Greetings from the Capitol!
Budget news has come to the forefront at the Capitol recently, with Gov. Mark Dayton issuing a revised plan and the House majority providing an overview of its proposal. Here is the latest on those topics and others from St. Paul.
HOUSE DEMOCRAT MAJORITY ISSUES BUDGET PLAN
House Democrats this week issued the outline of their budget. The proposed spending total is at least $39.3 billion. It includes at least $2.4 billion in new taxes, with a “temporary” income tax added for top earners. This is on top of the income tax hike the governor is seeking and, at around 11 percent, would give Minnesota one of the nation’s top rates. Members of the House majority say they expect their budget bills to pass through the House floor by the end of April.
What is particularly surprising about the Democrats’ budget proposal is a $150 million reduction in the Health and Human Services Budget. This is the area that funds and supports the state’s disability, elderly and underserved populations. While I do not agree with the tax increases and increased spending to bring us to a $39.3 billion budget, it is disappointing that, with such a large increase in spending, no increase is prioritized for people covered under Health and Human Services.
Our economy is heading in the right direction. New reports show our state gained 14,500 jobs in February. That brings us back to the pre-recessionary peak five years ago and knocks our unemployment rate down to 5.5 percent. Also, revenue continues to exceed previous projections and is rising by about 3.5 percent. There is some concern new tax increases could stunt the growth we are experiencing in these areas.
GOVERNOR REVISES BUDGET
Gov. Mark Dayton last week issued a revised budget proposal. In it, he officially conceded his plans to expand sales taxes to include services like haircuts and oil changes, and also eliminated the business-to-business sales tax he had proposed.
The governor’s revised budget still includes a spending increase of $2.7 billion over 2012-13. He proposes raising taxes by $1.8 billion. Tax increases the governor retained in his updated plan include: $1.1 billion on the top 2 percent of earners, $30 million on snowbirds, $317 million on cigarettes, and a metro transit sales tax plan (which may increase from .25 to .5).
The governor still would not pay back delayed school funding and withdraws his initial budget’s proposal of repaying it in 2016-17. This should be a priority instead of being placed on the back burner.
It is a step in the right direction for Dayton to cut some tax increases out of his revised budget, but we are not in the clear, as mentioned above. Democrat majorities in the Legislature are moving a budget forward with significant tax increases in order to raise spending levels.
HEALTH INSURANCE EXCHANGE PASSES
Last week, the House passed a health insurance exchange bill with no bi-partisan support. After many, many hours of work in committees and work to try to make this proposal better for Minnesotans, Democrats moved a proposal forward that does nothing to lower costs, increase protection around private health data, or increase choice around health care options.
Rather, the exchange will implement an unelected board of seven people who will impose a gross premiums tax on health care of up to 3.5 percent, manage an annual budget of $60 million to operate the exchange with no legislative oversight and will have the power to arbitrarily decide which health insurance products can be sold. Despite our attempts to increase oversight, data protection and cost reductions for Minnesotans, we were unsuccessful. This bill moved forward to the governor’s desk with no bipartisan support and was signed into law Wednesday.
SNACK TAX
Proposals already were in place to increase taxes on gas, beer, Internet purchases and cigarettes. The cost of snacks like potato chips and pretzels also could rise if a bill we heard this week in the House Taxes Committee is enacted.
The author of the bill indicated the “snack tax” legislation would simplify the taxing process for retailers. It was later discovered that if this bill becomes law, it could actually cost Minnesota roughly $33 billion over the next two years because of its complex implementation. The bill was set aside for future consideration as part of a more comprehensive tax proposal.
As always, I appreciate all the input I have received on these and other issues. Please continue sending me your thoughts on the issues. The Legislature goes on Easter/Passover break next week and will return to the Capitol April 2.
Have a great weekend!
Tara