Capitol Update #13April 1, 2011

Budget Bills Finalized

Senate Republicans moved almost all their budget bills through the committee process and thefull Senate during the past two weeks. Only two bills – the tax bill and transportation budget – remain to be voted upon by the full Senate before negotiations can begin with the House. As Isaid in last week’s update, I will provide an overview and some commentary on those billscovered in the Finance Committee this week.

State Government

The state government budget shouldered a large portion of the Republicans’ proposed budgetreductions, a 53.3% reduction from projected department funding.The bill eliminates current health insurance plans for state employees and, instead, offers high-deductible Health Savings Accounts combined with catastrophic coverage. The budget alsoimposes a two-year salary freeze on state employees and calls for a 15% state workforcereduction. Senate Democrats offered amendments to exempt some of the most critical staff in thestate, namely nurses, Mn/DOT transportation generalists (including snow-plow drivers, bridgeinspectors and employees being asked to respond to current flood emergencies), corrections staff with high levels of offender contact, and military and veterans’ affairs staff. The amendments toexempt military and veterans’ affairs staff prevailed, as did the exemption for corrections officers.Amendments were also offered to remove the high-deductible HSA and retain the current stateemployee health plan.The State Government Budget Bill also includes $217 million in estimated cost-savings for improving the way the state purchases goods and tracks tax compliance. I am strongly supportiveof these efforts to modernize our state’s purchasing and tax compliance efforts. However, after working on redesign and cost savings efforts for many years, I know well that while the savingspotential is great, such savings can only be estimated, and I don’t find it appropriate to book suchsavings ahead of the fact in our state budget. State agencies testified that the $217 million figureis unrealistic, because Minnesota is already in the process of implementing many of the initiativesproposed to generate these savings, and the timeline for realization of these dollars does not allowfor the savings to be booked now in a responsible manner. In addition, the same bill cuts the stateworkforce by 15%, eliminating much of the support staff that would be needed to actuallyincrease tax audits and compliance efforts.We must move forward and apply pressure to our state agencies to continue to implement theseinnovative approaches. It is the only responsible thing to do as state lawmakers. We shouldremain wary, though, of budgeting for savings that have not been fully fleshed out, as this has thepotential to add greater challenges to our structural deficit and indirectly under fund the very cost-savings efforts that have the potential for tremendous long-term savings.

I had the privilege of hosting the Almquist family in my office this morning. Seth, whose art piece hangs on my officewall, is a student at Kimberly Lane Elementary School in Wayzata.

Employment and Economic Development

The Jobs and Economic Growth Omnibus Budget bill was heard on the Senate floor this week.Much of the conversation was focused on a transfer of $45 million out of the IRRRB DougJohnson Fund. This fund is paid for by a taconite production tax paid by northern Minnesotamining operations in lieu of property taxes.This $45 million represents 70% of the total $65 million budget reduction for the Department of Employment and Economic Development (DEED), Department of Labor and Industry (DOLI),Housing Finance Agency and Explore Minnesota, which are all under the purview of the Jobs andEconomic Growth Committee. These local property tax dollars are intended for economicdevelopment purposes and to ensure the economic viability of the Iron Range after depletion of minerals in the area, and this would be the first time that local property tax dollars were used tobalance our state budget.

Health and Human Services

The proposed Health and Human Services budget omnibus bill was the subject of much debate onthe Senate floor this week. A few of the bill’s provisions include

Repealing the early expansion of Medicaid signed by Gov. Dayton earlier this year,

Moving thousands of low-income Minnesotans off Medicaid and MinnesotaCare and on tohigh-deductible private insurance plans.

Eliminating optional services for Medical Assistance and MinnesotaCare recipients, includingchiropractic, podiatry, therapies, eyeglasses, and prosthetics.

Cutting funding for child care and adoption grants, prescription drug assistance, mental healthcrisis grants, developmental disability family supports, children’s mental health screening,family planning and more.

Eliminating state loan forgiveness programs for medical training.