymar (DFL-St. Paul)
  • Representative Kelby Woodard (R-Belle Plaine)
  • Representative Kurt Zellers (R-Maple Grove) — Zellers is running for Governor

Election Preview

This November, Minnesota voters will be selecting a Governor and Lieutenant Governor, Attorney General, Secretary of State, State Auditor, a U.S. Senator, all eight members of the U.S. House of Representatives, and Representatives in the Minnesota House. Both the Democratic-Farmer-Labor Party and Republican Party are hosting their state endorsing conventions from May 30 to June 1. The primary election will be on August 12, and the general election will be held on November 4.

In the gubernatorial race, incumbent Governor Dayton is seeking re-election after serving one term. He has selected a new running mate for Lt. Governor in Tina Smith, his former chief of staff. Republican gubernatorial candidates include former Speaker of the Minnesota House Kurt Zellers, Hennepin County Commissioner Jeff Johnson, former State Representative Marty Seifert, State Senator Dave Thompson, businessman Scott Honour and school teacher Rob Farnsworth.

Seifert, Thompson, Johnson and Zellers have announced their Lieutenant Governor choices. Seifert is running with former State Representative Pam Myhra from Burnsville, Thompson has teamed with State Senator Michelle Benson from Ham Lake, Johnson selected former State Representative Bill Kuisle from Rochester and Zellers picked former State Representative Dean Simpson from New York Mills. The Independence Party has endorsed software developer Hannah Nicollet of Roseville as its gubernatorial candidate.

In the U.S. Senate race, incumbent Al Franken is seeking re-election after serving his first term. The Republican candidates for the U.S. Senate include State Senator Julianne Ortman, investment banker Mike McFadden, former State Representative Jim Abeler, St. Louis County Commissioner Chris Dahlberg and farmer Monti Moreno. Business consultant Kevin Terrell of Minneapolis earned the Independence Party's nomination for the Senate seat.

Conclusion

The legislature adjourned early with DFL legislators emphasizing a stable budget accompanied by tax relief, increased education funding, health care workers salary increases, funding of many capital projects and the increase in the minimum wage. Republican minorities are criticizing the $2 billion tax increase from 2013, the minimum wage increase and other spending increases supported by the DFL. The voters will ultimately decide whether they approve of the work of the DFL majorities over the past two sessions when they go to the polls in November 2014. The newly elected legislature will convene on January 6, 2015.

 

 

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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