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Budget Bill Veto Letters

Budget Bill Veto Letters

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Gov. Mark Dayton vetoed all of the budget bills passed by the Republican-held Legislature on Tuesday, May 24, 2011, the day after the end of the session.
Gov. Mark Dayton vetoed all of the budget bills passed by the Republican-held Legislature on Tuesday, May 24, 2011, the day after the end of the session.

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Published by: Minnesota Public Radio on May 24, 2011
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STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol. 75 Rev. Dr. Martin Luther King Jr. Boulevard. Saint Paul, MN 55155

May 24, 2011

The Honorable Kurt Zellers Speaker of the House

State Office Building, Room 463

100 Rev. Dr. Martin Luther King, Jr. Blvd. St. Paul, Minnesota 55155

Dear Mr. Speaker:

With this letter, I am vetoing and returning Chapter 42, House File 934, the Education Finance Bill. I do so with the hope that we can come together to find a compromise: a balanced solution without the damaging cuts and harmful policy items contained in this legislation.

Legislators from both parties have worked well with Education Commissioner Cassellius and with me, to find areas of common within this bill. I thank them for their thoughtful and persistent work. Ensuring an excellent education for all Minnesota students should be among our highest budget priorities. Having worked together on the alternative pathways to licensure bill, I know we can find compromise. I am encouraged by the potential to find common ground in this bill in early reading proficiency and recognition of high-achieving schools. I am hopeful that we can build on those areas of agreement.

Unfortunately, this Education Finance Bill would have very harmful effects on students, on teachers, and on schools. I will not sign an education funding bill that pits student-against-student or district-against-district. I have consistently stated my intention to increase education funding, which is why my original budget included $36 million in new funding for schools. Subsequently, in agreement with the Legislature's desire to put additional money on the per pupil formula, I proposed to increase the formula allowance by $50 per pupil in each fiscal year of the biennium, for a total of $164 million in new education investments. By contrast, this bill cuts school funding by nearly $44 million below current base-funding level. Within those reductions, it unfairly and disproportionately shifts funding among school districts.

The cuts to special education would create significant funding gaps that would force school districts to shift funds from general education programs, increase class sizes, or raise property taxes, just to maintain their current levels of special education services.

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn.us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Kurt Zellers May 24,2011

Page 2

Additionally, the elimination of integration revenue and freezing of compensatory revenue wrongfully harms poor children and children of color, which I will not accept.

None of Commissioner Cassellius and my education proposals are contained in this bill; most notably, funding for optional all-day Kindergarten and initiatives in early childhood education. The bill also contains numerous policies, including school grading, collective bargaining limitations, teacher evaluation, and Common Core prohibitions, which are controversial, are punitive to teachers, and have little research to support their efficacy in improving student learning and closing achievement gaps. I am disappointed that the bill creates a private school voucher program, an experiment that has not worked in other states. Until our public schools are funded at adequate and sustainable levels, a diversion of public dollars to private schools is unwise.

The funding cuts to the Department of Education were reduced in this bill, which I certainly appreciate. However, when combined with the 15% staff reductions in the State Government bill, the agency would be faced with the loss of at least 30 fulltime employees. Cuts of this nature, on top of eight years of cumulative budget reductions, would further hinder the Department's already limited capacity to provide technical assistance, support, and oversight to schools throughout Minnesota.

Budgets are about priorities, and priorities are about choices. We can choose to work together, compromise, and create a budget that fairly spreads the burden we must all shoulder if we are to weather these tough times and position Minnesota for future success. I know that working together we can create a reform-minded blueprint for our state's K-12 education, of which we can all be proud.

Each of us started our budget proposals by making a choice. I chose a balanced approach to our budget; one that included both significant cuts, but asked the top two percent of Minnesotans to pay more to ensure our quality of life and the services millions of Minnesotans depend on. My approach chooses not to balance the budget on the backs of the other ninety-eight percent of Minnesotans.

In the spirit of compromise, more than one week ago, I cut my proposal in half, in the hopes that an offer to meet in the middle would spur action towards the balanced solution the people of Minnesota have asked for.

Instead, you chose to present me with an all-cuts approach, one that has serious consequences for Minnesotans, and that I do not believe is in line with our shared commitment to build a better Minnesota.

The Honorable Kurt Zellers May 24,2011

Page 3

From the beginning of this legislative session, it has been clear that compromise would be necessary to balance our state's budget. In November, Minnesotans voted for a divided government, and I believe, in their wisdom, they did so because they want part of what each of us has to offer, and they want us to work together to solve the state's budget crisis and build a better Minnesota.

Compromise is never easy, because each person must give up something that is important. Compromise requires us to agree to items that we don't agree with. That is the only way we will reconcile our differences on the state's budget. I am returning this bill to you with the hope that you will choose to work with me, to find a fair, responsible, and balanced solution.

Mark Dayton Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader

Senator Gen Olson

Representative Paul Thissen, Minority Leader Representative Pat Garafolo

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol. 75 Rev. Dr. Martin Luther King Jr. Boulevard. Saint Paul, MN 55155

May 24,2011

The Honorable Kurt Zellers Speaker of the House

State Office Building, Room 463

100 Rev. Dr. Martin Luther King, Jr. Blvd. St. Paul, Minnesota 55155

Dear Mr. Speaker:

With this letter, I am vetoing and returning Chapter 46, House File HF 1010, the Environment, Energy and Natural Resources Finance Bill. Reductions at the levels proposed in this bill to the MPCA, DNR, BWSR and the Department of Commerce would have harmful effects on Minnesotans throughout our state.

In regard to the MPCA's budget, the reduction of 67% to the general fund appropriation hits a few key areas especially hard. Some of the cuts will directly undo the gains made in the timely environmental review and permitting of projects my executive order and House File 1 accomplished earlier this year. Specifically, the elimination of general fund dollars and staff for MPCA' s environmental assistance and multimedia programs is estimated to result in 30 to 45 day delays in wastewater permits for industries and municipalities.

MPCA's clean water activities receive a disproportionate reduction, including support for ambient surface water monitoring, SSTS technical assistance, and Clean Water Partnership grants. Minnesotans wanted more resources to go to these activities when they approved the dedicated funding constitutional amendment, not fewer.

The Agency would also find it much harder to respond to the increasing requests. for assistance from citizens, businesses, and its local partners. It is MPCA staff regulated parties prefer to turn to, not high-priced consultants when seeking help to comply with state and federal regulations. Equally troubling is the elimination of funding for the environmental health tracking and biomonitoring program, which is a successful, crossagency collaboration we need to be expanding, not abolishing.

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn.us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Kurt Zellers May 24,2011

Page 2

My fiscal concerns related to MPCA are not limited to funding reductions. I also oppose the shifts and caps proposed in the bill. Moving penalties from the environmental fund to the general fund (coupled with the significant general fund cuts) effectively disconnects the penalty monies from their intended purpose - having the polluter pay for environmental protection. The reduction in dollars transferred from the environmental fund to the remediation fund will extend the time it takes to close the remaining closed landfills and require the program to operate at higher staffing levels longer into the future - costing the taxpayers more in the long run.

In regard to the Department of Natural Resources sections of the bill, I have concerns about using environment and natural resources trust fund dollars to fund accelerated efforts to prevent future spread of aquatic invasive species; the state needs a long-term and dedicated funding source to build lasting programs. I urge you to include my Aquatic Invasive Species funding proposal to fund these important programs.

General fund reductions to DNR water programs would negatively impact the Department's ability to support critical water management activities, including dam safety, shoreland management, climatology, ground water monitoring, and flood programs and damage reduction efforts. Managing the state's water supply is critical to supporting drinking water for two-thirds of the state's population and important industries throughout the state.

The general fund reductions for DNR forest management programs would reduce the Department's ability to offer approximately 170,000 cords of wood for sale annually (out of an annual target of 800,000 cords). This has the effect of reducing revenue by more than $3 million annually, and would have devastating impacts to forest economies in northern Minnesota. These reductions will have huge impacts on Minnesota's forest product industries and threaten thousands of jobs in northern Minnesota that depend on the state's forest economy. In addition, the language related to the State Forest Nursery program is problematic and needs to come out of the bill.

Reductions to DNR's Divisions of Lands and Minerals will result in reduced technical assistance and mineland reclamation-permitting activities, resulting in reduced field inspections and monitoring, delays in permitting decisions, and lengthened permit review timeframes.

The bill does not include my recommendation for restructuring of game and fish license fees and related funding initiatives for a conservation officer academy, wildlife,

The Honorable Kurt Zellers May 24, 2011

Page 3

and fisheries programs. This initiative has the strong support of the hunting and angling community, and I urge your consideration of this proposal.

The proposed reductions to the Board of Water and Soil Resources (BWSR) come on top of multiple reductions since FY02 that would total 46%. By necessity and ingenuity, BWSR and our local government conservation partners have already implemented many cost-savings and efficiency measures during that time period. There is no capacity to absorb $7M in cuts (26%) in one biennium without compromising the ability of the agency and the local governments to meet the agency's mission and the clean water and conservation goals of the state.

The impacts to the core agency operations and local government programs seriously jeopardize the ability of the state to secure and implement projects with federal conservation funding, which brings in over $100 million to Minnesota per year. USDA economic analysis (January 2010) shows that every dollar invested results in $1.28 in total return within Minnesota and that one fulltime job is created or maintained for every $107,250 of project funding.

This bill will significantly reduce technical capacity statewide, resulting in delayed project design and implementation, including many agricultural practices such as feedlot water quality projects and soil conservation practices. The Federal Farm bill brings in the majority of clean water and best management practice funds available in Minnesota. However, there is very little money available for the technical assistance. It is the responsibility of the state to fund technicians and engineers who get the projects done.

With respect to the Department of Commerce sections of the bill, there will be serious impacts on the Department's ability to fulfill its mission to protect consumers and to ensure equitable commercial and financial transactions and reliable utility services. The Department investigates and resolves consumer complaints, regulates insurance and banking and business activity in more than 20 other industries, advocates for the public's interest before the Public Utilities Commission, and administers various state and federal programs.

The effects of the bill are substantial. The bill contains a significant cut in the Administrative Services Division, which provides department core functions, including the Financial Management, Human Resources and Information Technology. The 31 % cut, while offset by increases to unclaimed property staff, hurts these core functions.

The Honorable Kurt Zellers May 24,2011

Page 4

My budget contained an appropriation for three positions for the Division of Energy Resources, which were not included in the bill. These three positions would help expedite rate case reviews and other regulatory filings that the Department must process. There was no net impact on the General Fund as the cost for these positions would be assessed to the regulated utilities. These positions are supported by industry.

HF1010 contains $29,707,000 in special revenue fund transfers not contained in my budget. These funds are paid by businesses and individuals for specific and limited purposes. Two of the fund transfers are particularly troubling:

• The bill transfers $950,000 from the Insurance Fraud Prevention Account, which funds positions in the Department's Insurance Fraud Unit. The transfer would create a severe cash flow gap starting July 1,2013, jeopardizing antifraud efforts and severely restricting the unit's ability to perform its duties.

• The bill transfers $1,500,000 from the Auto Theft Prevention Account. Funds from this account are used for grants to law enforcement and local units of government for auto theft prevention programs. The transfer will significantly curtail grant-making while the fund is restored to financial health.

Two controversial policy provisions were added to the bill during the conference committee process. Policy language on restrictions to new coal-fired power was added by the conference committee and is highly controversial. This issue is moving through the legislative process on its own and has no place in an omnibus budget bill. Additionally, the bill transfers the Auto Theft Prevention Account from the Department of Commerce to the Department of Public Safety. The account is properly located at Commerce, and I object to its transfer.

Finally, the interplay between the State Government Finance bill and this bill only compound these already significant impacts to Minnesota's quality of life, economic well-being (especially in rural Minnesota), and the sustainability of Minnesota's valued natural resources. The 15% reduction in staff required by 2015 in the State Government Finance bill will result in valuable workers being laid-off, in addition to those released because of this bill's reductions. Not to mention the additional cutbacks that each of them will be required to take because of the Legislature's $95 million unallocated reduction in the State Government Finance bill.

The Honorable Kurt Zellers May 24,2011

Page 5

I trust we can work together in the coming weeks to find a mutually agreeable resolution to these key government services.

Mark Dayton Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader

Senator Bill Ingebrigtsen

Representative Paul Thissen, Minority Leader Representative Denny McNamara

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol + 75 Rev. Dr. Martin Luther King Jr. Boulevard + Saint Paul, MN 55155

May 24,2011

The Honorable Michelle L. Fischbach President of the Senate

226 State Capitol

St. Paul, Minnesota 55155

Dear Madam President:

With this letter, I am vetoing and returning Chapter 41, Senate File 760, a bill establishing the Health and Human Services budget for fiscal years 2012 and 2013.

This Health and Human Services bill, passed by the House and Senate, would cause devastating harm to many thousands of Minnesotans, which I will strongly oppose. I cannot support a $1.8 billion reduction in health and human services spending. A reduction of this size jeopardizes the progress Minnesota has made in providing health coverage for the uninsured, supporting our seniors in their communities, offering treatment and community support for people with mental illness, and establishing a public health infrastructure that protects all Minnesotans. I understand the need for belttightening and I embrace the need for reform. But, I do not accept that Minnesota must go backward in the support we provide to our most vulnerable citizens. We are better than that.

I find it unconscionable that this bill eliminates health care coverage for over 140,000 people. If all of those losing coverage comprised a new community, it would be the third-largest city in Minnesota, far ahead of the populations of Rochester and Duluth. This is accomplished in part by the repeal of the expansion of Medical Assistance to adults without children implemented under my Executive Order. I have made it very clear, but I will repeat it yet again: I will veto any legislation that repeals the expansion of Medical Assistance. This expansion has provided access to quality, comprehensive health care for 100,000 of Minnesota's poorest and most vulnerable citizens. This expansion leverages $1.5 billion in federal funds over three years. I fail to understand why, in a time of fiscal and human need, we would not take advantage of this

opportuni ty.

I am concerned the bill reinstitutes the Coordinated Care Delivery Systems (CCDS) and creates a new voucher program to provide health care for a substantial number of low-income people. The CCDS is a significant step back from the opportunity

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn.us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Michelle L. Fischbach May 24,2011

Page 2

provided by the expansion of Medical Assistance. It is also dramatically underfunded for the 125,000 people who would have no access to other care. The voucher approach, with its significant cost-sharing, garners much of its budget savings because about one-third of the people cannot afford it and will simply go without coverage.

Ensuring our citizens have health care coverage is also critical to supporting a strong health care infrastructure. This bill puts that infrastructure at risk not only by the dramatic reductions in coverage, but also by making significant reductions to the funding that supports medical education. Minnesota faces major health care workforce shortages as both the population and our current workforce of physicians, pharmacists, and others age at the same time. These shortages are most acute in Minnesota's rural and underserved areas, where vacancies are hardest to fill. These reductions will have a major impact throughout the state affecting the education, training, and recruitment of nearly 3,500 health care jobs critical to the health and well-being of our citizens and the future of our state. The bill also marks a retreat from our efforts to make Minnesota a healthier state by addressing life style drivers of health care like obesity and tobacco use and closing the gaps in health outcomes in our communities of color.

We have made so much progress in health care over the last two decades in Minnesota. I will not allow that progress to be turned back in one year.

I also have grave concerns that this bill restricts Minnesota's ability to implement the Affordable Care Act (ACA). This sets Minnesota back in terms of expanding health care coverage opportunities for families and puts us at risk of non-compliance with Medicaid law, unnecessarily risking billions of dollars in federal revenue. The ACA is a path forward for lower health care costs, and Minnesota must be on that path.

This bill also moves Minnesota in the wrong direction in the care of seniors and people with disabilities. Minnesota has pursued a decades-long, bipartisan strategy that supports people in their homes and in the community so they do not need to live in institutions. Yet 98% of the reductions to long-term care are to home and communitybased services with only 2% to institutions. The bill would force 1,500 people into nursing homes. This is bad public policy; not only is it much less costly in the long run to support people in their homes and the community, but this is where seniors and people with disabilities want to live. We should not move backward in an area where we have had so much success.

The Honorable Michelle L. Fischbach May 24,2011

Page 3

The bill would also undo much of the progress we have made to support people experiencing mental illness, specifically undermining the bipartisan reforms passed in 2007. Reducing community grants that support people with mental illness and repealing the expansion of Medical Assistance, undermine the successes we have accomplished in keeping people out of institutions. We must not return to a system where too many of our mentally ill citizens end up in jail, emergency rooms, and psychiatric hospitals.

I am also dismayed this bill takes aim at many of our very poorest and most vulnerable citizens. The bill would eliminate the General Assistance program that provides $203 a month to 20,000 Minnesotans who cannot support themselves due to illness, age, or disability. Without this necessary support, many of these Minnesotans would be at risk of becoming homeless, and would severely strain the basic safety net our already over-extended counties are striving to maintain.

Moreover, the bill makes many short-sighted reductions to services that support vulnerable families and children. For example, the 50% reduction in the home visiting program undermines a proven program that stabilizes low-income families and supports healthy child development. Likewise, cutting family planning grants in half severely limits access to primary and reproductive care for women. Both of these programs have been proven to improve outcomes and lower costs. The bill also reduces funds counties and tribes use to protect children who have been abused or neglected. In each instance, these reductions will result in more deep-end service costs down the road.

We must agree that budget bills cannot be vehicles for divisive policy provisions.

SF 760 includes several problematic policy provisions. Of particular concern in this bill are:

• Prohibition on stem cell research: This provision will halt important, ongoing, and future research into promising treatments for chronic diseases, traumatic injuries, and genetic disorders. This prohibition will deeply affect the state's emerging biotechnology industry and reduce jobs in this important sector of our economy.

• "Freedom of Choice Act": This provision attempts to nullify the Affordable Care Act requirement that all individuals get health care coverage by 2014. Minnesota does not need to wade into this debate; the courts will determine if this provision of federal law is constitutional. This is in addition to the policy language previously mentioned that would prohibit all state activities in compliance with this enacted federal law.

The Honorable Michelle L. Fischbach May 24,2011

Page 4

• Nursing home rate equalization: This will lead to a two-tier system of nursing care for our seniors and, over time, will increase long term care costs for thousands of Minnesotans.

• Residency requirements: The bill imposes a residency requirement for the Minnesota Family Investment Program. Such requirements are unconstitutional; including it in the bill, will only lead to litigation and the associated costs.

• Nurse licensure compact: The Nursing Compact will introduce multi-state licensure and compromise Minnesota's high quality nursing standards by issuing an open invitation to any nurse practicing anywhere in the country, while ignoring our academic and clinical requirements.

The bill also fails to make necessary investments recommended in my budget.

These investments must be part of the health and human services budget to address federal compliance concerns and program growth:

• Funding must be provided for the growth in the Minnesota Sex Offender program to ensure Minnesota meets the treatment needs of this population and provides for the safety of the public.

• Full funding for growth in the Adoption Assistance program is necessary to support families who adopt abused and neglected children with special needs and to ensure federal compliance and continuation of federal funding.

• Compliance with federal Medicaid law requires we delay implementation of eligibility changes passed in 2009. Failure to pay for this delay could put billions of dollars in federal Medicaid funds at risk.

• Funding must be provided to continue the activities outlined in the bi-partisan 2008 health care reform bill. In passing the 2008 law, policy makers recognized the health care system has unsustainable health care cost growth and uneven quality. The law provided temporary funding for MDH to collect and report critical information about costs, quality, and overall value of health care services for consumers and purchasers. Continued funding is crucial in controlling the rate of health care cost growth and promoting quality improvement. The law also established the statewide Health Improvement Program (SHIP) that addresses the leading drivers of health care costs, tobacco use and obesity.

• We must meet the challenge of streamlining health care eligibility processes by leveraging federal technology funding.

I am also concerned about the size of the reductions to the administrative budgets of the Departments of Health and Human Services. Over the last three years the DHS and MDH operational budget has been reduced over 15%. For DHS, this bill will reduce

The Honorable Michelle L. Fischbach May 24,2011

Page 5

another $13.9 million a year, resulting in a loss of 123 full time positions. For MDH, the bill will reduce operational budgets per year by another $3 million, of which $2.5 million is general fund. This equates to a reduction of 20 FTEs in MDH.

The interactions with the State Government bill will only exacerbate this impact and extend reductions to the patient care functions of the Department. An impact of this magnitude, risks public safety, patient care, and program integrity.

We must continue to move Minnesota's health and human services systems forward. I do believe we can work together to accomplish that. I understand reductions must be made in the health and human services budget in order to balance the state budget. I note that SF 760 includes many of the reductions to health and human services, which I included in my budget. While those reductions are painful, I am encouraged we have found common ground in some areas.

I am also encouraged we have a common interest in reforming how we pay managed care organizations. We must ensure we are paying only what is necessary to provide people with access to quality health care. We also have a common interest in reducing fraud and improving the integrity of our health care system. I also support initiatives that lead to more efficiency and coordination among state agencies in our licensing, regulation, and data collection efforts.

I share your interest in seeking flexibility from the federal government so we can improve Minnesota's health care system in a way that meets Minnesota's unique needs. Some aspects of the CHOICE waiver in SF 760 align with the recent request for information published by the Department of Human Services to encourage development of new health care delivery system models. The Request for Proposals being issued later this spring by DHS to develop new models of care delivery can serve as a foundation for achieving the overarching goals of the waiver. This includes allowing providers and others to mutually benefit by working together to improve health outcomes, improve quality of care, and provide better coordination of care and patient experience, while also reducing the total cost of health care.

Budgets are about priorities, and priorities are about choices. We can choose to work together, compromise, and create a budget that fairly spreads the burden we must all shoulder if we are to weather these tough times and position Minnesota for future success.

The Honorable Michelle L. Fischbach May 24,2011

Page 6

Compromise is never easy, because each person must give up something that is important. Compromise requires us to agree to items that we don't agree with. That is the only way we will reconcile our differences on the state's budget. With that in mind, I am returning this bill to you with the hope that we can come together to find a balanced solution: one without these deep, damaging cuts, and one which achieves the balance most Minnesotans have said they want in a budget solution.

~ M~kD~'f':-

Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader

Senator David W. Hann

Representative Paul Thissen, Minority Leader Representative Jim Abeler

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol. 75 Rev. Dr. Martin Luther King Jr. Boulevard. Saint Paul, MN 55155

May 24,2011

The Honorable Kurt Zellers Speaker of the House

State Office Building, Room 463

100 Rev. Dr. Martin Luther King, Jr. Blvd. St. Paul, Minnesota 55155

Dear Mr. Speaker:

With this letter, I am vetoing and returning Chapter 50, House File 1101, the Higher Education Finance Bill. The deep cuts for the University of Minnesota and Minnesota's State Colleges and Universities would cause hundreds of faculty layoffs, tuition increases, and fewer courses available to students. Minnesota would have a harder time providing employers with employees who have the skills and education they require. When the future of our state depends on strong institutions of higher education, H.F. 1101 includes, in real dollars, the deepest cuts to higher education in our state's history.

The cuts of 19% to the University of Minnesota and 14% to MnSCU are far too extreme. The total appropriations leave both the University of Minnesota and MnSCU with substantially lower levels of state funding at the same time they ate serving 50,000 more students. Your bill contains $240 million less than my recommendation and is unacceptable to me.

The combination of reduced funding and tuition caps included in the bill would unwisely limit the systems' abilities to manage the severe funding reductions. The proper entities to make final tuition decisions within our two state systems are the University of Minnesota's Board of Regents and MnSCU's Board of Trustees.

The funding for the Office of Higher Education is also too low. The reductions for administrative support would limit the agency's ability to provide critical services, such as student financial aid: work-study, grants, and loans. The combined effects of additional cuts proposed in the State Government bill could force on OHE a 42% reduction in staff funded through the General Fund.

Voice: (651) 201-3400 or (800) 657-3717 Website: http://~overnor.state.mn.us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Kurt Zellers May 24,2011

Page 2

The bill contains a policy provision that prohibits the use of state or federal funds to support human cloning or to pay for any expenses incidental to human cloning. The definition included in the bill is vague and could threaten further development of stem cell research. It is imperative for Minnesota's bio-medical future that both the University of Minnesota and the Mayo Clinic approve of any language affecting this vital area of research, which has the potential to bring thousands of jobs to Minnesota and save many thousands more lives.

The choices we made as leaders are a reflection of our values and priorities. Our colleges and universities, as well as our highly-skilled and educated workforce, are part of what make Minnesota great. I am returning this bill to you with the hope that we can come together and compromise, and demonstrate our commitment to our students and to higher education in Minnesota.

Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader Representative Paul Thissen, Minority Leader Representative Bud Nornes

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol. 75 Rev. Dr. Martin Luther King Jr. Boulevard. Saint Paul, MN 55155

May 24,2011

The Honorable Michelle L. Fischbach President of the Senate

226 State Capitol

St. Paul, Minnesota 55155

Dear Madam President:

With this letter, I am vetoing and returning Chapter 39, Senate File 887, the Jobs and Economic Development Finance Bill.

I appreciate that you have spared the Department of Labor and Industry from significant cuts. This Department's work to enforce labor standards, facilitate apprenticeship programs, and to enforce prevailing wage is so important in this economy.

Nevertheless, your cut in funding for the Department's Apprenticeship Program would reduce the department's ability to assess employers' needs and to develop appropriate recruitment and training strategies. And the cuts to the Labor Standards Division may mean the department will not be able to provide critical and timely services.

Regarding the MN Housing Finance Agency, I thank the Conference Committee for adopting my position on three housing programs that serve the most vulnerable populations - the Family Homeless Prevention and Assistance, Bridges, and Housing Trust Fund programs. They are very important programs, and I appreciate that we are all looking out for the very vulnerable people, who use these programs.

However, there are cuts to the home buyer counseling programs that will negatively impact the nearly 1,200 households that will not receive homebuyer counseling at a time when the mortgage financing system has become more complicated to navigate. In addition, fewer potential home buyers will have access to down payment assistance, less neighborhood stabilization activities will occur in response to the foreclosure crisis, and fewer rental housing properties in Greater Minnesota will be rehabilitated. Housing development and redevelopment programs that help create jobs are reduced in the bill. For every $1 million in state investment in affordable housing, 11.8 jobs are created in Minnesota.

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn.us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Michelle L. Fischbach May 24, 2011

Page 2

Your modest reduction to the Bureau of Mediation Services is also appreciated.

You likely know that the present reduction was preceded by a 28% base funding reduction from FY2003 to FY2011 and a 40% reduction in staff. The adoption of new technologies, different scheduling procedures, and other efficiencies has reduced the impact of these cuts. Nonetheless, their cumulative effect is a significant reduction in the ability of the Bureau to carry out its core mission of ensuring efficient, harmonious and positive relationships among all of Minnesota's public jurisdictions. Thank you for recognizing those challenges.

I was pleased to see a $2 million dollar increase in the match appropriation for one year, which will allow the Vocational Rehabilitation Program (VR) to fully leverage the federal funds. However, when the match appropriation reverts to $8.8 million in SFY 13, the VR program will be unable to leverage the full federal appropriation. Ideally, this program would be fully funded in both years. Doing so leverages federal funds $4 to $1.

The bill eliminates the Minnesota Trade Office, which is unacceptable to me. The Trade Office provides vitally important services to many Minnesota businesses, such as training and consulting on how to export their products. Minnesota-manufactured

exports jumped to $17.2 billion in 2010, an increase of$2.5 billion (or 17.3%) between 2009 and 2010. More than 8,100 businesses throughout Minnesota exported goods and services and Minnesota ranked 20th in export value among all states. Exports are responsible for 145,800 jobs in Minnesota, ranking 16th among all states. Another 81,000 export-related jobs are found in marketing and sales, transportation, and logisticskey sectors in delivering products to export markets. These exporters have an important impact on our economy and their international success is a source of new jobs for the state. I insist on continuing the funding for this important office.

Further concerns with the bill include no new funding for the Redevelopment Fund and Minnesota Investment Fund (MIF). These programs are important to help communities invest in economic growth and repurpose underutilized assets. The cuts would greatly reduce the ability of communities to offer potential for redevelopment. MIF is the state's key incentive-based tool used to compete for job expansions with other states. DEED currently has more than ten projects interested in Minnesota with nearly all of them requesting MIF financing. As our MIF balance remains sparse, it will constrict our ability to successfully compete with other states for high-quality expansions that are increasing in number as the economy recovers.

The Honorable Michelle L. Fischbach May 24,2011

Page 3

Chapter 39 contains deep reductions to important programs that help spur economic development and job growth. Some examples include:

• The Contamination Clean Up grants program, which takes a $802,000 cut in their General Fund dollars each year in FY 12-13. The cuts would greatly reduce the ability of communities to clean up the estimated 10,000 brownfield sites in Minnesota;

• The 6.1 % cut to Extended Employment Basic would mean fewer Extended Employment employees would receive support. As many as 600 persons would likely lose their jobs and the total persons being served in Extended Employment would be reduced from roughly 5,400 in the current year to 4,800. The subsequent loss in wages for the biennium would be up to $3.25 million;

• Cutting the Jobs Skills Partnership program, by 12% or $1,090,000 will limit resources for employers looking to retain their employees through training. The impact of this reduction would be approximately 2.7 fewer projects awarded per year, 1,185 fewer trainees per year receiving training, and 6.2 fewer businesses served per year;

• Minnesota Science and Technology Authority funding is currently split between two bills: taxes and economic development. Adequate funding for this program is essential. At a minimum, we need the $500,000 in the tax bill, plus we need to reinstate the $107,000 base in the economic development bill, which is eliminated for FY12. Current funding levels will not address funding gaps prioritized in the Strategic Plan to support entrepreneurial job growth for the state; and

• The bill takes penalty money, assessed on unemployment insurance fraud cases, currently going to unemployment insurance administration and puts it in the state general fund. The bill takes the current balance as well as, changes the law permanently. Taking this money in the future, will jeopardize the efficient handling of unemployment insurance benefits and taxes. DEED can handle a onetime transfer but a permanent transfer is not acceptable.

I do appreciate your attempts to reform what have become standing appropriations in the Economic Development Budget area by developing a competitive grant program. My concerns are with the serious cuts to the pool of funds available for the grant program. The Youth and Adult programs receive a 15% reduction and Business programs receive a 17% reduction. These cuts mean that either 15-17% fewer programs will be funded, or that every program will see a serious reduction in resources. These are strong programs that help to spur economic growth in Minnesota and these cuts are troubling.

The Honorable Michelle L. Fischbach May 24,2011

Page 4

The difficult consequences of the funding levels in the Economic Development finance bill are compounded by provisions in the State Government Finance bill. The State Government Finance bill mandates a 15% reduction in staff employed in the executive branch, regardless of funding source. Most of the state agencies funded in the Economic Development bill have relatively few, if any, staff that are paid for by the General Fund. Consequently, the General Fund savings from this provision are minimal for most of these agencies.

The reduction of up to 15% FTEs would cut up to 266 positions at DEED, even though only 110 of DEED's agency employees are funded with General Funds. For the Department of Labor and Industry (DLI), the 15% reduction equals 64 FTEs. The measure would only save $129,000 for the general fund since most DLI funds come from fee income. The 15% reduction in staff would result in a loss of 32 staff at Minnesota Housing. The concomitant reduction in costs would not benefit the general fund since no general fund monies are used to pay for the Agency's administrative expenses. The Bureau of Mediation Services will also be required to eliminate three positions as a result of this mandate. A reduction of this magnitude would render the agency incapable of meeting its core statutory obligations.

Compromise is never easy, because each person must give up something that is important. Compromise requires us to agree to items that we don't agree with. That is the only way we will reconcile our differences on the state's budget. I am returning this bill to you with the hope that you will choose to work with me, to find a fair, responsible, and balanced solution.

Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader

Senator Geoff Michel

Representative Paul Thissen, Minority Leader Representative Bob Gunther

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol. 75 Rev. Dr. Martin Luther King Jr. Boulevard. Saint Paul, MN 55155

May 24,2011

The Honorable Michelle L. Fischbach President of the Senate

226 State Capitol

St. Paul, Minnesota 55155

Dear Madam President:

With this letter, I am vetoing and returning Chapter 37, Senate File 958, the Public Safety Appropriations Bill. I do so with the hope that we can come together to find a compromise; a balanced solution without the damaging cuts currently contained in this bill.

Legislators from both parties have worked well with my Commissioners and with me, to find some areas of agreement. I thank them for their thoughtful and persistent work. I appreciate the funding level provided for the courts in this Public Safety bill. You mostly hold the courts harmless, as I proposed in my budget. We all understand how crucial adequate court funding is to justice and public safety in Minnesota. Additionally, the removal of several problematic policy items is appreciated.

However, the Public Safety bill, as passed by the House and Senate, has consequences for Minnesota that I am unable to support. If enacted, this legislation would cut programs that hold felons accountable, would negatively affect crime victims, and would compromise our ability to protect the rights and freedoms of all Minnesotans.

Your suggestions to study medical discharge and early release are very unlikely to produce the savings needed to make up for the extreme cuts in funding in this bill.

The reduction in funding to the drug treatment program at the Faribault facility is especially troubling. Failing to fund the 90 chemical dependency beds at Minnesota Correctional Facility-Faribault may gamer short-term savings of $1.35 million in this biennium, but it will make Minnesota less safe and cost taxpayers more money in the long-run. Recent studies show that for every dollar invested in chemical dependency treatment, taxpayers save six to twelve dollars. It is much more cost effective to tum an offender into a taxpayer. Needless to say, I hope we can find compromise on this important budget item.

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn. us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Michelle L. Fischbach May 24,2011

Page 2

I am also concerned about the $872,000 in cuts to the DOC Operational Support Division. The DOC currently has a very low cost for administrative support - only 5% of its total budget. In the past eight years, the workload of the Operational Support Division has increased, while the DOC has decreased the number of staff to do the work. Additional reductions to this division could impact the agency's ability to provide the logistical support necessary to operate our prisons. It will also jeopardize the DOC's ability to continue updating important databases that track sex offenders and other felons.

Your cut to community corrections does not recognize Minnesota's corrections delivery system. The DOC is able to achieve savings, while maintaining public safety, because it only incarcerates offenders who pose a direct threat to the community. Community-based correctional services such as probation, in-home monitoring, and sentencing to service programs ensure that offenders are held accountable for their actions. The proposal to cut $1.712 million more than my proposal from community corrections programs would jeopardize their effectiveness. Offenders living in our communities may not receive the supervision needed to keep other citizens safe, and counties will be forced to spend more to make up for the loss of these resources.

The reduction to Civil Legal Services of 17%, or $4 million over the biennium, is another serious concern. Civil Legal Services makes our courts more efficient by keeping over 3,000 non-meritorious cases out of the courts and helping thousands of Minnesotans to settle before trial. More importantly, they help ensure fair and equal access to Minnesota courts for all people regardless of race, ethnicity, income, or language abilities. This cut would be harmful to victims of domestic violence, families experiencing foreclosure, and seniors and disabled Minnesotans attempting to secure access to healthcare and disability benefits. I would also add my concern over a 6% reduction to the Guardian ad Litem Board. These individuals work to protect vulnerable children in our court systems. It is wrong to take funds away from such an urgently needed program.

I totally oppose the cuts this legislation would make to the Minnesota Department of Human Rights. This Department has a budget of less than $6.6 million, composing .019% of the total budget proposed by conferees. However, this funding pays for 100% of the investigations and public outreach efforts that ensure Minnesota's citizens are not discriminated against in the workplace, in housing, and in their places of worship.

The proposed 65% cut to the Department of Human Rights is by far the worst to any agency, and it would eviscerate our ability to investigate human rights violations. An

The Honorable Michelle L. Fischbach May 24,2011

Page 3

additional policy rider prohibiting the Department from reaching out to businesses with technical assistance and education to avoid formal investigations is seriously misguided.

For citizens this bill would lengthen the time needed to complete investigations and make determination on charges. Education and outreach on diversity and discrimination would lessen, possibly causing unfair discriminatory practices. My budget provided the Department of Human Rights with barely sufficient funding to perform their mission; your proposal takes that away.

Discrimination remains a serious problem in Minnesota. Your extreme cut in funding, along with your policy language, would weaken the Human Rights Act and lessen the effectiveness of the Department of Human Rights. That I will not allow.

Taking $5.2 million from the Department of Public Safety's 911 Fund, is contrary to federal law and puts Minnesota's bond rating in jeopardy. However, I am even more concerned by the setback this would create for our efforts to ensure our first responders have the equipment they need to communicate across jurisdictions and departments during a crisis.

The nearly $12 million cut to the Office of Justice Programs would have a significant impact on crime victim services, prevention and reparations programs, and violent crime enforcement teams. It would reduce law enforcement's ability to respond to violent crimes throughout our state. The cuts to the Department of Public Safety are on top of a possible budget reduction stemming from the State Government Finance bill that could amount to $5.5 million and the elimination of 320 employees. That outcome is very alarming.

The effects of the State Government Omnibus bill are significant in these agencies. Staff in these agencies are our crime fighters, our prison correctional officers, investigators, and public safety employees who keep us safe at night. The effect of the 15% staff reduction to this area will have a significant impact on public safety in our state. It is possible that 320 people from the Department of Public Safety and over 600 people from the Department of Corrections would be let go if this bill were to become law.

Each of us started our budget proposals by making a choice. I chose a balanced approach to our budget; one that included both significant cuts, but asked the top two percent of Minnesotans to pay more to ensure our quality of life and the services millions

The Honorable Michelle L. Fischbach May 24,2011

Page 4

of Minnesotans depend on. My approach chooses not to balance the budget on the backs of the other ninety-eight percent of Minnesotans.

In the spirit of compromise, more than one week ago, I cut my proposal in half, in the hopes that an offer to meet in the middle would spur action toward the balanced solution the people of Minnesota have asked for.

Instead, you chose to present me with an all-cuts approach, one that has serious consequences for Minnesotans, and that I do not believe is in line with our shared commitment to build a better Minnesota.

From the beginning of this legislative session, it has been clear that compromise would be necessary to balance our state's budget. In November, Minnesotans voted for a divided government, and I believe, in their wisdom, they did so because they want part of what each of us has to offer, and they want us to work together to solve the state's budget crisis and build a better Minnesota.

Compromise is never easy, because each person must give up something that is important. Compromise requires us to agree to items that we don't agree with. That is the only way we will reconcile our differences on the state's budget. I am returning this and the other budget bills to you with the hope that you will choose to work with me, to find a fair, responsible, and balanced solution.

l1~tO~

Mark Dayton Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader

Senator Warren Limmer

Representative Paul Thissen, Minority Leader Representative Steve Smith

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol + 75 Rev. Dr. Martin Luther King Jr. Boulevard + Saint Paul, MN 55155

May 24,2011

The Honorable Michelle L. Fischbach President of the Senate

226 State Capitol

St Paul, Minnesota 55155

Dear Madam President:

With this letter, I am vetoing and returning Chapter 40, Senate File 1047, the State Government Appropriations Bill. I do so with the hope that we can come together to find a mutually agreeable compromise in the weeks ahead.

Already, Legislators from both parties have worked well with my Commissioners and with me to find areas of common ground within this bill. I thank them for their thoughtful and dedicated efforts. We share a strong commitment to make government work better for all Minnesotans. We also share strong commitments to a more data driven, results-oriented state government and to continuous government improvements.

To that end, my administration has already moved forward with a Master RFP to use data analytics to improve tax compliance, state building efficiency, medical fraud detection, fleet management and strategic sourcing. While we disagree on whether to include in the budget the estimated savings from this work, we share high expectations that data analytics will improve government performance and save money for Minnesota taxpayers.

I am open to further discussions on the Pay for Performance pilot program in your bill, despite my serious concerns about using debt to pay for ongoing operations. I also support your State Agency Value Initiative (SAVI), which would allow agencies to retain half of the savings from efficiencies identified by agency employees.

Thank you also for joining me in protecting Military and Veterans Affairs from funding cuts. This bill corrects the failure of the bills which passed the Senate and the House to protect those two vitally important agencies from funding and staffing reductions.

While we have important areas of agreement, we must acknowledge that our approaches are very far apart in other ways. My primary concern with this bill is the fundamental mismatch between funding recommendations and expectations for services. Total funding is roughly one-

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn.us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Michelle L. Fischbach May 24,2011

Page 2

third lower than these activities currently need. Such extreme reductions to agency operations would jeopardize core government functions and substantially impair the state workforce.

This bill would reduce the state workforce by 15% regardless of funding source or need, which would result in an arbitrary decrease in employees who provide critical government services. What successful business executives would order an across-the-board 15% employee reduction in all operations, regardless of their size, efficiency, profitability, and need?

This drastic cut would greatly damage our ability to deliver services like plowing roads and maintaining parks. I cannot agree to a blanket 15% workforce reduction, especially when it occurs on top of other agency specific budget cuts.

This bill also sets statutory goals for the upcoming labor negotiations which in my view encroach on the collective bargaining process. You would require that labor negotiations mandate a salary freeze and save $90 million from health insurance. This requirement undermines the collective bargaining process and the responsibility of the executive branch to negotiate labor agreements in good faith.

The bill makes substantial reductions in operating funding even as it establishes multiple, new requirements for state agencies. For example, Minnesota Management and Budget would sustain a 10% operating budget reduction while at the same time have new responsibilities for creating a zero-based budgeting process, administering an employee gain-sharing program and conducting a job classification study.

I will demand that state agencies continuously improve their operations, but at the same time we must be honest with people that the cuts your propose to state agencies will reduce services and work against the reforms we have already begun to implement. For example, the bipartisan permitting reform work will flounder if we do not have the staff in the PCA and DNR to expedite permitting. In the Department of Revenue, we will be unable to improve collections if we also have across the board cuts to auditors.

We have had many discussions about the revenue estimates included in the State Government finance bill. The bill fails to account for the estimated revenue loss of $37 million due to the operational funding reductions to the Department of Revenue but recognizes $169 million from enhanced data analytics capabilities and the federal reciprocal agreement for nontax debts, even though Revenue analysts cannot substantiate these figures. Minnesota is a national leader in audit selection, tax compliance activities and collections and we should respect their understanding of what we can achieve.

The Honorable Michelle L. Fischbach May 24, 2011

Page 3

There are additional concerns that have been voiced in person and through letter. These areas of disagreement do not diminish my interest in working collaboratively with you to improve how state government works and ensure we are getting the very best value for every tax dollar spent. My Commissioners and I have led the executive branch for only four months, and while we deeply respect the hard work and professionalism of state employees, we feel no need to defend the status quo. We are dedicated to working with you to find ways to save money, reduce expenses, and improve the services provided by state government. I know that, working together, we can create a reform-minded blueprint for our state of which we can all be proud.

/Vl;"kO~

Mark Dayton Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader Representative Paul Thissen, Minority Leader Representative Bud Nornes

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol + 75 Rev. Dr. Martin Luther King Jr. Boulevard + Saint Paul, MN 55155

May 24, 2011

The Honorable Kurt Zellers Speaker of the House

State Office Building, Room 463

100 Rev. Dr. Martin Luther King, Jr. Blvd. St. Paul, Minnesota 55155

Dear Mr. Speaker:

With this letter, I am vetoing and returning Chapter 38, House File 42, the Omnibus Tax Bill.

Your tax proposal would require most Minnesota property owners and renters to pay higher property taxes. The property tax is the most regressive and unfair of all state and local taxes. Minnesota businesses pay four times more in property taxes than they do in either corporate income taxes or individual income taxes on business income. Your budget would increase property taxes on Minnesota businesses by $89 million in 2012.

By contrast, my proposal makes our tax system more progressive, and it raises taxes only on the top 2% of Minnesota income earners. 98% of all Minnesotans would pay no higher state income or property taxes under my proposal.

On a positive note, I appreciate that the Legislature included conformity to most federal tax law changes in the bill and included provisions necessary to maintain Minnesota's conformity to the streamlined sales and use tax agreement. We agree on the importance of expanding and improving the Research & Development Tax Credit and the Angel Investor's Tax Credit. I would consider supporting other measures, such as the single apportionment formula for business, if we can agree on an overall revenue target for this bill.

Chapter 38 makes unnecessary and geographically imbalanced cuts to local government aids, which the Minnesota Department of Revenue estimates would reduce funding for critical local services by over $400 million and increase property taxes by over $400 million next year and by over $1.2 billion during the next three years. Those property tax increases would fall disproportionately on low and middle income Minnesotans.

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn.us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Kurt Zellers May 24,2011

Page 2

Over 20% of your budget solution calls for shifting the state's budget problem to local units of government and property taxpayers. More specifically, Chapter 38:

• reduces local government aid (city LGA) by nearly 30% in FY2012-13, and eliminates aid entirely for selected communities;

• lowers county program aid by almost 19% in FY2012-13 and beyond;

• uses $60 million of local resources, maintained by the state in the Douglas J.

Johnson Fund to balance the state budget;

• eliminates the market value homestead credit that targets property tax relief primarily to owners of low-valued homes; and

• cuts property tax refund payments to 308,000 renters statewide by an average of 45%, including 85,000 senior and disabled renters, many of whom are on fixed Incomes. Property tax refund payments would be entirely eliminated for 72,000 renters.

After making those cuts to local governments-which would result in significant property tax increases-your bill then directs over $200 million from those cuts to expanded tax expenditures for corporations and others. Further, while advocating for reductions in local government spending, your bill extends authority for local options sales tax to nine cities and grants special tax increment financing authority to others. The Department of Revenue estimates that your local options sales tax provisions will increase sales taxes on Minnesotans and visitors by about $17 million per year.

Chapter 38 includes other problematic provisions, such as various changes to mineral tax laws and the language specifying how the State of Minnesota is to reestablish an income tax reciprocity agreement with Wisconsin. Additionally, the operating budget and workforce reductions in Chapter 40 will diminish the Department of Revenue's ability to effectively collect projected voluntary and compliance revenue.

Your budget solution, which results in the bottom 90% of households paying nearly 20% more of each dollar of income in state and local taxes than do the top 10%, is unacceptable to me. Under your proposal, Minnesota's state and local tax system would become more regressive. My proposal, on the other hand, asks the state's wealthiest 2% to contribute to solving our budget challenge and, even after this increase, the wealthiest 2% would still pay a smaller share of their incomes in state and local taxes than other Minnesotans.

The Honorable Kurt Zellers May 24,2011

Page 3

In sum, Chapter 38 would destabilize the state-local finance system, make the tax system more regressive and more complex, and exacerbate our ongoing budget challenges by beginning new tax expenditures in future years and eliminating state budget reserves.

J1A4a,'h-

Mark Dayton Governor

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader

Senator Julianne Ortman

Representative Paul Thissen, Minority Leader Representative Greg Davis

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

STATE OF MINNESOTA Office of Governor Mark Dayton

130 State Capitol + 75 Rev. Dr. Martin Luther King Jr. Boulevard + Saint Paul, MN 55155

May 24,2011

The Honorable Kurt Zellers Speaker of the House

State Office Building, Room 463

100 Rev. Dr. Martin Luther King, Jr. Blvd. St. Paul, Minnesota 55155

Dear Mr. Speaker:

With this letter, I am vetoing and returning Chapter 49, House File 1140, the Transportation Finance Bill.

There are areas on which we agree. I greatly appreciate your inclusion of a new trunk highway economic development account. This tool builds on the success of previous initiatives for stimulating economic growth, and complements efforts to use transportation infrastructure for building a vital economy in Minnesota. I understand that the Legislature intends to also fund the Better Roads initiative, which I recently proposed. It is a very important program to improve pavements on the trunk highway system around the state. I look forward to working with you further on this program.

Your funding of many other transportation-related programs at the levels I recommended is also greatly appreciated. I remain optimistic that, with your leadership, the final budget will move closer to a more balanced perspective that invests in multimodal transportation programs so that we can continue to provide the quality transportation system Minnesotans expect.

However, in its current form, this bill would seriously underfund transit, resulting in drastic fare increases and cuts to services. It also fails to invest in our transportation future, including passenger rail and modernization of Driver and Vehicle Services.

I believe that providing comprehensive and reliable transit services, both in the Metro Area and in Greater Minnesota, are essential components of the transportation system in Minnesota. Transit services improve labor market efficiency, freeway performance, and air quality in the metro area, while sustaining economic viability in Greater Minnesota. The draconian cuts to transit in this bill are unacceptable to me.

Voice: (651) 201-3400 or (800) 657-3717 Website: http://governor.state.mn. us

Fax: (651) 797-1850

MN Relay (800) 627-3529 An Equal Opportunity Employer

Printed on recycled paper containing 15% post consumer material and state government printed

The Honorable Kurt Zellers May 24,2011

Page 2

My budget spared transit funding from cuts due to the critical nature of public transportation and its connection to jobs and the economy. This bill moves in a very different direction. This bill cuts $109 million from the state's general fund commitment to Metro area transit for the biennium-an 85 percent reduction.

Cuts of this magnitude will fundamentally change the availability of transit services in the region. This cut would mean:

• An across-the-board fare increase of 50 cents (29% increase from base fare of $1.75); resulting in the loss of6.8 million rides, 8% of annual ridership; and

• Service reduction of241 buses, 30% of the service on the street, resulting in the loss of 20 million rides, 23% of annual ridership.

Combined, the fare increase and service reduction would result in 27 million fewer rides a year, 31 % of annual ridership, as well as the layoff of 610 Metro Transit employees, 22% of Metro Transit's workforce.

This bill includes options allowing the Metropolitan Council to reduce the bill's impact on transit. Unfortunately, the choices fall short of addressing the cuts and would shift the Metropolitan Council property taxes for essential and economically sensitive non-transit activities to transit.

The bill also cuts the general fund appropriation for Greater Minnesota transit by $3.729 million per year. Transit plays an important role in many of the communities outside metro areas, providing a transportation option to people who are unable to drive. Transit in Greater Minnesota keeps people in their communities, in their homes, greatly improves their quality of life, reduces the cost of long-term care, and helps sustain viable communities across Minnesota.

This decrease in spending would result in a reduction of about 101,000 hours of service per year, approximately a 10% cut. That would result in the loss of about 50 jobs. It would lead to a loss of mobility for thousands of Minnesotans, making it much more difficult for them to get to work, medical services, school, and shopping. People who use local public transit are disproportionately elderly, disabled, or low income.

Additionally, the lack of an appropriation for passenger rail activities results in the elimination of the MniDOT Passenger Rail Office. If there were no state general funds for the Passenger Rail Office, federal funds for rail activities would be relinquished. MniDOT would obtain no federal funds for intercity passenger rail activities, and private sector jobs for the next steps on passenger rail would occur in other

The Honorable Kurt Zellers May 24,2011

Page 3

states. As a condition of receiving federal funding, MnlDOT's Passenger Rail Office is required to administer and manage existing agreements, and ensure federal grant requirements are met. MniDOT is already under contract for several passenger rail activities. Additional activities that would end include discussions on a partnership with Wisconsin and Amtrak to establish a second, daily train service to Chicago, and grant applications for the next round of federal TIGER funds anticipated for this summer/fall.

Experience in other regions of the US, and other countries around the world, has demonstrated that people value passenger rail service. Investments in passenger rail development are an opportunity to leverage existing private investments with public investment to improve efficiency and capacity of both freight and passenger rail service in Minnesota. I think it is imperative that we find compromise to keep the rail office open and functioning.

I am disappointed at the failure to extend the Driver and Vehicle Services technology fee to 2015. This funding is essential to complete the Minnesota License and Registration System (MNLARS), the state's new information system for vehicle and driver's license-related records and transactions. MNLARS will be relied upon by the courts, law enforcement, automobile dealers, and various other stakeholders-as well as the public.

On top of the impacts listed above, the State Government bill, also includes items that impact transportation agencies negatively. A 15% reduction in personnel for MniDOT, in addition to the 400 employees taking early retirement in fiscal year 2011, will result in a potentially serious loss of institutional knowledge. It will have an unacceptable impact on service levels in key functions like engineering, highway maintenance, and delivery of construction programs of around $1 billion per year.

The fleet management provision is likely to increase costs for MniDOT.

MniDOT has a highly developed fleet management system, which is administered by certified fleet managers. It is very likely that purchasing fleet management from a central pool will only add additional overhead without additional efficiency.

Finally, the information technology consolidation will cause unintended inefficiencies in agency operations, and will add cost to MniDOT IT functions. MniDOT has over 100 specialized information technology applications, such as traffic management systems and bridge design software. A previous consolidation of email service resulted in higher costs and reduced service levels for MnlDOT. The consolidation of IT services, at the same time the agency is reducing staff, managing

The Honorable Kurt Zellers May 24, 2011

Page 4

construction volumes of historically high proportions, and implementing a new, statewide accounting system will inevitably reduce efficiency and affect service delivery for MnlDOT.

I trust we can work together to find a compromise solution.

cc: Senator Michelle L. Fischbach, President of the Senate Senator Amy T. Koch, Majority Leader

Senator Thomas M. Bakk, Minority Leader

Senator Joe Gimse

Representative Paul Thissen, Minority Leader Representative Michael Beard

The Honorable Mark Ritchie, Secretary of State Mr. Cal R. Ludeman, Secretary of the Senate

Mr. Albin A. Mathiowetz, Chief Clerk of the House of Representatives

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