Authors
Sonnie A. Elliott
Richard A. Forschler
Kathryn S. Hahne
John H. Herman
Nancy B. Hylden
Other Authors
Meredith Beeson

Budget Deficit Will Take Center Stage in Short Bonding Session

The 2010 legislative session will be a short, action-packed few months that begins on February 4 and must adjourn by May 17. Early in session, the legislature and Governor will be concerned with major capital investment project proposals and other ways to stimulate Minnesota’s struggling economy. In addition to a bonding bill, the state faces a projected $1.2 billion deficit in the current biennium even after significant budget reductions last session. A projected shortfall of $5.4 billion looms for the 2012-13 biennium. Some of the reductions made in 2009 were ruled unconstitutional and may need to be added to this year’s budget woes. The next state forecast occurs in February when updated revenue projections will be calculated for the 2010-11 biennium.

Last session, elected officials tackled a $6.4 billion budget deficit – the largest in Minnesota’s history. Even after the influx federal stimulus money, legislative budget reductions, and line item vetoes by the Governor, consensus could not be made on how to fill the remaining $2.7 billion short-fall. In the final days of session, the Governor announced he would use his executive powers of “unallotment” to unilaterally balance the budget. A district court judge has since ruled that Governor Pawlenty’s use of his use of such powers is unconstitutional. The Governor has appealed that ruling and it is unclear whether his 2009 budget reductions will remain in place. Regardless of the outcome of the court case, it is bound to add confusion and chaos to the 2010 session.

Capital Bonding Bill:

The bonding bill, which is produced each second year of a biennium, funds construction and renovation projects for state buildings, transportation initiatives, environmental programs, and various local projects. Expect extensive debate, between the DFL-controlled legislature and the Governor regarding the size of the bill. Governor Pawlenty recently released an $815 million proposal that will begin to be vetted in various legislative committees. The DFL will most likely approve a bill closer to $1 billion. Democratic leadership has promised swift action on the bonding bill to spur economic growth and job creation.

Taxes:

As in sessions past with a DFL-controlled legislature and a Republican governor, agreement on whether to cut funding, raise revenues, or a combination of both, is difficult. The philosophical disparities are only heightened by successive budget shortfalls.

Democratic majorities in both bodies of the legislature adopted a significant individual income tax increase in 2009 which was vetoed by the Governor. Tax reform and tax increases will certainly be debated again in 2010. The debate will likely include repeal of the corporate income tax, or significant reductions in the rate, expansion of the sales tax base to include clothing and/or services, increases in the statewide business property tax, individual income tax increases and other significant proposals. It is unlikely that the Senate, House and Governor can reach agreement on tax increases or significant reform.

Elections Abound in 2010, Gubernatorial Race Already Crowded

On top of the bonding and budget debates, the political atmosphere around the capitol will be exaggerated by the upcoming November election of a new governor, all members of the Minnesota House and Senate, constitutional officers and congressional representatives.

After Governor Pawlenty announced that he would not seek re-election in 2010, many interested candidates from both sides of the aisle stepped forward to indicate their gubernatorial aspirations. There are seventeen candidates registered, eight of the seventeen are currently serving in the House or Senate.

Other Issues Likely to Surface in 2010

Education:

K-12 education policy and funding discussions are always on the legislative agenda. In addition to annual attempts to change the entire education funding structures, expect to see specific reform in charter school governance, continued discussion of shared services among school districts, and early childhood initiatives in 2010.

As for higher education, these institutions were substantially cut last legislative session. Minnesota State Colleges and Universities (MnSCU) and the University of Minnesota may again be a target for budget reductions to help fill the deficit. Speaker of the House Margaret Anderson Kelliher has stated that her caucus will strive to balance the budget without cutting any education funds, including higher education.

Election Reform:

Legislative members from both sides of the aisle have indicated that there will likely be a change to the primary election date from September to August. The change would allow more time to count absentee ballots before the general election.

Energy:

Another perennial issue that is certain to get some discussion is the State’s current moratorium on nuclear energy facilities. Last session, a lift on the nuclear facility ban passed the Senate, but died in the House.

Environment:

Without money to spend on new initiatives, there are a number of policy reforms that legislators will likely push this year. “Product stewardship” initiatives – mandating new requirements for manufacturers, distributors and retailers to collect and recycle products and packaging – will likely be proposed on a range of items from beverage containers to pharmaceuticals. “Green chemistry” proposals to eliminate or reduce toxics in products will also continue to be advanced.

Healthcare:

There is likely to be legislation adopted to restore, at least partially, funding for the General Assistance Medical Care program which was eliminated by Governor Pawlenty’s unallotments. If federal health care reform is adopted before the end of session, the legislature may take action necessary to conform to the new federal system.

Home Foreclosure:

Foreclosure assistance and regulation of foreclosures is likely to come up again this session. The Governor vetoed two bills; the first was to mandate financial institutions to offer mediation for homeowners that defaulted on their loans and the other tried to tighten regulations on reverse mortgages.

Legacy Amendment:

Most of the dedicated sales tax money from the constitutional amendment for arts, culture, and outdoor heritage funding was appropriated last session. Sales tax revenues are on track to meet their projected amounts and it is unlikely that the legislature will make any reductions for programs receiving the funds.

Medical Marijuana:

After many years of trying to pass a medical marijuana law, a narrowly written proposal passed both bodies for the first time in 2009. The Governor vetoed the bill, but it is sure to be an issue to watch for in this coming session.

Product Regulation:

In order to replace harmful lead levels in many products, some manufacturing companies in China began using the chemical cadmium as a substitute. More harmful than lead, cadmium is a known carcinogen and is typically used in children’s jewelry products. Expect to see some legislative discussion on this issue, although major action is likely to happen on the federal level.

Race Track Casino:

The expansion of gambling through a “racino” proposal may be a hotter issue than usual in 2010. After his 17th session in the legislature, Senator Dick Day (R-Owatonna) announced in late 2009 that he will be retiring from the Senate to lobby on behalf of pro-racino groups.

Vikings Stadium:

Vikings fans may go another legislative session without a new stadium. Legislative leaders and the Governor have expressed that the stadium is a low priority amid such a deep deficit. However, expect the legislature to give the issue some attention with an eye towards developing a realistic plan.