The second year of a biennium often is reserved for a significant bonding bill, policy work, and a smaller supplemental budget. The dynamics of last session and current budget situation mean this year may look a bit different:
The Legislature approved a $988 million bill in 2017, which may impact the size of a bill legislators will agree to this year. Governor Dayton released a $1.54 billion proposal in January with a promise of additional local project recommendations forthcoming. Senate Republicans balked at the size of the proposal and estimated their bill would be more in the $800 million range. A total of $3.3 billion in requests have been submitted to MMB.
The November forecast revealed a $188 million budget deficit for the current fiscal year, but $178 million of that deficit was attributed to Congress’ failure to reauthorize funding for the Children’s Health Insurance Program. Since November, Congress passed a six-year extension in CHIP funding, which should mitigate some of this expected cost to the state.
Additionally, Congress passed a federal tax reform package in December. That generally has no fiscal impact on Minnesota unless the Legislature takes action to conform, except for one change regarding corporations’ foreign-earned income. Regardless of legislative action, about $153 million in additional revenue is expected to be reported in the February forecast due to this federal change.
Monthly revenue updates from MMB since November have been positive. Spending fluctuations are not considered until the economic forecast, but it is possible all of these circumstances could affect the February forecast.
The Legislature passed a $650 million tax cut in 2017, which would typically mean this session would be relatively quiet in the tax area. However, Congress’ federal tax reform package passed in December leaves the Legislature with serious choices that will be debated this session. If we conform to federal law, significant state-based tax reform will be needed to avoid an $815 million tax increase on Minnesotans. If the state does not conform, 2019 state tax filing will be extremely complicated for most taxpayers.
The Legislature still does not have a budget of its own. The House and Senate are currently operating on funds originally appropriated to the Legislative Coordinating Commission. Governor Dayton has told the media he is willing to sign a legislative funding bill early in the session, but how that is presented or what other stipulations could be included remain to be seen.
Senate balance and the lieutenant governor
As Senate President, Michelle Fischbach was constitutionally appointed to the position of Lieutenant Governor in January after former-Lt. Gov. Tina Smith was appointed to fill the remainder of former U.S. Senator Al Franken’s term. A constituent of former-Sen. Fischbach sued on the argument that she cannot serve in both the legislative and executive branches of government. An initial court hearing is scheduled for Feb. 6, 2018.
Task Force on Sexual Harassment
The Senate DFL supports the creation of a Task Force on Sexual Harassment as part of our continued work to ensure a safe and respectful workplace for everyone at the Capitol, including legislators, staff, and lobbyists. Members of the Minnesota House of Representatives and a former House candidate called on the Legislature in November to create this task force in response to recent allegations of sexual misconduct. Unfortunately, Republicans have stated their intent to handle sexual misconduct allegations internally and the creation of a task force appears unlikely.