In the waning hours of the 2016 legislative session, lawmakers wrapped up a supplemental budget and a tax bill, but failed to pass a comprehensive transportation package, a bonding bill, and a plan for implementing federal Real ID requirements. The breakdown came after hours of negotiations and lengthy floor sessions.

Transportation/Bonding

House and Senate lawmakers negotiating a long-term transportation funding package outlined new offers on May 21 that appeared to move each side significantly off their initial positions in an effort to pass a comprehensive transportation package. In the end, however, they couldn’t get past their fundamental disagreements over where the money should come from and whether to include mass transit. Democrats preferred new revenue from taxes or fees and Republicans preferred to shift existing revenue from the General Fund.

In place of a comprehensive transportation funding package, lawmakers put together a nearly $1 billion public works bill that included $236 million in road and bridge bonding, $266 million in cash for transportation projects, and $181 million in trunk highway spending. In the closing minutes of the session, the House passed the compromise bonding bill and sent it to the Senate. Instead of voting on the House passed bill, the Senate Democrats amended it to add money for light rail transit. The House adjourned before the bill was returned from the Senate, making it impossible to reconsider the bill in the House. The Senate minority attempted to reconsider the amendment, but calls to adjourn won out.

House Speaker Kurt Daudt (R-Crown) asked Governor Mark Dayton to call a meeting of leadership and a special session to address the unfinished bonding bill. Dayton said he is open to calling a special legislative session in early June if legislative leaders agree to his terms. Yet to lay out his requirements, Dayton has made it clear that any agreement must include a new health sciences building at University of Minnesota. He is also considering adding Light Rail funding – the issue that took the bonding bill down. Only Dayton can call a special session, but legislators decide when it ends. The Governor said he plans to send a letter to legislative leaders outlining his requirements for a special session early the week of May 30.

Supplemental Budget

House Republicans had originally proposed little supplemental spending, reserving the bulk of the State’s projected $900 million surplus for transportation projects and tax relief. The Senate DFL and Governor Dayton, in contrast, had proposed spending more than half of the surplus on supplemental budget items. One article at a time over the weekend, lawmakers began to reach compromises on the supplemental budget.

The budget bill conference committee approved an overall bottom line of $182 million in supplemental spending for the biennium. The House had previously proposed just $3.2 million in supplemental spending, compared to the Senate’s $454.8 million. The bill would provide funding for a wide range of programs, including $25 million for prekindergarten, $35 million for broadband expansion, and $35 million for equity programs – all of which were priorities for Dayton.

The overall budget impact of the proposal is:

• Jobs, Energy and Equity: $75 million, including $35 million for broadband and $35 million for equity;
• State Government: $45.23 million;
• E-12 Education: $25 million;
• Public Safety: $24.97 million;
• Environment and Agriculture: $7.18 million;
• Higher Education: $5 million; and
• Health and Human Services: $0.

The bill also includes four tax provisions, which would cost $39 million in Fiscal Year 2018 and $29 million in Fiscal Year 2019. The provisions would:

• Provide a one-year extension for the angel investment tax credit;
• Exempt military pensions from state tax;
• Provide a $2,000 tax credit for families who have a stillborn baby; and
• Eliminate sales tax for modular homes.

Tax Cuts

The Legislature passed a comprehensive tax bill on Sunday with about $257 million a year in assorted tax breaks. The bill includes a mix of property tax relief for famers and businesses, a new credit for student loans, incentives for college savings, increased State aid for cities, expanded credits for veterans, and aid to parents with childcare expenses. It also contains tax breaks for the St. Paul professional soccer stadium and the 2018 Super Bowl. Another provision, which drew the Governor’s criticism, removes the automatic annual tax hike on cigarettes and other tobacco products that was approved in 2013.

Real ID

Legislators were also unable to reach final agreement on how to make Minnesota drivers licenses and identification cards compliant with tougher federal security standards laid out in the 2005 Real ID Act. This federal act was based on the 9/11 Commission’s recommendations that secure identification was needed to ensure that those with fraudulent documentation do not enter vulnerable facilities in the United States.

Both the House and Senate passed legislation that would lay out new requirements for state IDs, including new security features, added proof of residency requirements, and extended data retention timelines. The bills differed in a number of sections and the conference committee met three times in an attempt to iron out the differences.

Conferees had agreed to the Senate’s preferred implementation timeline of January 2018 and allowing rulemaking by the Department of Public Safety to implement the requirements. However, the discussions derailed on May 21 on Senate language that would allow rulemaking for undocumented persons to obtain a Minnesota driver’s license. It is possible REAL ID could be included in a potential Special Session to deal with the other unresolved issues of transportation funding and a capital investment bill.

In mid-May, the Department of Homeland Security (DHS) notified Governor Dayton that DHS was unable to grant a request for an extension to the State to comply with the 2005 federal law, meaning Minnesotan’s cannot gain access to secure federal facilities and military bases using only the State’s non-compliant ID’s. If the problem is still unaddressed by January 2018, Minnesotans also would not be able to board domestic commercial flights without an enhanced ID. Dayton said that timeline means there is still time for lawmakers to come to an agreement next year.