Ewald at the Capitol

Budget Bill Movement

With the Easter/Passover Break in the rearview mirror, House and Senate Finance Committees aggressively began work to put together funding bills that will make up two proposed state budgets — one from the House and one from the Senate.

The House DFL budget, totaling $52.52 billion, includes significant increases in funding for E-12 education and childcare; support for those who have been most impacted by COVID-19 (students, families, and small businesses); and investments to improve economic security, including paid family leave, earned sick and safe time, affordable housing, and worker protection and support.

Senate Republicans announced their intention to pass a $51.9 billion two-year state budget. Their proposal includes $591 million in tax relief on Paycheck Protection Program loans, tax relief for unemployment benefits, and no proposed tax increases. Other measures include a 5 percent cut to state government administrative costs, $100 million for unemployment due to the pandemic and $40 million in broadband, among others.

One factor coming into play as budget bills advance is the impact that federal COVID-19 funding has on different areas of the state budget. Minnesota will receive $2.5 billion from the recently passed federal American Rescue Plan; debate is heating up on the role the legislature should have in how these funds are used. Many bills include directives on the use of federal dollars, if possible, for various appropriations, and we expect any end-of-session negotiations on the state budget will include talks on the use of these federal funds.

K-12 Education

Not surprisingly, the House and Senate omnibus education appropriations bills are vastly different. While the differences begin with their budget targets and budget priorities, they diverge in many other ways on policy priorities.

The House advanced their bill this week that proposes an additional $771 million for public education. Their proposal includes an increase to the basic per-pupil funding formula of 2 percent per year and provides funding predictability by linking any future increases to inflation. The House bill also addresses underfunding in areas of special education, English Language Learners, teachers of color and student support personnel. Key components of HF1065 (Davnie-Minneapolis) include:

2 percent per year increase to the per-pupil formula and linked to inflation
Continued funding for voluntary pre-kindergarten
$70 million for special education underfunding
$29 million for English Language Learners underfunding
$17.2 million to increase school counselors and other student support personnel
$15.6 million for grants to increase the number of teachers of color
$13.3 million for paraprofessional training

The Senate advanced a bill this week that proposes an additional $152 million for E-12 education. Their bill provides no increases to the basic per-pupil funding formula and does not address underfunding in areas of special education and English Language Learners. The Senate, however, provides one-time classroom pandemic aid, invests additional funding for safe schools aid and funding to help mitigate the impact of local school district property taxes. The Senate bill also directs funding for subsidies for nonpublic schools through the Education Savings Account program.

Key components of SF960 (Chamberlain-Lino Lakes) include:

$60 million for classroom pandemic aid
$11.5 million education savings accounts for private schools
$24 million to equalize local property taxes
$16 million for safe schools aid
$3.25 million for grants to increase teachers of color

Health and Human Services

How many times can we say that the House and Senate have vastly different approaches to this year’s legislation? Well, count the HHS committees in both bodies as part of the list of those who accentuate the differences.

All four major HHS committees in the House and Senate released their omnibus bills this week. The House has a joint target between the health and human services bills that is $346.51 million above the current base in General Fund spending, including nearly $191.6 million in Human Services Finance and Policy spending. The House bill, passed out of committee on Thursday, largely follows the governor’s recommendations.

The same day, the Senate Human Services also passed its omnibus bill, but sent it to the Finance Committee without the bill’s appropriations article. The chair promised those watching the hearing (who follow that article closely) that it will be available soon. The other two bills for the Health committees are being heard today.

Transportation

The House and Senate Transportation Committees took two different paths to funding transportation — with the House advancing a $1.5 billion increase in transportation taxes and fees while the Senate has advanced a transportation funding package that does not raise the gas tax but raises transportation funding by dedicating more General Fund monies to transportation.

Highlights of House Transportation Bill HF1684 (Hornstein, DFL-Minneapolis) include:

Authorizes $400 million in trunk highway bonding
Increases General Fund transportation funding $39.6 million
Indexes the gas tax
Increases the motor vehicle sales tax rate to 6.875 percent
Imposes a surcharge on some higher-priced vehicles
Imposes a 0.5 percent transit sales tax in the Twin Cities metropolitan area
Reduces sales tax revenue currently dedicated to the Highway User Tax Distribution Fund
Allows individuals to obtain a driver’s license without showing proof of citizenship
Provides $29.1 million in dedicated funding for the Small Street Assistance Fund
Establishes self-service kiosks that can be used to renew vehicle registrations

Highlights from Senate Transportation Bill SF1159 (Newman, R-Hutchinson) include:

Increases funding for roads and bridges by increasing the share of dedicated revenue from the auto parts sales tax to 60 percent
$3.03 billion for state road construction, development, and maintenance
$2.25 billion for County and Municipal State Aid Roads
Dedicates 10 percent of Trunk Highway Funds dedicated statutorily appropriated to the corridors of commerce program
Establishes self-service kiosks that can be used to renew vehicle registrations
Pilot project for same-day driver’s license issuance
Appropriates $873.7 million in FY22 and $898.1 million in FY23 from the county state aid highway fund for distribution to counties
Appropriates $30 million in each of FY22 and FY23 for local bridge improvements
Includes $1.7 million for the 2021 trooper academy
Administers and funds a third-party tester program for commercial driver’s licenses
Funding for numerous specific highway projects

Taxes

The House Taxes Committee heard public testimony and debated amendments on a House Omnibus Tax Bill sponsored by Rep. Paul Marquart (DFL-Dilworth). The Senate Taxes Committee will hold hearings on their tax bill next week.

Highlights of HF991 (Marquart-Dilworth) include:

Raises state revenue $49.1 billion for the 2022-23 biennium
Provides $4.2 billion in property tax refunds, aids and credits
Leaves $1.74 billion in the state’s budget reserve account
Creates a new fifth individual income tax tier of 11.15 percent for individuals with annual incomes of $500,000 or more, or $1 million for those married filing jointly
Creates a tax subtraction for unemployment benefits up to $10,200 for those with gross incomes under $150,000
Payroll Protection Program tax exemption for 90 percent of recipients
County relief grants for local businesses and nonprofits of $69.7 million in fiscal year 2022
A new homelessness prevention fund would provide $25 million in annual aid to counties beginning in fiscal year 2023
$10 million to be allocated for the small-business investment credit, or “angel credit,” for tax year 2022
A market value exclusion on the statewide property tax increase from $100,000 to $150,000
Increasing the maximum refund for the homestead credit by $250 and reducing the copay for the renter’s credit by between 5 percent and 15 percent
Establishing an annual meeting for the public to provide input on proposed property tax levies for counties, cities and school districts
And many other provisions and changes