End of legislative session raises more questions than it answers

The legislative session ended as scheduled late last night, but the final outcome is still not exactly clear. At least two of the three major bills everyone thought the Legislature needed to address this year seem headed for a likely veto. The fate of the tax bill and supplemental budget bill appear very much in doubt as there was little actual negotiation between the Legislature and Gov. Dayton in the final hours of the session and both bills are filled with several provisions the Governor likely finds objectionable. The bonding bill seems the most likely to be signed, but even that is not without controversy.

Once presented with the bills, the Governor has 14 days to determine if he is going to sign them, issue a veto, or leave them unacted upon which would be a “pocket” veto. See below for more details and stay tuned for further developments as Gov. Dayton decides the fate of legislative measures.

Consensus on bonding bill emerges at 11th hour
The bonding bill is always one of the last bills to be finalized during the legislative session, and this year was no different. The all-too-familiar script played out this week when the House successfully passed its version of the bonding bill off the floor on May 14, but the Senate version failed to pass off the floor two days later. This set up a waiting game of when a bonding bill would “emerge” and the guessing as to what would be in it.

True enough, a conference committee was called midday Sunday (just hours before the Legislature’s deadline) and a bill materialized. The bill passed the conference committee with little trouble, but it was not immediately brought to the floor as pressure built. The halls of the Capitol were rampant with rumors that the Senate would not have the votes to pass the bill and last-minute arm twisting, negotiating and maneuvering reached a fever pitch.

The final bill ultimately passed in House by a vote of 113 to 17 and in the Senate by a vote of 42 to 25, with both bodies reaching the supermajority required to pass a bonding bill.

The final bill included funding for CGMC priorities including $5 million for the Greater Minnesota Business Development Public Infrastructure (BDPI) Grant Program, more than $120 million for clean water infrastructure (see more below), and hundreds of millions of dollars in authorization for transportation projects.

While there is a strong expectation that Gov. Dayton will sign the bill, it is his prerogative to line-item veto projects. There is also a chance that he could veto the whole bill. If he does, it would be largely over a disagreement over some of the mechanisms used to fund projects out of monies associated with the Environmental Trust Fund and the state’s Legislative-Citizen Commission on Minnesota Resources (again, see more below).

If your city has a project in the bonding bill, we strongly encourage you to reach out to the Governor’s office and urge him to sign the bill.

Legislature uses new funding mechanism to get money for clean water programsIncreased funding for the Public Facilities Authority’s (PFA) clean water programs is one of the CGMC’s top funding priorities for 2018. The bonding bill passed by the Legislature last night contained approximately $123 million for the PFA to provide grants for wastewater and drinking water projects. However, the bill created a new funding mechanism for Point Source Implementation Grants (PSIG) that could lead to a line-item veto of those funds. 

The bill includes general obligation bond funding of $14 million for state matching funds for federal Environmental Protection Agency grants and $25 million for drinking water grants from the Water Infrastructure Fund (WIF). In addition, it includes $25 million for grants to specific political subdivisions. 

Where it gets little murky is that the Legislature also created a new class of appropriation bonds that will be funded by the Environmental and Natural Resources Trust Fund (ENRTF), which are lottery funds typically used to fund grants recommended by the Legislative-Citizens Commission on Minnesota Resources (LCCMR). These new appropriation bonds will add $6 million to the state matching funds for the EPA capitalization grants, $14.6 million to WIF for wastewater grants, and $38 million to PSIG.

A number of groups are objecting to the creation of the appropriation bonds, claiming that the funding mechanism defeats the intent behind the constitutional amendment creating the ENTRF. There is a danger that Gov. Dayton could veto this portion of the bill because of the funding mechanism. Please keep your eye out for an “Action Alert” from the CGMC asking members to call on the Governor to support the bonding bill, including the new funding for PFA programs.

If you have any questions regarding this portion of the bonding bill, please contact Elizabeth Wefel at eawefel@flaherty-hood.com.

Transportation funding makes its way into bonding, supplemental budget bills
Corridors of Commerce – Disappointment set in for many Greater Minnesota residents on May 1 when the Minnesota Department of Transportation (MnDOT) announced that $400 million in Corridors of Commerce funding it was authorized to allocate would go to projects inside the metro area or immediately adjacent to it. Advocates for many important Greater Minnesota transportation projects had been waiting for years to make the type of progress that this funding presented, and were dismayed when the dollars flowed elsewhere.

In response, the CGMC and other Greater Minnesota transportation advocacy groups called on the Legislature and Governor to make it right by allocating additional funds to Corridors of Commerce and directing all of those funds to Greater Minnesota projects. This set in motion a chain of events that resulted in $400 million in Corridors of Commerce funding being approved in the final bonding bill that passed both the House and Senate just minutes before the Legislature adjourned. These dollars are accompanied by language that is designed to direct a significant share of them to projects like Highway 14, Highway 23, and potentially others if funding allows.

All that these projects need now is the Governor’s signature on the bonding bill. If you have a project you care about, please contact the Governor’s office and encourage him to sign the bonding bill.

Local roads and bridges – The Local Road Improvement Program, which provides grants to local governments for road projects and is typically funded through the bonding bill, received around $78 million in total funding. Approximately $28.6 million of those funds are earmarked for specific projects, leaving about $50 million to be awarded as grants. These grants are awarded through an application and selection process that will likely take place later this year. Stay tuned to the CGMC in Brief for updates.

City street funding Legislators continue to express sympathy for small cities which receive no funding for their city streets through the existing constitutional formulas. This year’s House transportation bill would have included permanent funding for the Small Cities Assistance Program, but that funding was reduced to a one-time appropriation of $8.5 million for FY2019 only in the final supplemental budget bill. It is still unknown whether Gov. Dayton will sign the supplemental budget bill, which totals nearly 1,000 pages and touches on numerous issues.

For MSA cities—those with a population greater than 5,000 residents—efforts to increase city street funding largely fell on deaf ears. While the House advanced efforts to put more funding into the Highway User Tax Distribution Fund, which would have trickled down to MSA cities through the formula, no other permanent increase came out of this session.

Constitutional amendment for transportation fails
Throughout this legislative session, talk of a possible constitutional amendment to re-dedicate existing general fund revenues to transportation simmered in the background and nearly boiled over in the final weeks as the House took up and passed the measure. Ultimately, the measure failed to gain enough support in the Senate and was never brought to the floor for a vote. Thank you to all of our members who contacted your legislators and urged them to oppose this amendment.

The CGMC voiced concerns along the way because of the significant detrimental impacts the proposal would have had on our state’s general fund. Once fully phased in, the measure would have re-directed around $279 million a year in existing general fund revenues.

The CGMC supports long-term sustainable funding for transportation, but has long opposed efforts like this one that would jeopardize the integrity of the state’s budget in the process.

Legislature passes tax bill, but Governor threatens veto
The Legislature passed a tax bill on the final day of the session which would align Minnesota’s state tax system with the recently reformed federal tax reform. The bill cuts some business taxes while decreasing the individual income tax rates for the two lowest income tax brackets.

Gov. Dayton asserted that the bill did not do enough for middle-class Minnesotans, and sought $138 million in emergency school funding. The GOP bill provided new money (by forcing the state Department of Natural Resources to repay the use of school land), while making existing education funding more flexible. The Governor opposed the GOP plan.

The Governor has up to two weeks to sign the bill. If he chooses not to sign it, the Legislature can still pass a federal tax conformity bill before the 2019 tax filing season. DFL legislative leaders support vetoing the bill.