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Legislative News and Views - Rep. Jerry Hertaus (R)

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Legislative report from Rep. Jerry Hertaus

Tuesday, March 26, 2019

Dear Friends,

Like the snow receding and the landscape now appearing, so is the legislative landscape emerging from the proclaimed “One Minnesota” rhetoric from the campaign of last fall.

The governor’s proposed budget and the House finance “targets” (spending amounts are assigned to different committees) have been announced by the House Democrat majority. While this first year of the 91st Legislature is primarily dedicated to establishing a budget for the next biennium, there are a few notable items worthy of your attention.

The Governor’s Commissioner Appointments

The governor has made his appointments to the various departments and agencies. While these departments and agencies touch nearly every aspect of our lives, the appointments of the 15 most visible departments and agencies ranging from Education to Health and Humans Services, from Agriculture to Natural Resources, and from Transportation to Corrections are from the Twin Cities metropolitan area. Only four of the major departments; IRRRB, HHS, VA, and Agriculture are from Greater Minnesota.

The Governor’s Budget Proposal

Governor Walz has unveiled his budget and he proposes a general fund budget of $49.352 billion. While the proposal increases spending in nearly every area of state government, notable and controversial subjects of increased spending include raising a tax on motor fuels by 20 cents/gallon and not ending the sun-setting 2% provider tax (often referred to as the “sick tax”) on medical services provided to consumers by health care facilities and health care providers.

Increasing taxes on consumers for transportation costs does not end with the increased costs to fuel your car or automobile. It will increase the price of goods and services in every aspect of our state economy in which fuel is used to distribute and deliver the ordinary goods and services that we consume on a daily basis.

The proposed 20 cents/gallon fuel tax is widely misunderstood and misrepresented to consumers by its proponents.

First, 7.5 cents of the new tax would be used to supplant general fund spending and not on transportation. House republicans passed and Gov. Dayton signed into law last biennium, the dedication of sales taxes levied on auto parts and auto leases to transportation funding instead of the general fund. This change provides a relatively stable and reliable source of funding currently amounting to more than $425 million. Gov. Walz proposes ending this revenue source and replacing it with the motor fuel tax. By doing so, 7.5 cents of the 20-cent tax simply replaces revenue already provided in previous legislation.

Second, because increased motor fuel taxes are deemed to be very regressive to low-income earners, the Walz administration proposes increasing the working family credit to off-set their increased costs of going to work. This is estimated to cost an additional 2.5 cents/gallon. In addition, the fuel retailing industry points out that increasing the cost of fuel and the preponderance of credit card use at the pump increases their transaction fees to bank card processors.

Therefore, it will be necessary for retailers to further increase the retail price/gallon of motor fuels to offset the increased transaction costs. This is an example of the ripple effect on the end cost to consumers. Sadly, half or more of the proposed .20 cents/gallon tax will not be new money for transportation, but would instead provide for increased general fund spending on budget items.

Increased Bill Introductions

So far this session, more than 2,700 bill introductions have occurred and at this rate will certainly exceed 3,000 before the end of session. This rate of introductions would be on pace to be more than 6,000 for the biennium. This volume would exceed the past biennium by approximately 30 percent.

Needless to say, this volume of legislation makes it challenging for bills to get committee hearings and make their way through the legislative process. Local legislative priorities can get quickly lost in the legislative process and/or compete for urgency or priority. First committee deadlines have passed and second committee deadlines are this week. Most committees will be marking up their division reports and a final House budget proposal will be moving forward likely before the Easter/Passover Break (April 12-22). Official business resumes on April 23 and that will leave four weeks remaining before the scheduled end of session.

H.F. 2031

Of special interest to our district should be House File 2031, which I have chief authored. H.F. 2031 addresses a very huge and growing disparity among the 835 cities comprising Minnesota communities.

I became aware of this inequity more than 16 years ago serving upon local government. The bill addresses fixing an antiquated formula concerning the distribution of local government aid (LGA) from the general fund to communities.

This aid assistance originating from the “Minnesota Miracle” of the early 70’s was as relevant 50 years ago as it is today. However, in the beginning, the aid was distributed equally and fairly to ALL cities and was largely distributed upon dollars per/capita basis. Over the years, the formula kept getting changed to benefit a narrower group of cities and at the expense of other cities.

My proposal would end once and for all cities getting bumped off of the formula and guarantee every communities participation in the benefits of the program in some manner. Today, 95 cities are “off formula” meaning that they receive zero LGA dollars. Next year it is estimated to be more than 100 cities.

These same cities comprise 20 percent of the state’s population. These communities are contributing to the general fund through their economic activity (sales taxes), contributions to the general fund accruing from the state general levy on business property paid only by business property owners, and also contributions to the fiscal disparities program, yet no revenue sharing of the LGA program. LGA is considered to assist local governments in meeting unmet needs. Approximately 15 cities in Senate District 33 would benefit from this formula change. All cities in our district are Class IV cities, meaning that they are under 10,000 residents each in size with certain unmet needs as well.

Enjoy the remainder of the week and welcome the warmer weather which has finally arrived.

Best Regards,

Jerry

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