The Minnesota Legislature          April, 2010

Capital Investment

The Capital Investment/Bonding bill (H.F. 2700) was passed, approving $999 million in general obligation bonding.  On March 14th, Governor Pawlenty signed the bill using his line-item veto authority to drop spending to $680 million.

Some of the items cut from the bill through line-item veto included:

• $130 million in reductions for 16 projects in the Minnesota State Colleges and Universities system
• $53 million for civic center projects in Mankato, Rochester and St. Cloud
• $43.5 million for the Transit Capital Improvement Program
• $2 million for the Minneapolis Sculpture Garden.

State Budget

A supplemental budget bill (H.F. 1671) was passed with bi-partisan support and signed by the Governor on April 1.  The bill solves nearly one-third of the state’s projected $994 million deficit, reducing it by $312 million.  It cuts state spending by $222 million, and increases revenue to the General Fund by $90 million primarily through one-time transfers from special accounts. 

The bill does not include human services and education budgets, which are currently on hold pending a decision in a court case over Pawlenty’s 2009 unallotments and possible expansion of federal health care funding. The human services supplemental budget is expected to be unveiled in early April.

H.F. 1671 includes reductions in the following areas:

• $105 million to county and city aids and credits
• $47 million to higher education
• $35.4 million to public safety
• $33 million to state government operations
• $24.1 million to environment and natural resources
• $23.7 million to energy and commerce
• $16.3 million to economic development
• $14.5 million to transportation
• $7 million to agriculture and veterans
• $2.5 million to arts and cultural heritage

Health Care Reform

The many proposals considered by the legislature and governor this year have been overshadowed by congressional passage of the federal Patient Protection and Affordable Care Act.  It is too soon to know the implications of the act on Minnesota statutes and programs. The House Commerce Committee, Health Care and Human Services Policy Committee and Finance Division, at a joint hearing, began what will be a long and arduous process of coming to grips with this new law.  The process will likely take several years.  Much is unknown and regulations are still being developed.  A preliminary, high altitude view of some of the act’s provisions were presented to the committees by representatives of the agencies that will be charged with implementing the new law including the following: 

• Julie Sonier, Deputy Director, State Health Access Data Assistance Center (SHADAC), University of Minnesota,
• April Todd-Malmlov, State Health Economist, Minnesota Department of Health,
• Manny Munson-Regala, Deputy Commissioner, Minnesota Department of Commerce, and
• Brian Osberg, Medicaid Director, Minnesota Department of Human Services.

February Economic Forecast

The February 2010 economic forecast from the Minnesota Office of Management and Budget predicts a current biennium deficit of nearly $1 billion.  MMB Commissioner Tom Hanson said this is good news because it shows a $209 million improvement over the November forecast.  He said it shows evidence that the economy has bottomed out and we are on the road to recovery.  However, he later stated that the smaller short-term deficit is mostly due to spending reductions and money from the federal government and not to an improving economy.

The forecast predicts a $5.8 billion deficit in the next biennium, which is $363 million more than predicted in November.  Lawmakers are concerned that this deficit could actually be closer to $8.5 billion when accounting for inflation and restoration of programs that were eliminated last year by the governor.

State Economist Tom Stinson said that prospects for economic recovery will be measured by improvement in employment.