After a lot of backroom negotiating, Gov. Tim Pawlenty and legislative leaders put the finishing touches on their agreements mid-afternoon Sunday, May 18. Their main task was to eliminate a projected $935 million deficit in the state’s two-year $34 billion budget. They did so by cutting spending by $360 million, taking $500 million from the budget reserve fund (leaving $153 million in reserve) and raising $109 million by closing a tax loophole for companies with foreign operating corporations. With the clock winding down, the Minnesota Legislature had only a few hours left to pass a legislative package ratifying those agreements. Under the Minnesota Constitution, the legislature had until midnight Sunday to finish their work. They adjourned with literally minutes to spare. The following are some of the major provisions of the package:

State government finance. They cut the budgets of the legislature by $1.8 million, the governor’s office by $113,000, the attorney general’s office by $749,000, the secretary of state’s office by $195,000 and state’s court system by $5.5 million. They also cut state agency budgets by 4 percent.

Deficit fixed for now. Though the legislative session dealt with the known biennium budget shortfall. The assumptions they used regarding revenue, expenditures (not inflation-adjusted) and savings are likely to result in an additional budget shortfall in the remainder of this biennium. In addition, they are already expecting a shortfall in the next biennium estimated at between 1 and 2 billion dollars. The only portion of the present budget not directly cut this session was K thru 12 education, which constitutes 40 percent of the total budget. The expectation is that even the education budget will suffer cuts in the next budget cycles. 

Bonding. They included state bonding to restored $70 million for the Central Corridor light-rail project. That’s the state’s share of the $909 million light rail line connecting downtowns Minneapolis and St. Paul, which Pawlenty had vetoed, in an earlier bonding bill. The University of Minnesota has also ended its objection to the proposed route. Either, of which could have permanently derailed the project. They allocated $10.1 million for work on a 100-bed nursing facility on the campus of the Minneapolis Veterans Home. They set aside $20 million to buy land for a state park on Lake Vermilion in northeastern Minnesota. It would be the state’s first major state park in about 40 years.

Property tax relief. They imposed a 3.9 percent cap on city and county property tax levy increases for the next three years. Pawlenty had called the cap provisions the linchpin of the budget deal. He said that levy limits on cities and counties will save taxpayers $78.5 million in 2009 and $450 million over the next three years. He cautioned that the caps don’t mean property tax cuts for homeowners, he claimed, however, property tax increases will be lower than they would have been without the tax caps. To help mitigate the stress the caps place on local governments they provided an additional 2 percent increase in local government aid in 2011 and a 4 percent increase in 2012. They also allow cities to exceed the tax caps to prevent cuts in essential police and fire protection, and to deal with high rates of home mortgage foreclosures. The legislation also requires a study of state aid to local governments be completed by December 2010. They targeted $20 million in property tax refunds to some homeowners (based on income and property taxes payable for 2009). Taxes relief and local sales tax division committee chair, Paul Marquart (DFL-Dilworth), said the law moves the state towards a property tax system based on an ability to pay.    

Other elements of the tax bill. They gave the Department of Revenue an additional $2 million to go after individuals and businesses not paying all the taxes they owe, which officials expect to produce $15 to $21 million more for the state next year. They closed a loophole for companies with foreign operating corporation that will bring in $109 million to the state treasury in 2009. They provided a tax credit of up to $750 for veterans and members of the military who served more than 20 years or were disabled in service. All National Guard and Reserve pay would be exempted from income taxes, and military personnel serving in combat zones in Iraq and Afghanistan would get a $120-a-month tax credit.

Health care. They passed legislation that will provide coverage for an estimated 12,000 uninsured Minnesotans while reducing health costs by an estimated 15 percent and improve quality while making health care more transparent and consumer oriented. They allowed the use 50 million dollars of the Health Care Access fund, designed to ensure access to health care, to plug a hole in the deficit. The fund is to be repaid with the assumed savings generated by health care reforms. They reduced some state reimbursement payments to hospitals, especially rural hospitals. They increased state payments to nursing homes by 4 percent for compensation increases for nursing home workers. They cut about $170 million from the state’s health and human service budget in the 2008-2009 budget cycle and about $206 million for the following two years, the largest single target for reduction of any state agency. 

Education. Schools got about a $49 million bump in funding, or about a 1 percent increase. That provides public schools with about $51 more per student, financed in part by a $10 million cut to the QComp program and by insuring that money from a trust fund for public schools will be sent directly to school districts. Those trust funds currently go to the state’s general fund. That’s about $29 million in permanent funding. For a school district like Forest Lake, which enrolls approximately 7,000 students, that’s an extra $430,000 for next year. That could pay for about seven new teachers. School districts also would be allowed to transfer $51 per student, one time only, from their capital budgets to their operating budgets. They made $21 million in combined cuts to the University of Minnesota and the Minnesota State Colleges and Universities system budgets.

This session 220 bills passed the Senate and House and were sent to the governor for consideration. The governor veto 30 bills and the legislature overrode one of his vetoes. For a complete list go to the Federation web site, www.mnseniors.org.