May 31, 2017

Minnesota  Legislature - Update

As promised, Governor Dayton took action on the budget and tax bills yesterday, signing all of them into law, however all is not done with the 2017 session due to a controversial line-item veto of House and Senate funding.  The Governor also vetoed the Uniform Labor Standards Act, which Republicans rolled together with the omnibus pensions bill and state worker paid leave approval - a move made during the special session to entice Dayton to sign the bill.  The Governor expressed his disappointment with numerous policy provisions in some of the bills, deciding to line-item veto all funding for the Minnesota House of Representatives and Minnesota Senate until the legislature addresses his issues. 

The House and Senate have some funds in reserves, but the question remains on how long those reserves will last and if the legislature will need to return to address the House and Senate’s operating budget. Some believe the Governor cannot completely cancel out funding for a branch of government. According to a MinnPost article, Speaker Kurt Daudt (R-Crown) stated, “I am disappointed in the governor's behavior — eliminating funding of the Legislature in order to get his way on policies he has already agreed to.”

The MBA will continue to watch the happenings in St. Paul.

Click here for the letters the Governor wrote regarding the budget bills.

How the Session Ended?

After five months of meeting, Minnesota's 2017 regular session ended at midnight on Monday, May 22, with the legislature passing five of the ten budget bills. Around the clock meetings and hearings had been occurring as the legislature worked to get agreements on the $46 billion biennial budget. Unfortunately, time ran out on the 2017 regular session before all the bills could be finalized, resulting in a four day Special Session.

Around 11 p.m. on May 22nd, a global agreement framework between Speaker Kurt Daudt (R-Crown), Senate Majority Leader Paul Gazelka (R-Nisswa), House Minority Leader Melissa Hortman (D-Brooklyn Park), Senate Minority Leader Tom Bakk (D-Cook) and Governor Mark Dayton (D) took place. The Governor agreed to call legislators back for a Special Session immediately at 12:01 a.m. Tuesday with the expectation that all work would be completed by 7:00 a.m. on Wednesday. While the Special Session took a few days longer to wrap up than some would have liked, all the bills were passed with the hopes the Governor would sign the bills and avoid a state shutdown.

Early on Friday morning, the Legislature adjourned the four day Special Session finalizing the remaining budgets bills and sending them on to Governor Mark Dayton (D) for his signature.

The Legislature had completed and sent five budget bills to the Governor prior to the Special Session. Among the final bills passed in the Special Session were: K-12 Education, Transportation, State Government, Health and Human Services, Tax, Bonding and a Labor Standards bill, which included the Uniform State Labor Standards language.

Click here for a Session Daily article regarding the end of the Special Session.

Important Date: The 2018 legislative session is scheduled to begin at noon on February 20, 2018.

$1 Billion Bonding Bill Signed By Governor

Once all other bills were agreed to, the Legislature unveiled and passed a $987.9 million bonding bill as the Special Session wrapped up on Friday morning. The bonding bill, Special Session H.F. 5, authored by Representative Dean Urdahl (R-Grove City) and Senator Dave Senjem (R-Rochester) passed the House 119-11 and the Senate 60-2. The bill was signed by the Governor yesterday. Bonding bills typically are the focus in the second year of a biennium. Since there was no bonding bill last year, many of the projects and additional projects this year were to make up for not having a bill last year.

Projects in the bill include:

  • $119. 93 million for the University of Minnesota
  • $92.3 million for the Minnesota State college system
  • $116.33 million in local road improvement fund grants;
  • $71.12 million for rail grade separation crossings on crude oil rail transport corridors in Coon Rapids, Moorhead and Red Wing;
  • $70.26 million for renovation and expansion at the state security hospital in St. Peter;
  • $56.25 million for the local road improvement program;
  • $55 million in water infrastructure ($40 million for wastewater and $15 million for drinking water);
  • $31.88 million to rehabilitate the 10th Avenue bridge over the Mississippi River in Minneapolis;
  • $25.41 million for contaminated sediment management actions to restore water quality in the St. Louis River Area of Concern;
  • $15 million for Department of Natural Resources asset preservation;
  • $15 million for the first phase of renovation of the seal and sea lion habitat at Como Zoo;
  • $12.1 million for the Orange Line bus rapid transit line between Burnsville and downtown Minneapolis;
  • $11.55 million for four flood hazard mitigation projects; and
  • $7.85 million for a bridge project at the Minneapolis Veteran’s Home.

Tax Bill Signed By Governor

As was mentioned in last week’s Political Insight, the Tax bill passed the House and Senate and was signed into law by the Governor, though the Governor has expressed displeasure with a few items in the bill, including the estate tax provisions, the Commercial/Industrial Property tax exclusion amount and the tobacco tax language.  Minnesota has not had a comprehensive tax bill the past three years. The Tax bill (Special Session H.F. 1), authored by Senator Roger Chamberlain (R-Lino Lakes) and Representative Greg Davids (R-Preston), includes $650 million in tax relief.

According to a recent Session Daily article, “The bill, nearly half the size of its predecessor, comes with a lot changes – in some cases it was just nibbling around the edges, and other proposals were dropped from the mix entirely. In total, the bill proposes almost $451.54 million in relief over the 2018-19 biennium in various tax credits and approximately $196.6 million in property tax refunds aid.”

The MBA-supported provision to address the Department of Revenue's Residency Factors is included in the Tax bill.  These factors currently include the location of a person's bank accounts and also where their financial advisor, attorney and others are located. The language that is included in the bill would remove these factors from the list and not allow the Department to consider them at any time. The MBA has been actively involved in the drafting of language and lobbying for this measure the past three years.

A provision the MBA is supporting to help first-time homebuyers was also included.  It would allow for a deduction for those who save for their down payment in a special account. Under this program, individuals could establish a dedicated savings account to help buy a home for themselves or another qualified beneficiary; interest earned on the accounts would be exempt from Minnesota income tax if used for a down payment or closing costs on a home for the beneficiary. A first-time homebuyer is someone who does not own or has not owned a residence in the last three years. The program would become effective the day following enactment and, for income tax purposes, would apply beginning for tax year 2017. (The appropriation for the administering of the program is included in the State Government Finance bill.)

Language was included in the bill that would make a modification to the definition of financial institutions. By expanding the definition, the State of Minnesota is expected to benefit with an additional $10 million over the biennium. In past hearings, Commissioner Cynthia Bauerly, Department of Revenue (DOR), testified that the goal is to update the definition to capture tax revenue from all entities that function as financial institutions, including non-corporate subsidiaries and affiliates of financial institutions. The language was modeled after a Multistate Tax Commission definition, however, in the model language state credit unions are included, but were not included in the Minnesota version. The MBA has mentioned the Governor’s interest in this provision in past Political Insights, as he has been pushing this language for the past three years.

The bill also increases the amount of an estate that is generally exempt from taxation to $3 million (from $2 million under present law). This increase is phased in four steps.

Click here for a summary of the bill.

Jobs Omnibus Bill Signed by Governor

On May 22nd, the House and Senate passed the Omnibus Jobs budget bill (S.F. 1456), authored by Senator Jeremy Miller (R-Winona) and Representative Pat Garofalo (R-Farmington) on a 46-20 Senate vote and an 87-43 House vote. The $373.8 million bill includes budget and policy items for several agencies, including the Department of Employment and Economic Development, Commerce Department, Department of Labor and Industry and the Iron Range Resources and Rehabilitation Board. The final bill is $23.1 million higher than the bill that was previously vetoed by the Governor. Yesterday, the Governor signed the bill into law.

The Department of Commerce Financial Institutions budget is included in this bill.  Currently, the funds that are taken in by the Department in assessments and examination fees are sent to the General Fund and then in a budget year, they are appropriated back to the Department. This year, the Department’s proposal was a Financial Institutions Special Revenue Fund which would give the Department more authority over the funds, as they would go directly to the Department and not have to be appropriated by the Legislature. Legislators had resisted this for much of the session, as the Department could not answer many of the questions regarding how much of depository funding is currently being used for the non-depository side of the Department. In the end, the Financial Institutions Special Revenue Fund was included into the bill, along with a $420,000 per year base increase. We are unsure if this base increase will come through increases in bank assessments or if the Department will finally find a way to leverage funds from the non-depositories that have been increasing in number over the years.

The MBA-sponsored language on Residential PACE was included in the bill. The language creates a stakeholder group, which will be convened by the Department of Commerce, to develop recommendations and draft legislation regarding consumer protections for energy efficiency financing programs for residential homes. The language also suspends the statutory authorization for Residential PACE loans until these consumer protections are implemented. (Federal legislation has been introduced that would require disclosure for such loans through the Truth in Lending Act (TILA), a federal law created to inform use of consumer credit by requiring disclosures about its terms and costs).

Other items of interest included in the bill:

  • $400,000 each year for grants to Prepare and Prosper for purposes of developing, marketing, evaluating and distributing a financial services inclusion program that will assist low-income and financially underserved populations build savings, strengthen credit and provide services to assist them in being more financially stable and secure. The MBA has been a part of this project for the past three years.
  • $100,000 in Fiscal Year 2018 for a grant to Exodus Lending to assist individuals in reaching financial stability and resolving payday loans.
  • $200,000 is appropriated to create and execute a statewide education and outreach campaign to protect seniors, meaning those aged 60 or more years, vulnerable adults and their caregivers from financial fraud and exploitation.
  • $100,000 is appropriated for a “Getting to Work” grant program to make grants to nonprofit organizations to provide, repair, or maintain motor vehicles that will assist low-income individuals in obtaining or keeping employment. Outlines program and application criteria. Requires a report to the legislature on program outcomes.

Agriculture Finance Bill Including Farmer Lender Mediation Becomes Law

The Agriculture Finance Bill (H.F. 1545), which included many agriculture policy provisions, passed overwhelmingly at the end of the regular session. The bill was signed into law yesterday by the Governor. The Agriculture budget bill was the first bill on which legislative leaders and the Governor could reach consensus and therefore was passed before a more global agreement.

The MBA was watching this bill closely, as we knew that the Farmer Lender Mediation language was going to be incorporated into the bill. The final language came as a result of the MBA-advocated Farmer-Lender Mediation Task Force that was convened over the interim. After 30 years, the language in the bill would increase the triggering threshold from $5,000 to $15,000. An amendment was attempted that would set the threshold at $10,000, but it failed on a party line vote.

According to a recent Session Daily article, “Anderson said a lot of work has been done over the last couple of years to study the program and the increase was needed to bring it up to date. ‘Inflation has really taken place on the farm scene, and what we’re really trying to do is bring the numbers up to the 21st century.’”

History: After researching with House and Senate staff on the best approach to the Farmer-Lender Mediation Act, the MBA met last session with House committee staff and research to craft the Farmer Lender Mediation Task Force language that eventually passed specifying the groups that would be involved and worked directly with the Senate and House authors testifying at all hearings. We worked closely with Senator Dan Sparks (D-Austin), Representative Paul Anderson and their staff to successfully move this language.

The MBA is grateful to both of these legislators for their hard work. The MBA would also like to thank Mark Miedtke from Citizens State Bank of Hayfield for his work on the Farmer-Lender Task Force and his hard work pushing the language to increase the threshold, prevent re-mediation of the same debt, and also require that farmers be more prepared at their initial mediation meeting.

Final Public Safety Bill Signed without Claw Back Language

The Governor signed the Public Safety bill (H.F. 480) into law, even though he had concerns with policy language that was included in the bill regarding drivers’ licenses. The bill was of interest to the MBA, as there was language (H.F. 2067) included in earlier versions that would change the current law regarding how funds given to charities are treated in claw back situations by exempting donations or contributions of apromissory note, stock, bond, debenture, or other nonmonetary asset. The version passed in 2012 was written for cash gifts and specifically excluded investments.

The MBA worked on this issue back in 2012 when charities were looking for legislation that would stop claw backs of funds they had received, by stating that the funds are often spent and that they could go under if they had to repay. This change goes much further than just cash contributions, which was the discussion back in 2012. The change this session is written specifically for the remaining three foundations that are in litigation on the Petters case and it is likely that with this change the cases against them would have been dismissed. At the hearing, there was a lengthy discussion from the parties involved in the current case before the Federal Bankruptcy court, giving their interpretations of what the bill would accomplish. The MBA feels that the language in 2012 was truly compromise language and this language was not needed this year.


  • Legislation (H.F. 347) that would make changes to the process by which a manufactured home is determined to be an improvement to real property was included in the negotiated Transportation Omnibus Budget Bill (Special Session H.F. 3) and signed into law by the Governor. This language also creates a system for resolving situations where the ownership of a manufactured home is at issue. The MBA was approached a year ago regarding this topic and has been involved in the discussions throughout the process. Here is a summary of the manufactured home language.

Please contact Tess Rice or Therese Kuvaas for any additional information.

For more legislative updates, follow Therese Kuvaas, Government Relations Manager, on Twitter @thkuvaas