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  • Higher education omnibus budget bill increases financial aid, freezes tuition

    by Clark Biegler | May 21, 2013

    The higher education bill for the FY 2014-15 biennium (Senate File 1236) invests $250 million in additional general fund resources to help the state continue to build a highly educated workforce and make higher education more affordable for Minnesotans.

    Financial aid. The final bill increases funding for financial aid to low- and middle-income students through the State Grant Program by $47 million in FY 2014-15. It increases the cap on living expenses and adjusts the share of tuition students and families are required to pay. Some of this financial aid is specifically targeted at Minnesota State Colleges and Universities (MnSCU) students.

    The agreement also reduces the waiting list for the American Indian Scholarship and funds a summer bridge program to help students transition between high school and college.

    MnSCU. The final higher education bill targets affordability at MnSCU, providing $78 million in FY 2014-15 to freeze undergraduate tuition at 2012-13 academic year levels for two years, and also seeks to retain quality faculty. Overall, MnSCU funding increases by $102 million in the FY 2014-15 biennium.

    University of Minnesota. The final agreement also makes affordability at the University of Minnesota a priority, providing $43 million to freeze undergraduate tuition at 2012-13 academic year levels for two years, and also invests $36 million for MnDRIVE (a new research and innovation program).

    Some investments did not make the final bill. Funding for internships and apprenticeships to help advance workforce competitiveness, as well as an investment in training to target high-demand professions at MnSCU were not funded, and the loan forgiveness program for health care professionals at the University of Minnesota did not receive funds in the final bill.

    The final omnibus higher education bill takes some important steps forward in making college affordable and building our future workforce. However, this budget brings the higher education budget back to only FY 2010-11 levels, with no increases to respond to inflation or enrollment growth.

  • Tax bill makes strides toward tax fairness, investments in our future

    by Nan Madden | May 20, 2013

    Governor Dayton, the House and Senate all made commitments this year to tax plans that would resolve the state's budget deficit, fund investments and make the tax system less regressive. They had different priorities for how to get there, but they've agreed to an omnibus tax bill, House File 677, that maintains their commitment to those crucial goals.

    By increasing reliance on an income tax based on the ability to pay, and reducing what low- and middle-income Minnesotans pay in property taxes, the omnibus bill makes progress toward fairness. It also raises adequate revenues to address the deficit without deep cuts, and to invest in schools, affordable college education, workforce development and other public services that are crucial for a strong future.

    Fourth tier income tax: The tax bill includes a new "fourth tier" income tax rate of 9.85 percent on taxable income above $250,000 for married filers, above $200,000 for head of household filers, and above $150,000 for single filers. That's a 2 percent rate increase that affects the 2 percent of Minnesotans with the highest incomes. It raises $1.1 billion in FY 2014-15, and helps narrow the gap between the share of income that most Minnesotans pay in state and local taxes and the smaller share of income paid by the highest-income Minnesotans.

    Property tax aids and credits: The omnibus tax bill includes $411 million in additional funding for property tax refunds and aids to local governments.

    The bill improves property tax refunds, starting with refunds filed in 2014:

    • Property tax refunds for low- and moderate-income renters (the Renters' Credit) will increase by $15.5 million in FY 2015. More than 79,000 currently eligible households will receive an average $152 increase in their property tax refunds, and some additional households will become eligible.
    • Property tax refunds for homeowners will increase by $120 million in FY 2015. About three-quarters of currently eligible households will see an average $219 increase in their refunds. Another 112,000 households will now qualify for a refund. The bill also includes a one-time effort in 2014 to reach out to homeowners who may be eligible for a property tax refund of at least $1,000 but have not applied.

    In addition, the bill increases Local Government Aids to cities by $80 million in FY 2015 and County Program Aid by $40 million, and provides $10 million in aid to townships. It also includes $86 million in FY 2015 for changes in education finance, primarily by increasing equalization of operating referendum levies.

    Corporate tax: The omnibus tax bill raises $424 million in FY 2014-15 through several corporate tax changes, such as repealing two provisions for corporations with overseas activities (Foreign Operation Corporations and the Foreign Source Royalty subtraction); no longer allowing the Research & Development credit to be refundable; and increasing minimum fees for businesses for the first time since 1990.

    Tobacco taxes: The bill raises $408 million in FY 2014-15 by adopting the House's proposal for a $1.60 per pack increase in cigarette taxes, and makes related changes to taxes on other tobacco products. In FY 2014, $26.5 million of the increase raised through the cigarette tax will be dedicated to the reserve account related to funding for the Vikings stadium.

    Sales taxes: The bill modernizes the sales tax through several changes, including: taxing all paid television services the same (replacing a current disparity between cable and other kinds of TV service delivery), taxing some digital goods, and requiring some online retailers to collect sales taxes on purchases made by Minnesotans.

    In addition, the bill applies the sales tax to business purchases of warehousing and storage, electronic and commercial equipment repair and maintenance, and telecommunications equipment.

    These sales tax expansions pay for sales tax cuts, which include exempting cities and counties from paying the sales tax; allowing an exemption for business purchases of capital equipment at the time of purchase, which replaces a cumbersome refund process; and exempting purchases of construction materials for a number of economic development projects.

    In total, the sales tax changes raise $59 million in FY 2014-15. Another provision of the bill raises $15 million through the motor vehicle rental tax.

    Estate and gift taxes: The bill raises $78 million in FY 2014-15 through updates in the estate tax and by using a gift tax to back up the estate tax.

    Reversing the school funding shifts: The omnibus tax bill does not include the House's proposed income tax surcharge to reverse the school funding shifts. Instead, any positive balance at the end of the 2013 fiscal year will be applied to reversing school funding shifts, in addition to the current requirement to use positive balances from future forecasts. This provision is found in the education omnibus finance and policy bill, House File 630.

    In past years, the response to budget shortfalls has been deep cuts to services and use of timing shifts to kick the problem down the road. This year's tax bill and budget take a better approach, raising the revenues needed to balance the budget and invest in the future; and reforming our tax system so that we share the responsibility for funding public services more equally.

  • More details of tax portion of budget framework emerge

    by Nan Madden | May 17, 2013

    Thursday night, legislative leaders and Governor Dayton added some details to the tax portion of the previously announced budget framework, which reduces regressivity of the tax system, funds investments made in the other parts of the budget, and solves the budget deficit.

    Some of details of the tax plan that were filled in through the updated budget framework include:

    • A 9.85 percent income tax rate on taxable income above $250,000 for married couples and $150,000 for single filers. This represents a 2 percent rate increase that affects the 2 percent of Minnesotans with the highest incomes.
    • A $1.60 per-pack increase in cigarette taxes, as proposed in the House omnibus tax bill.
    • $400 million in property tax reductions.
    • Corporate tax changes.
    • Revenue-neutral sales tax reform, which will apply the sales tax to certain business services; exempt cities and counties from paying the sales tax on purchases; and allow an exemption for business purchases of capital equipment at the time of purchase, replacing a cumbersome refund process.
    • The framework no longer includes a temporary income tax surcharge to fully reverse the school funding shifts during the FY 2014-15 biennium. Instead, any positive balance at the end of the 2013 fiscal year will be applied to reversing the school funding shift, as will any positive balances in future forecasts as in current law. If these measures are not sufficient to fully reverse the shifts in the FY 2014-15 biennium, policymakers will take additional action next session.
    • There will be no increases in alcohol taxes.

    We're watching the tax conference committee closely for further details to be filled in as the final tax legislation emerges, and will write more as the committee completes its work.

  • Governor, House, and Senate move forward with budget framework in place

    by Minnesota Budget Project | May 15, 2013

    As the 2013 Legislative Session quickly draws to a close, the final pieces of the budget are coming into place. Over the weekend, Governor Dayton and House and Senate leaders agreed to a budget framework for the upcoming FY 2014-15 biennium that raises significant revenues to close the state's budget deficit and make critical investments in the building blocks of our future economic success.

    The framework gives the conference committees their budget targets needed to wrap up their work developing the FY 2014-15 budget. The table below compares the Governor, House and Senate targets with the budget agreement.

    Table Comparison of budget targets for FY 2014-15 biennium

    Education continues to be a high priority. The budget framework includes an additional $475 million for E-12 education and $250 million for higher education in FY 2014-15. Leaders also agreed to fully repay the school funding shifts in the FY 2014-15 biennium.

    One of the more significant changes in the budget framework comes in health and human services, where the final agreement includes a $50 million reduction in spending for FY 2014-15. While this is a significant improvement from the targets proposed by the House and Senate (cuts of $150 million and $153 million respectively), it is still far from the Governor's proposal to increase investments in our vulnerable families and children by $124 million in the next biennium.

    The budget framework also outlines some of the parameters of a tax package in order to address the state's budget deficit and fund these investments. The budget agreement calls for a net $1.65 billion increase in revenues in FY 2014-15. The framework outlines some of the major components, with many details to be resolved this week by the tax conference committee based on ideas in the Governor's tax billSenate omnibus tax bill and House omnibus tax bill. Some of the reported tax components of the budget agreement include:

    • An income tax increase on taxable income above $250,000 for married couples and $150,000 for single filers. The final rate and amount raised are still to be determined.
    • $400 million in property tax reductions. The conference committee will determine how this will be allocated among increased funding to cities, counties and townships; property tax refunds for homeowners and renters; and education property tax reductions.
    • An increase in cigarette taxes, with the rate and amount to be determined by the conference committee.
    • Corporate tax changes.
    • A temporary income tax surcharge to fully reverse the school funding shifts during the FY 2014-15 biennium. The rate and amount of the surcharge will be determined later in the year after the 2013 fiscal year is concluded and any positive balance is applied to reversing the school shift.

    The Senate tax conferees are putting together a revenue-neutral sales tax reform proposal, which is not expected to include a sales tax on clothes or other consumer purchases. The tax conference committee will also determine what role, if any, alcohol taxes, estate taxes and the statewide business tax will play in the final tax bill. The conference committee is expected to work throughout the week to craft a bill that meets the budget framework's parameters and makes the state's tax system less regressive and invests in our future.

  • House and Senate make key investments in economic development and housing

    by Clark Biegler | May 09, 2013

    For the state’s economy to grow, Minnesota needs to invest in a strong and stable workforce. The entire state benefits when Minnesotans have better access to education, specialized training and stable housing. The House and Senate omnibus economic development bills propose new investments to strengthen the workforce through more jobs, training and affordable housing options.

    Economic Development

    Job creation is a frequent theme at the Capitol these days, and the Senate invests $55 million in the Minnesota Investment Fund and the Minnesota Job Creation Fund. These funds go to local governments and businesses, with the goal of creating 12,500 to 15,000 new jobs in the state. The House invests nearly $39 million in these two funds.

    The House also provides just over $2 million in funding for the Job Skills Partnership, which works with businesses and educational institutions to train Minnesotans to meet needs in the labor market.

    Both the House and Senate increase funding for workforce and business development grants to nonprofit organizations and other entities, but they go about it in very different ways. The House opens up grants to a competitive process, where organizations must apply for funding in the upcoming biennium. The Senate allocates funding to the organizations that received grants in 2012 to simplify the process.

    Housing

    The new Housing and Job Growth Initiative, originally proposed by the Governor, seeks to build affordable housing to respond to job growth. The Senate provides $15 million for this new initiative. The House funds the existing Housing Challenge Program instead, providing nearly $7 million to build rental housing in support of economic development.

    There are also additional investments in the Housing Trust Fund, with the House and Senate both increasing overall funding by approximately $2 million in FY 2014-15. Both also provide funding for rental assistance to stabilize housing for children whose families move frequently ($1.5 million in the House and $3 million in the Senate); and the Senate includes $2 million in rental assistance for ex-offenders reintegrating into the workforce.

    Other investments in housing include:

    • Family homelessness prevention: an additional $1 million in the House and $4 million in the Senate.
    • Rental assistance for individuals with a serious mental illness: an additional $2 million in the Senate.
    • Rental rehabilitation in Greater Minnesota: an additional $1 million in the House.
    • Affordable rental housing for low-income families throughout Minnesota: an additional $2 million in the Senate.

    As the House and Senate work out differences in conference committee, we urge them to keep job training and affordable housing as a top priority for investment.

  • Senate omnibus tax bill shares goals with Governor and House, but differs in the details

    by Nan Madden | May 01, 2013

    The Senate omnibus tax bill has similar goals to Governor Dayton's and the House's tax proposals: make the state's tax system less regressive; end the cycle of budget deficits; and fund investments in quality schoolsaffordable higher education and strong communities.

    Some components of Senate File 552, the Senate omnibus tax bill authored by Senate Tax Chair Rod Skoe, are similar to proposals from the House and Governor. Some components take a different path.

    Here are the main provisions in the Senate tax bill that affect the amount of revenues raised and how the responsibility for funding services is shared.

    Income tax. The Senate omnibus tax bill would apply a 9.4 percent income tax rate on taxable income above $140,960 for married joint filers, taxable income above $120,070 for heads of households, and taxable income above $79,730 for single filers. This proposal raises the rate on the existing top (or third) income tax bracket, rather than create a new fourth income tax bracket like the Governor and House do. The Senate proposal raises $1.2 billion, slightly more than the $1.1 billion raised by Governor Dayton's fourth tier proposal, which would apply a 9.85 percent rate to taxable income above $250,000 for married filing joint filers. The House raises $1.5 billion in targeted income tax increases in FY 2014-15 through a combination of a temporary 4 percent surcharge on taxable income above $500,000, and a fourth tier of 8.49 percent on incomes above $400,000 for married joint filers.

    A targeted income tax increase of about the size of the Governor's and Senate's proposals is an essential piece of any tax reform plan that seeks to both raise needed revenues and make Minnesota's tax system less regressive. The rate and income threshold for that increase will be a key point in end-of-session budget negotiations.

    The Senate bill also includes income tax cuts in the form of new or expanded income tax credits, some of which include increasing the Angel Investment Credit for high-income investors, and larger tax credits for past military service and service in combat zones.

    Tobacco taxes. The Senate omnibus tax bill raises $333 million from increasing taxes on tobacco products, primarily a 94-cents-per-pack increase on cigarettes. Governor Dayton also proposes a 94 cent increase per pack; the House proposes an increase of $1.60.

    Sales tax. The Senate takes a "broaden the base, lower the rate" approach to modernizing the state's sales tax. The state's sales tax rate would be lowered from its current 6.875 percent to 6.0 percent, and a range of items would become newly subject to the sales tax, such as:

    • Clothing;
    • Digital products, including digital books, music downloads and ringtones;
    • Personal services, such as haircuts, spa services, tattoos, wedding planning, dating services and personal shopping;
    • Auto repair, and repair and maintenance of household goods;
    • Warehousing and storage services;
    • Over-the-counter drugs;
    • Admission to trade shows and professional athletic events, as well as stadium box seats and suites;
    • Publications, excluding newspapers.

    Sports memorabilia would be subject to a gross receipts tax. The bill also creates a more level playing field for Minnesota businesses by requiring some internet retailers to collect sales taxes from Minnesota residents, just as retailers physically located in the state do.

    Not only does the proposal lower the overall sales tax rate, it also offsets some of the sales tax increase through a new refundable clothing tax credit for low- and moderate-income Minnesotans. The bill also provides a sales tax exemption for purchases by cities and counties, and phases in an upfront sales tax exemption for business purchases of capital equipment, replacing a cumbersome refund process.

    The net impact of all sales tax provisions - those that increase sales taxes and those that reduce them, including the clothing sales tax credit - is nearly revenue-neutral, raising $22 million.

    Corporate taxes. The omnibus tax bill also takes a "broaden the base, lower the rate" approach to the corporate tax. It ends several tax preferences in the corporate franchise tax, similar to Governor Dayton's proposal, including preferences for businesses with overseas activities; and it adjusts minimum fees paid by businesses, which have not been updated since 1990.

    The bill would lower the corporate tax rate from 9.8 percent to 9 percent, and increase the Research and Development Credit. The net impact on corporate taxes is to raise $63 million in FY 2014-15.

    Property taxes and funding for local governments. The Senate omnibus tax bill includes a number of provisions aimed at reducing property taxes. These include:

    • $18 million in improvements to the Property Tax Refund for Renters (the Renters’ Credit), ensuring that these low- and moderate-income Minnesotans don’t pay too high a share of their incomes in property taxes. More than 300,000 Minnesota households would receive an increase in their property tax refunds, and the average refund would increase by $57. The Renters' Credit was seriously eroded by cuts passed in 2011.
    • State funding to reduce school property taxes (this is in addition to similar provisions in the E-12 education omnibus funding bill.)
    • Increases in funding for other local governments, including an additional $80 million per year starting in FY 2015 for Local Government Aid to cities, a $40 million increase in County Program Aid, and $5 million in aid for townships.

    The Senate would raise $176 million by increasing the property tax that commercial-industrial properties pay to the state.

    A preliminary analysis by Senate Counsel and Research estimates that property taxes would be 2.5 percent lower overall as a result of the proposed changes in the Senate's omnibus tax bill and omnibus education bill, and homestead property taxes would be 4.9 percent lower.

    Now that all the parties have released their tax plans, they will need to work out final tax legislation. The tax conference committee starts today, and while there are important differences in the details to be resolved, there is agreement on the goals: a fairer tax system that solves the deficit and invests in our future.

  • Health and human services omnibus bills make good investments using wrong resources

    by Christina Wessel | Apr 30, 2013

    When the House and Senate released their committee targets in March, we were surprised that the health and human services budget division was required to cut $150 million in the House and $153 million in the Senate. After years of reductions to critical services for Minnesota's most vulnerable, including $1 billion in cuts in the 2011 Legislative Session, we believed this year would offer an opportunity to start making up lost ground investing in our state's health and well-being.

    Policymakers have made some important strides in health care this session, expanding health insurance for very low-income Minnesotans and creating MNsure, a state health insurance exchange. And we are relieved that the House (House File 1233) and Senate (Senate File 1034) health and human services omnibus bills do a surprisingly good job of making some new investments and avoiding harmful cuts in the face of these difficult targets.

    Unfortunately, the secret to this success is the controversial decision to tap hospitals and HMOs for additional resources; and even more troubling, use hundreds of millions of dollars from the Health Care Access Fund. These actions generate significant savings or bring in additional revenue for health and human services:

    • The House raises $105 million through a hospital surcharge and another $5 million through a surcharge on Intermediate Care Facilities for the Developmentally Disabled (ICF/DD). Health care providers will get most of the surcharge back through federal reimbursements, although not all providers will break even.
    • The House and Senate also look to HMOs and managed care organizations for additional revenue. The House caps HMO reserves, saving the state $48 million in FY 2014-15. The Senate raises $80 million from an HMO surcharge. Both reduce state costs in managed care contracts, with the House saving $21 million in FY 2014-15, and the Senate saving $54 million.
    • However, the real money comes from moving Medical Assistance expenses currently paid from the general fund into the Health Care Access Fund (HCAF). The HCAF is funded by the provider tax, and pays for health care for low- and moderate-income working families. In FY 2014-15, the House shifts $406 million of general fund spending into the HCAF, and the Senate shifts $428 million. We have blogged on how shifting spending into this fund puts essential health care services at risk since the provider tax ends in 2019.

    The House and Senate use these resources to meet their negative targets and make some important investments in the health and well-being of Minnesotans. Here are a few of the highlights from the proposals.

    Health care.

    • Both the House and Senate preserve affordable health insurance through MinnesotaCare for families with incomes up to 200 percent of poverty, with the Senate proposal reducing premiums and improving benefits.
    • Both expand health care coverage through Medical Assistance to children and pregnant women with incomes up to 275 percent of the federal poverty line, and eliminate a number of barriers that prevent people from enrolling or staying enrolled.
    • Both continue to provide cancer and dialysis coverage through Emergency Medical Assistance. The Senate also includes grants to help assist people who could be eligible for other health insurance options.
    • Both include increases in payments to some Medical Assistance health care providers, including dental providers.
    • The House includes funding for intensive services for children with autism.

    Mental health. The House takes a number of positive steps to improve mental health outcomes for Minnesotans, including helping children get better mental health care by investing in more school-linked mental health services and adding mobile mental health teams to respond to crises. The Senate does not include school-linked mental health grants, but does invest in mobile mental health teams, as well as a number of other improvements in mental health coverage.

    Child care. The House and Senate both increase the number of excused absent days for families using child care assistance from 10 to 25 (the House also allows additional excused days for children with medical conditions). This will give parents needed flexibility to deal with family schedules without jeopardizing their child care assistance. The Senate includes a 2 percent increase in child care provider reimbursement rates in FY 2014.

    Long-term care and waivered services.

    • The House and Senate both include additional funding for nursing homes. The Senate updates, or rebases, how nursing home payment rates are calculated, increasing funding by $20 million in FY 2014-15. The House increases payment rates by 3 percent in FY 2014, or $21 million in additional resources for nursing homes in FY 2014-15.
    • Providers of home and community-based services also get an increase in both bills. The House proposes a 2 percent increase, or $65 million over the biennium. The Senate increases rates by 1 percent beginning on January 1, 2015, an additional $7 million.
    • Both cancel a scheduled 1.67 percent rate reduction for long-term care providers.

    There are many other highlights in the bills, including:

    • The House and Senate both repeal the family cap in the Minnesota Family Investment Program that prevents families from receiving additional assistance when another child is born (the Senate delays implementation until July 1, 2014).
    • The Senate includes funding to support youth facing challenging circumstances, including $4 million for runaway youth, homeless youth and youth at risk of homelessness; and another $4 million for youth who have been the victims of sexual exploitation.
    • Both reinstate state funding for FAIM, or Family Assets for Independence in Minnesota, which matches savings by low-income participants who are seeking to obtain post-secondary education, purchase a home or start a new business.
    • The Statewide Health Improvement Program, which supports local efforts at improving community health through prevention, gets increased funding. Both bills use the Health Care Access Fund to increase funding. The House allocates $45 million in FY 2014-15 and the Senate $15 million.
    • Both increase funding for Medical Education Research Costs (MERC) to provide grants to health care providers who train medical students, the Senate by $6 million and the House by $15 million.

    As the House and Senate begin to work out their differences in conference committee, we ask them to reconsider the decision to reduce general fund spending in this area of the budget. Although the bills include many positive investments, they do so only by using controversial surcharges and the Health Care Access Fund to bring in additional revenues. These investments are critical to the health and well-being of hundreds of thousands of Minnesotans and should be funded in a sustainable way.

  • House omnibus tax bill's priorities include progressivity and lower property taxes

    by Nan Madden | Apr 29, 2013

    As the Legislature passes budget bills to invest in our kidsour workers and our communities, legislators also need to figure out how to fund those investments, address the deficit and share the responsibility for funding public services fairly.

    The House passed its plan to meet the need for fair and adequate revenues last week in its omnibus tax bill, House File 677, authored by Tax Committee Chair Ann Lenczewski. Below are the primary mechanisms in the tax bill to raise revenues and make the tax system less regressive.

    Income tax. The House omnibus tax bill includes a new permanent income tax rate of 8.49 percent on taxable income above $400,000 for married filing joint filers, taxable income above $340,700 for heads of households, and taxable income above $226,200 for single filers. The House's "fourth tier" income tax bracket has a lower rate and applies to a smaller number of households than Governor Dayton's fourth tier proposal, and as a result only raises $282 million in FY 2014-15. House File 677 also includes a temporary 4 percent surcharge on taxable income above $500,000 to pay back the school funding shifts used in prior years as a short-term budget-balancing maneuver.

    Property tax refunds and aids to local governments. The House has put a high priority on reducing property taxes, and the omnibus tax bill increases property tax refunds for homeowners by $157 million and for renters by $15.5 million in FY 2015. Around 80,000 currently eligible renting households would receive an average $152 increase in their property tax refunds, and some additional households would become eligible. Around 424,000 households would benefit from the increases to homeowner property tax refunds, which would increase an average of $219. Local Government Aid to cities is increased by $80 million in FY 2015, and County Program Aid will see a $30 million boost.

    Tobacco taxes. The House tax bill raises $434 million in tobacco taxes, primarily through a $1.60 per pack increase on cigarettes. Governor Dayton and the Senate omnibus tax bill have increases of 94 cents per pack.

    Alcohol excise taxes. These taxes would be raised by $347 million, roughly the equivalent of 7 cents per drink. Minnesota's alcoholic beverage excise taxes are set at a certain number of cents per unit, not as a percentage of the sales price. Minnesota's alcohol excise taxes have not been updated for inflation since 1987.

    Corporate taxes. The bill raises $316 million in FY 2014-15 by ending a number of corporate tax preferences, including those for corporations with overseas activities. Similar but not identical proposals are found in both Governor Dayton's budget and the Senate omnibus tax bill. The House bill also requires that corporations report income from their activities in "tax haven" countries for purposes of calculating their corporate taxes, and changes the Research and Development tax credit so that the credit amount does not exceed the amount owed in taxes.

    Sales tax. The House omnibus tax bill makes few changes in the sales tax, which would be reduced by $94 million in FY 2014-15 but remains largely unchanged in the following biennium. The largest item replaces a cumbersome refund process for business purchases of capital equipment with an exemption at the time of purchase. The bill also increases taxes on car rentals, includes a tax on sports memorabilia, and applies the sales tax to box seats and suites at professional sporting events.

    The House bill contains several components focused on closing the gap between the share of income that most Minnesotans pay in state and local taxes and the smaller share of income paid by the highest-income Minnesotans. These components include the fourth tier, the income tax surcharge and increases in property tax refunds for homeowners and renters described above. The bill's provision to update Minnesota’s Working Family Credit to reflect recent federal changes affecting married couples is another important step in making the tax system less regressive.

    The largest and most progressive component of the bill - the income tax portion - raises one serious concern. Too much of the House's targeted income tax increases are temporary. Larger permanent changes are needed to make the tax system less regressive beyond the FY 2014-15 biennium. As policymakers work out final tax legislation, they should adopt a permanent targeted income tax increase, similar in size to what's been proposed by Governor Dayton and the Senate omnibus tax bill.

  • E-12 omnibus bills make significant investments in our children

    by Clark Biegler | Apr 25, 2013

    We know a quality school system plays a critical role in a state's economic success, and making sure that all Minnesota students get a top education should remain a priority. Minnesota cannot reach that goal until it addresses serious achievement disparities that have plagued the state for years.

    The House and Senate plans to meet those goals through the omnibus education bills that are now moving through the Legislature. Both bills make significant investments in our children in the next biennium. The House (House File 630) increases funding for E-12 education by $550 million in FY 2014-15, while the Senate (Senate File 453) increases funding by $486 million.

    The Senate omnibus bill follows the Governor's recommendation to increase funding for schools through the basic student formula by $52 per pupil, while the House omnibus bill makes a much bigger investment - an increase of $209 per pupil over the biennium. Both bodies provide additional equity aid to help school districts that are unable to pass local school referendums.

    A key component of reducing disparities is getting children on the right path from the beginning. The House and Senate bills propose improvements to early educational opportunities:

    • Both support funding full-day kindergarten for all children starting in FY 2015.
    • Both fund early learning scholarships so high-needs children ages 3 to 5 can attend high-quality child care and early childhood programs. The Senate follows the Governor's recommendation to increase funding for these scholarships by $44 million for the biennium, while the House increases funding by $50 million.
    • The House provides additional funding for Head Start to offset funding lost due to federal sequestration.

    The E-12 education omnibus bills also increase investments to support children as they move through school:

    • The House and Senate both provide funding for the Minnesota Math Corps to help 4th- to 8th-grade students meet state standards. The Senate also increases funding for the Minnesota Reading Corps.
    • The House funds Regional Centers of Excellence to help schools erase academic achievement gaps and reach 100 percent high school graduation rates by 2027.

    The House and Senate also support lifelong learning opportunities by increasing funding for Adult Basic Education to help Minnesotans gain basic skills in math, reading, writing and speaking.

    Even though the Governor recommended a $127 million increase for special education, the House provides no additional funding, and the Senate provides only a small increase.

    There are two other notable proposals. The Senate E-12 education omnibus bill includes $150 million to reduce school property taxes. The House fully repays the school funding shift in FY 2014.

    The House passed its omnibus bill Tuesday evening, and the Senate is taking up the bill on the floor today.

  • Higher education budget bills focus on making college affordable

    by Clark Biegler | Apr 24, 2013

    By 2018, Minnesota’s employers are expected to require one of the most highly educated workforces in the nation, with 70 percent of jobs needing some education beyond high school. The House and Senate help prepare us to meet those needs by investing in higher education in their omnibus higher education bills.

    The Senate bill (Senate File 1236) increases funding for higher education by $263 million in FY 2014-15, while the House bill (House File 1692) increases funding by $150 million. The two omnibus bills have very different ways of targeting these resources.

    Financial aid. The Senate increases funding for the State Grant program, which provides financial aid to low- and moderate-income students, by $80 million over the biennium. It increases the cap on living expenses and adjusts the share of tuition students and families are required to pay. Some of this financial aid is specifically targeted at Minnesota State Colleges and Universities (MnSCU) students.

    The Senate also reduces the waiting list for the American Indian Scholarship and funds a summer bridge program to help students transition between high school and college.

    The House recommendations for financial aid are more limited, increasing funding for the State Grant program by $11 million in FY 2014-15. The House improves affordability by reducing the amount a family is expected to pay toward a student's tuition.

    MnSCU. The Senate funds internships and apprenticeships for MnSCU, seeks to retain quality faculty, invests in training that targets high-demand professions and caps tuition increases at 3 percent for the next two years. Overall, the Senate increases MnSCU funding by $80 million in the FY 2014-15 biennium.

    The House proposal for MnSCU targets affordability, providing $78 million in FY 2014-15 to freeze undergraduate tuition at 2012-13 academic year levels for two years.

    University of Minnesota. The Senate follows the Governor's recommendations for funding the University of Minnesota, providing $43 million to freeze undergraduate tuition at 2012-13 academic year levels for two years, $36 million for MnDRIVE (a new research and innovation program) and just over $1 million for a loan forgiveness program for health care professionals.

    The House freezes resident undergraduate tuition at 2012-13 levels for University of Minnesota students, but only invests $18 million in MnDRIVE, and does not fund the loan forgiveness program.

    The higher education omnibus bill passed the Senate last week and is expected to be on the House floor this Thursday.

    The House and Senate will have some important differences to iron out in conference committee, but both bills share the important goals of investing in our workforce and making higher education more affordable.

  • Governor Dayton's budget provides a good framework for final budget legislation

    by Barb Brady | Apr 23, 2013

    Our priorities for the FY 2014-15 state budget are to raise revenues to resolve the budget deficit and invest in the state's future prosperity, and reform the tax system to make it less regressive.

    Our recent issue brief digs into the details of the Governor's budget proposal in key areas including health and human services, education, economic development, and tax reform, and concludes that it seeks to achieve these goals.

    Governor Dayton's FY 2014-15 Budget Focuses on Tax Reform, Financial Stability and Investments finds that the Governor's proposal takes important steps to reinvest in Minnesota and restore financial stability after years of budget cuts and gimmicks, and provides a good framework for the Legislature to follow as the House and Senate work to put together final budget legislation.

    Watch for our upcoming blogs on House and Senate budget bills to see how they match up against our priorities.

  • Repealing the provider tax puts vital health care services at risk

    by Christina Wessel | Apr 19, 2013

    Later today, the Senate Tax Committee is expected to hear Senate File 1034, the Health and Human Services omnibus bill. We strongly support the provision in the bill that takes the fiscally responsible action of continuing needed revenues by repealing the scheduled sunset of the provider tax.

    The provider tax funds affordable health care for Minnesota's low- and moderate-income working families. It raises $1.1 billion in the next biennium and nearly $1.3 billion in the FY 2016-17 biennium to meet the health care needs of Minnesotans. These resources are deposited into the Health Care Access Fund where they have traditionally been used to fund MinnesotaCare, helping more than 100,000 Minnesotans access health insurance.

    The Governor, House and Senate have all chosen in their budget proposals to use the Health Care Access Fund dollars in the next biennium to pay for more than $400 million in Medical Assistance spending that is currently paid from the state’s general fund. In FY 2016-17, that amount grows to $600 million in the Senate omnibus bill and $741 million in the House omnibus bill. Medical Assistance is the state’s Medicaid program, providing very low-cost insurance to our lowest income families.

    The decision to use Health Care Access Fund dollars to fund vital health care services for our lowest-income families creates the very reasonable expectation that these funds will continue to be there in the future.

    But that is not the case. In current law, the provider tax sunsets December 31, 2019, the result of an agreement reached during final budget negotiations in 2011. There has not been a public discussion about the implications of eliminating the provider tax.

    If the provider tax sunsets in 2019 with no alternative revenue source in place, we put health care for hundreds of thousands of vulnerable Minnesotans at risk.

    Minnesota has long been a leader in health care reform, making sure that Minnesota families have access to meaningful and affordable health care coverage. We fully anticipate that Minnesota will continue to maintain its commitment to MinnesotaCare and Medical Assistance long after 2019.

    By taking the responsible action of keeping the provider tax in place, Senator Lourey's health and human services omnibus bill acknowledges that we are using the Health Care Access Fund to ease budget pressures in the general fund, protecting more than $1 billion in resources Minnesota will need to provide health insurance in the future.

    Repealing the provider tax without an alternative revenue source in place is irresponsible, jeopardizing vital health care services and creating a gigantic fiscal hole in the not-so-distant future. However, maintaining the provider tax creates an opportunity to have a discussion about how we should fund health care in the future.

  • 10 Ways in 10 Days Ten: Invest in all-day kindergarten

    by Leah Gardner | Apr 15, 2013

    Invest in Minnesota's 10 Ways in 10 Days campaign wraps up today with a story about the need to invest in all-day kindergarten:

    Amy teaches kindergarten in Janesville, Minnesota. Although it hasn’t been easy, the school district has made it a priority to fund all-day kindergarten because of the benefits they’ve seen.

    “Having the extra time with kids makes a huge difference in providing the repetition needed to prepare kids for reading, writing and math,” Amy says.

    Amy also sees all-day kindergarten as an important part of preparing kids for their future success emotionally and socially.

    Photo Children in classroom raising hands“The additional time it gives us to build relationships and have structure in our days is huge," she says. "For example, one year I had a young girl in my class who was very quiet. Even being in school all day, it took almost half the year before she came out of her shell. But when she did it was so rewarding to see her smile, say ‘good morning,’ answer questions, and make friends. ”

    Amy also knows how important these breakthroughs are to prepare students for the first grade.

    “First grade is a big learning year, but when they are used to coming to school all day and have had the chance to get comfortable with a teacher and their classmates, their anxiety goes down, which is critical to helping them learn.”

    But not every child gets that chance. Amy worries about the gap created in Minnesota when not every child gets that same opportunity.

    “We try to teach our kids about fairness," she says, "But what are we saying if they are not all having an equal opportunity to succeed?”

    With fair and adequate revenues, we can make sure all Minnesota kindergarteners get the time and attention they need to succeed.

  • 10 Ways in 10 Days Nine: Invest in services for homeless youth

    by Leah Gardner | Apr 12, 2013

    Today is Way Nine of Invest in Minnesota's 10 Ways in 10 Days campaign.

    It profiles Erich Lutz, who sees the urgency of investing in our youth every day:

    Erich Lutz has worked with youth experiencing homelessness in Duluth for 13 years.

    The young people walking through his doors at Life House don’t have any other options.

    “Many come from unsafe homes and face circumstances beyond their control," he says. "They are forced to grow up without anyone to show them how.”

    Youth come to Life House’s drop-in center simply to survive — they need shelter, food and clean clothes. Along with those necessities, they also get encouragement, learn to trust and begin to heal.

    “They have experienced trauma," Erich says. "Adults in their lives have taken advantage of them or abandoned them. We teach them a lot of things: how to balance a checkbook, do laundry and make doctor’s appointments. But most importantly, we teach them that they’re worth something and that someone cares enough to be there even if they make a mistake.”

    Erich has seen youth achieve great things after receiving help. One former resident was kicked out of her home by her abusive stepfather and mentally ill mother. She crashed on couches and under bridges until she found Life House.

    She recalls, “I knew it was a safe place where I could get help without fearing judgment. I was ashamed of what I’d done to survive, but Life House helped me pick up the pieces. With their help, I enrolled in college, got a job and established permanent housing.”

    Today she is leading a healthy, happy life and has dedicated her career to helping youth with similar experiences.

    According to Wilder Research's 2012 Minnesota Homeless Study, at least 1,151 unaccompanied youth were homeless in Minnesota on a single night. But state investments in services like those provided by Life House will make sure youth experiencing homelessness get the help they need to lead healthy, happy lives and contribute to their communities.

    The 10 Ways in 10 Days campaign features people from around the state who have first-hand experience with critical state services – and know their value. The campaign highlights how fairly raised revenue and state investments benefit all Minnesotans and why it’s time for policymakers to invest in prosperity for all.

  • 10 Ways in 10 Days Eight: Invest in job training

    by Leah Gardner | Apr 11, 2013

    Today's 10 Ways in 10 Days story from Invest in Minnesota is about investing in job training:

    Imagine that you're the main provider for your wife who has health issues, a brother with physical and mental disabilities, and a daughter preparing to begin college. Then you lose your job.

    That's what happened to Kenneth in 2010.

    Photo Worker in hatHe didn't know where to turn at first. After giving it some thought, he decided to change careers.

    Kenneth contacted Lifetrack Resources in St. Paul to find out about careers in welding. He took classes and received certifications offered through Renewable Energy Network Empowering Workers (RENEW), which provides access to sustainable career pathways, while ensuring that area businesses have access to a well-trained workforce.

    After completing the program, Kenneth still encountered challenges finding a permanent job but worked closely with his Lifetrack Resources job counselor to pursue potential employment opportunities while working temporary jobs.

    Today, Kenneth has a stable, permanent job due to his patience and determination to support his family - and because of state investments in services like Lifetrack Resources and RENEW.

    He says that thanks to the job training assistance and support, he was able to start over and succeed. Today, he is proud to once again provide for his family.

    Kenneth’s story is a prime example of how state investments benefit Minnesota’s economy – and why policymakers should raise revenues fairly to fund these services.

    The 10 Ways in 10 Days campaign features people from around the state who have first-hand experience with critical state services – and know their value. The campaign highlights how fairly raised revenue and state investments benefit all Minnesotans and why it’s time for policymakers to invest in prosperity for all.
  • 10 Ways in 10 Days Seven: Invest in higher education

    by Leah Gardner | Apr 10, 2013

    Day Seven of Invest in Minnesota's 10 Ways in 10 Days campaign shows why Minnesota needs to invest in higher education and our future:

    Justin Lewandowski is 24 years old and lives in Saint Cloud.

    At age 18, Justin started at Saint Cloud State University with bright eyes cast toward the future.

    “I fully believed in what I had been taught my entire life," he said. "If you study hard and work your way through college, you will have endless potential.”

    But by age 20, he found himself working 50 hours a week just to afford school and pay the bills while attending classes full time — and on top of that he was worried about the future job market.

    Photo JustinThe financial strain and debt burden became too much, and Justin decided to put his education on hold. Today, he is still working full time and is also active in the community. He even started his own nonprofit working with local artists and musicians to grow a culture of community development through the arts.

    To further his career, Justin knows he needs to go back to school. But he is afraid that the cost of college will leave him once again struggling just to make ends meet. “I see my story as the story of so many young people today. We want to be active and contribute to our communities, but too many of us are overwhelmed just trying to succeed and make ends meet juggling both work and school.”

    State investments in financial aid for our public colleges and universities are critical so Justin and others can afford school and meet their full potential. In 2011, Minnesota ranked 3rd in the nation in the average graduate's debt, which is a drag on the economy and contributes to lagging completion rates. Making higher education affordable for the next generation of Minnesotans is an investment in our future workforce - and our future community leaders.

    The 10 Ways in 10 Days campaign features people from around the state who have first-hand experience with critical state services – and know their value. The campaign highlights how fairly raised revenue and state investments benefit all Minnesotans and why it’s time for policymakers to invest in prosperity for all.

  • 10 Ways in 10 Days Six: Invest in Early Childhood Education

    by Leah Gardner | Apr 09, 2013
    Day Six 

    of Invest in Minnesota's 10 Ways in 10 Days campaign features an Osseo teacher:

    Gretchen Dullinger is an early childhood education teacher in the Osseo school district. She’s taught in Osseo for 11 years.

    “We have programming for children ages birth to five including preschool for three- and four-year olds, Early Childhood Family Education classes, home visits, screening and more," Gretchen says. “Children in our programs develop social, cognitive and motors skills that prepare them for kindergarten."

    Gretchen Dullinger

    Gretchen adds, "There is a tremendous return on investment in these children as they move on to be successful in our elementary schools."

    Osseo’s program served 3,260 students in 2012. However, there is a waiting list of more than 150 children who are currently unable to attend because of lack of space and resources.

    A large number of the students in the program qualify for free and reduced lunch, and are able to attend early childhood programs for a reduced cost or for free.

    Gretchen noted that children in the school district, which includes some or all of Brooklyn Center, Brooklyn Park, Corcoran, Dayton, Maple Grove, Osseo, Plymouth and Rogers, come from a variety of backgrounds and family structures.

    “With additional state funding, we would be able to ensure that dozens if not hundreds of children have the skills and knowledge base to succeed in school and life," she says.

    With fair and adequate revenues we can make high-quality early childhood education options accessible for all kids.

    The 10 Ways in 10 Days campaign features people from around the state who have first-hand experience with critical state services – and know their value. The campaign highlights how fairly raised revenue and state investments benefit all Minnesotans and why it’s time for policymakers to invest in prosperity for all.

  • 10 Ways in 10 Days Five: Invest in Domestic Violence Advocacy

    by Leah Gardner | Apr 08, 2013

    Domestic violence is the painful subject of Day Five of Invest in Minnesota's 10 Ways in 10 Days campaign. Today's profile looks at three survivors of domestic violence and how their lives were turned around thanks to advocacy services in Minnesota.

    To the outside world, Beth had a wonderful 15-year marriage. Behind closed doors, life was different. Her husband insulted her, controlled her relationships, constantly emailed/called her at work. Four days after the birth of their child, he beat her and ruptured her spleen. He routinely beat, bruised and raped her.

    Marisa was 17 and living in Mexico. She was kidnapped and held captive. She escaped and returned home but her family rejected her. So, she married her kidnapper. He beat and strangled her daily. When they came to the United States she hoped the abuse would stop. It didn’t: the abuse got worse.

    Nicki fell in love at the age of 20 but her boyfriend isolated her, told her she was stupid and unwanted. He held Nicki captive by gunpoint for three days, brutally beat, strangled, whipped and raped her. Finally he slept and Nicki escaped, running five blocks to find help.

    What happened to Beth, Marisa and Nicki? Thanks to domestic violence advocacy services around Minnesota, they survived and lead stable, happy lives today.

    In 2012, Beth, Marisa, Nicki and 63,267 other victims were able to get help in Minnesota – transportation to a safe location, crisis line support, legal assistance, safe housing, protection orders - a network of interdependent services.

    These services exist because of public investments: domestic abuse agencies are an essential connector in a network that includes law enforcement, prosecutors, the education system, the medical system, and social services.

    Unfortunately, these services have suffered cuts in recent years, and the network doesn't reach every part of the state. It's time to raise the revenues needed to fund these critical services.

    The 10 Ways in 10 Days campaign features people from around the state who have first-hand experience with critical state services – and know their value. The campaign highlights how fairly raised revenue and state investments benefit all Minnesotans and why it’s time for policymakers to invest in prosperity for all.

  • 10 Ways in 10 Days Four: Invest in Transportation

    by Leah Gardner | Apr 05, 2013

    Day Four of Invest in Minnesota's 10 Ways in 10 Days focuses on the importance of investments in transportation. It features a St. Paul resident who is a frequent public transit user: 

    Marc Wayman’s job requires him to be available at different hours of the day. He recently moved from Vadnais Heights to St. Paul to be closer to better transit.

    When he was living in the northeast metro, he said, “I couldn’t get anywhere without a car.” When his car broke down, he got another, but it broke down too.

    Marc tried to depend on the bus to get to work, but it was a three-mile walk from his house to the bus stop, and service is limited to six buses a day — three in the morning and three in the afternoon. “It was a cut-off situation: unless I could make those times, I couldn't get to work,” Marc said.

    Marc is grateful he can now connect to transit options that allow for more flexibility and cost savings, but he recognizes that not everyone has that opportunity.

    Photo bus at bus stop"Now I’m spending significantly less on transportation monthly," he said. "I have many more bus options and it will be even better when light rail comes. I can get to my job, but for many people that’s still a challenge.”

    According to Transit for Livable Communities, only 25 percent of Minneapolis-St. Paul metro area residents and 30 percent of metro area jobs are within range of convenient transit — meaning service that runs at least every 30 minutes. “We need to get going,” Marc said.

    Suburban and express bus services are some of the fastest growing in terms of ridership. But, fair and adequate revenues are needed to add more buses and expand coverage to help more Minnesotans get to their jobs or wherever they need to go.

    The 10 Ways in 10 Days campaign features people from around the state like Marc who have first-hand experience with critical state services – and know their value. The campaign highlights how fairly raised revenue and state investments benefit all Minnesotans and why it’s time for policymakers to invest in prosperity for all.

  • 10 Ways in 10 Days Three: Invest in Seniors

    by Leah Gardner | Apr 04, 2013
    Day Three of Invest in Minnesota's 10 Ways in 10 Days campaign features a Rochester woman who relies on state investments to continue living in her home and stay out of a nursing home.

    91-year-old Merle Krenzke is able to stay in her own home, thanks to her son Kevin and state investments in services for seniors.

    Merle is legally blind and suffers from multiple health issues, including dementia. She is in a wheelchair and needs round-the-clock care for her basic needs, including dressing, bathing and meals.

    Photo Son and elderly motherKevin has been his mother's full-time caregiver for the last six years. He is one of thousands of Minnesotans who provide in-home care for family members under the state's Personal Care Attendant service.

    "I can give my mom so much more attention and care than she'd receive in a nursing home," Kevin says. "It's important to our family to keep her in her own home."

    Kevin is grateful for the state resources available to his mom. "Mom receives visits from nurses, a Lifeline alarm, and being a Personal Care Attendant allows me to stay home and take care of her," he says.

    Kevin believes additional state investments in services for people like his mom are critical.

    "These services help seniors stay in their homes and save the state millions of dollars compared to the cost of nursing homes," he says. "There's no better investment than keeping families together and in their homes."

    The 10 Ways in 10 Days campaign features people from around the state like Merle and Kevin who have first-hand experience with critical state services – and know their value. The campaign highlights how fairly raised revenue and state investments benefit all Minnesotans and why it’s time for policymakers to invest in prosperity for all.