TENNESSEN LAW’S RECAP OF MINNESOTA’S 2009 LEGISLATIVE SESSION

BUDGET AND TAXES

Saying that the 2009 Minnesota legislative session was contentious is an understatement. Like other states, Minnesota had extraordinary budget deficits, $4.6 billion, and no consensus on how to resolve it. Through budget cuts, payment shifts to a future budget year, fee increases, and federal stimulus funds, the deficit was reduced to about $1 billion. The governor proposed to borrow $1 billion by selling off a stream of tobacco settlement monies the state is scheduled to receive over the next 20 years, while the legislature proposed various tax increases. Since the legislature passed and the governor signed all of the budget bills with no agreement on solving the remaining $1 billion deficit, the budget was not balanced as required by the Minnesota Constitution. The governor has vetoed some line items and said that he would resolve the remaining deficit by using his unallotment authority.

Since adjournment of the legislature, Commissioner Tom Hanson, Office of Management and Budget, has determined that authorized spending for 2010-11 will now exceed revenues by $2.7 billion due to declining receipts. Revenues for FY2009 are down $70.3 million compared to the forecast in February and the state does not have budget reserves or other available funds to cover these lower receipts. The details of the governor’s proposed unallotments and other administrative actions can be found at details.

Although state and local governments in Minnesota may receive an estimated $4.6 billion in one-time assistance under the ARRA, the impact on the state’s budget is expected to be substantially less than that amount. Much of the ARRA funds are dedicated to specific purposes identified by Congress and not commingled with general fund revenues. Total funds actually received may be more depending on the state’s success in receiving competitive grants for which there are no specific state allocations.

CAPITAL INVESTMENT

The legislature passed a capital investment bill (H.F. 855) that appropriated $343.5 million for capital improvements to state and local government facilities. The Governor signed the bill after vetoing line items totaling $85.16 million. The bill allocates:

$78.8 million to Minnesota State Colleges and Universities
$51.5 million to the University of Minnesota
$54.6 million to the Department of Transportation
$22.6 million to the Metropolitan Council
$54.8 million to the Department of Natural Resources
$35 million to the Rural Finance Authority
$17.2 million to the Department of Employment and Economic Development
$9.1 million to the Department of Public Safety for state and local matches for federal assistance
$2.7 million for reconstruction and repair of trunk highways and bridges
$2.1 million to the Minnesota Historical Society for asset preservation
$53.8 million for flood mitigation
18.2 million in disaster assistance money for northwestern Minnesota, Hugo and St. Charles
$10 million for local bridges
$26 million for commuter and the passenger rail corridors program
Various provisions for state agency asset preservation and for shovel-ready projects.

TRANSPORTATION

The omnibus transportation finance bill (H.F. 1309) cuts appropriations for both MnDOT and Metro Transit. MnDOT’s primary source of funding comes from constitutionally dedicated revenues, the gas tax, motor vehicle registration tax, and the sales tax on car sales. The economic recession caused a precipitous drop in these dedicated sources. Although dedicated to the constitutionally prescribed highway user tax distribution fund, the legislature must appropriate the money as the constitution requires.

Highways

MnDOT estimated that it was short $155 million for the biennium. The legislature closed the gap by reducing appropriations for state road construction by $120 million and proportional reductions across other MnDOT areas of $35 million.

The bill authorizes $4.29 billion in transportation funding, of which $194.27 million comes from the general fund, and $3.9 billion from constitutionally dedicated funds ($2.64 billion to state trunk highways, $1.02 billion to county-state aid highways and $275.4 million to municipal state-aid streets). The remaining $195.73 million comes from other smaller accounts.

Transit

Resolving transit funding deficits of $82 million ($76 million for Metro Transit and $6 million for Greater Minnesota transit) was more difficult than the highway and bridge deficit for a few reasons: (1) it is a larger percentage of the transit budget; (2) the transit funds are primarily for operating transit services in both metropolitan counties and Greater Minnesota; and (3) a bigger percentage of its operating money comes from the state’s general fund.

The budget solution for Metro Transit was complicated. The projected deficit was $63 million. In addition, $13 million was cut to help balance the overall state budget, for a total deficit of $76 million. The gap was closed by transferring $27 million from the Metropolitan Council’s Livable Communities and the Right-of-way Acquisition Funds; $18 million of one-time federal stimulus funds (shifts from capital to operating); $5 million in administrative cuts (efficiencies); use of $3 million of reserves; a reduction of $7 million in motor vehicle sales tax (MVST) to regional providers; and $13 million from a percentage change in the MVST.

Greater Minnesota transit will receive 4.75% from the MVST dedicated to the highway user fund in fiscal year 2010, after which it drops back to the planned 4%. Because this provision is only temporary, the funding gap will be revisited next biennium. MVST revenues may decline further in coming years. Using this fund for transit funding gaps will, in the future, create a larger deficit in roads funding.

Other Provisions

Allows MnDOT to authorize $40 million in trunk highway bonds for construction of interchanges to promote economic development and comply with a local match for federal grants to the state, to be split evenly between the metropolitan area and Greater Minnesota transportation districts.
Creates an endowment account for operations and maintenance of the Stillwater lift bridge.
Creates a design-build project selection council.
Authorizes a $2.25 million increase in airport development grants for 2010.
Provides MnDOT with authority related to passenger rail.
Authorizes MnDOT to create a grant program for rehabilitation or replacement of fracture-critical bridges.

FEDERAL STIMULUS OVERSIGHT

H.F. 2251 provides for oversight of stimulus money from the federal government. The bill provides for one-time appropriations of $700,000 to the Department of Finance and $348,000 to the State Auditor for expenses incurred in complying with reporting, monitoring, financial control, and transparency requirements of the American Recovery and Reinvestment Act of 2009 (ARRA), and creates a fiscal stabilization account in the state treasury’s federal fund. The bill became law on May 21^st.

DATA PRACTICES

Although passed by the Senate, the House author of the omnibus data practices bill (S.F. 863) did not bring it up for debate and a vote in the House. Portions of the bill were amended into H.F. 1853 and H.F. 1237. The statute regarding data research firms passed in 2008 and scheduled to become effective July 1, 2009 was amended to become effective July 1, 2010 providing additional time to fix its deficiencies. Important public records of purchases of game and fish licenses, cross-country skiing and trail passes, and snowmobile trail stickers were made private by HF 1237.

PUBLIC SAFETY POLICY

The omnibus public safety policy bill (H.F. 1301) eases state agency mandates and provides local agencies with assistance during emergency times. Provisions include:

Prohibits registered predatory offenders from using electronic devices to sexually solicit children by forbidding access to social networking websites, instant messaging and chat room programs.
Increases the time an officer may arrest a person suspected of committing domestic abuse from 12 to 24 hours.
Expands the ability of judicial districts to create domestic fatality review teams, and requires that prosecutors give notice about civil protection orders to victims of criminal sexual conduct .
Permits courts to order sentences beyond those specified in the sentencing guidelines based on aggravating factors arising from the same course of conduct.
Creates a state policy to eliminate racial, gender and ethnic fairness barriers in the courts.
Expands the authority to appoint referees in conciliation court.
Creates a license reinstatement diversion pilot program for people charged with driving after suspension or revocation.
Requires businesses that sell over-the-counter methamphetamine precursor drugs to maintain sales logs for 3 years and make them available to law enforcement at all reasonable times.
Prohibits the sale of toys designed for children under 12 after the toy has been recalled for safety reasons.
Expands the state’s trespass law to include entering onto public or private areas lawfully cordoned off by a peace officer.
Creates a working group to review changes to the state’s DWI laws and policies.

EDUCATION

Higher Education

After vetoing line items totaling $2.5 million, the governor signed the higher education omnibus bill (S.F. 2083). The bill appropriates $3.1 billion for higher education funding in the 2010-2011 biennium, representing a 2% cut from the forecasted base, and includes almost $138 million in fiscal stabilization funds from the ARRA. The law limits tuition increases at MnSCU institutions to 3% in 2010 and 5% in 2011. At the University of Minnesota the tuition increase is limited to $300 in the first year and $450 in the second year.

K–12 Education

K-12 education funding remained at $13.7 billion for the 2010-2011 biennium, including $500 million in one-time ARRA money, and will increase to $14.1 billion the following biennium. However, the governor proposes to reduce the amounts by $1.17 billion through delays and shifts in state aid payments to districts and other accounting measures. See details.

Other provisions include:

Redefines the purpose of integration revenue to include closing the achievement gap and requiring school districts’ integration budget plans to be approved by their boards.
Implements significant charter school reforms.
Implements GRAD (Graduation-Required Assessment for Diploma), providing an alternative path to graduation for students who cannot pass the current math test for graduation.
Expands a pilot project called Quality Rating and Improvement System for child care facilities to help parents choose programs that properly address school readiness.
Establishes Minnesota Reading Corps to train Head Start teachers in literacy instruction.

LOCAL GOVERNMENT AID (LGA)

Changes in LGA are normally implemented in the tax bill that the governor vetoed. The governor plans to unallot $300 million ($200 million to cities and $100 million to counties). One-third of the reductions will occur in FY 2010 and two-thirds in FY 2011.

HEALTH CARE

The governor line-item vetoed $381 million in funding for the state’s General Assistance Medical Care (GAMC) in the omnibus health and human services bill for FY 2011.

There were many proposals during this year’s session with regard to health care coverage ranging from universal health care to expanding current programs to cover more people. However, none were passed.

A bill to legalize the use of marijuana for medical purposes was passed by the legislature and vetoed by the Governor.

2009 LEGISLATION

Among the bills signed into law this year:

Mortgage foreclosure consultants provisions modifications.
Mortgage foreclosure procedures modification.
Uniform Disclaimer of Property Interests Act.
Existing statutory implied residential construction warranties required to be made as express warranties and be provided to the buyer in writing, and warranty waivers prohibited.
Youth violence addressed as a public health problem.
Medical assistance claims and liens against estates provisions modifications.
Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act
Health information technology and infrastructure and electronic health record system revolving account and loan program modifications; e-health advisory committee.
Consumer short-term (pay day) loan lending regulation.
Insurable Interest Act (STOLI)
Unfair ticket sales prohibited.
Seat belt violation made a primary offense in all seating positions regardless of age, and increased speed limit provided when passing.
REAL ID Act implementation prohibited.