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

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Legislative Update from Rep. Hertaus

Friday, April 26, 2019

Friends,

The House has spent this week discussing and debating numerous omnibus finance bills that, together, would set the state's next two-year budget. Here is a summary on a couple of the more notable packages, Health and Human Services and Taxes, both of which passed the House on Thursday mainly along party lines: 

The Health and Human Services Finance Bill (H.F. 2414), increases health care costs, cuts funding to nursing homes and fails to prevent rampant fraud in Minnesota’s childcare and other public programs.

The bill includes an extension of the health care provider tax that will add more than $2 billion to the cost of Minnesotans’ health care over the next four years, and includes changes to nursing home reimbursement rates that result in $68 million in cuts to Minnesota nursing facilities. It also establishes an insulin tax on insulin manufacturers, at a cost of nearly $42 million over the next four years. The bill also does not extend Minnesota’s reinsurance program, which could cause premium rates to skyrocket next year.

Also, the bill takes the first step toward a single-payer system by paying for a study of the benefits of single payer and requiring the creation of model legislation.

At 1,100 pages, this HHS bill is believed to be the largest bill in state history. For all the text it includes, one subject that glaringly is omitted is language to combat rampant fraud in child care assistance and other public programs confirmed by recent reports from the non-partisan Office of the Legislative Auditor. Efforts to amend the bill on the floor for the purpose of strengthening program integrity, prevent fraud, and increase penalties for fraudsters were blocked.

I sincerely hope this bill undergoes a significant overhaul in the conference committee process, because the current version will raise health care costs, cut funding for nursing homes and allow fraud to continue in our state programs. It is my hope and expectation that many of these suspect provisions will be stripped out as it travels through the remainder of the legislative process so that we can return our focus to going the opposite direction by lowering health care costs, supporting our nursing homes and combating fraudulent use of those dollars taxpayers provide to state programs.

Overall, the bill spends $17.219 billion over the next biennium.

Tax bill

The Tax Bill contains a number of new taxes that total more than $3 billion over the next four years. This bill includes regressive taxes that disproportionately impact middle- and lower-income earners and new taxes on businesses that will increase the cost of goods and services and hurt wage growth for Minnesota employees.

The $3 billion in new taxes within H.F. 2125 is part of a broader budget proposal by House Democrats that will raise taxes on Minnesotans by over $12 billion during the next four years, includes a 70% gas tax hike, (not including increases that retailers will add to cover the additional costs of transaction fees for credit cards at the pump ) billions in health care taxes, and over $2 billion in new taxes on Minnesotans’ paychecks to pay for their Paid Leave proposal.

Many of the tax increases in HF 2125 directly affect businesses including increases to the statewide property tax on commercial/industrial, putting Minnesota businesses at a competitive disadvantage and resulting in higher consumer prices and reduced wages for Minnesota workers. The bill would also give Minnesota the second highest income tax rate in the nation thanks to a new 3% capital gains tax on the sale of appreciated assets.

An amendment I offered would have helped all 15 cities in District 33A that are net contributors in the state’s Local Government Aid program. Unfortunately, the majority rejected my amendment. This is the same proposal I put forward earlier this session but it was not included in this omnibus bill. I have letters of support from many of the 95 communities statewide, including the majority of cities in our legislative district that are impacted by this issue. These dollars are always supported by advocates of Local Government Aid as being a prime benefit for lowering local property taxes. Apparently, the majority believes that our cities and its residents’ property tax burdens are of no concern. I will continue advocating for fairness in this program and continue working towards a resolution.

I mentioned tax increases that are proposed that would disproportionately impact lower earners. This is according to the Department of Revenue, which has released the results of an incidence analysis of the governor’s budget. The analysis found that under the governor’s plan, Minnesotans making less than $45,000 per year would experience a double-digit percent increase in their tax burden and Minnesotans of every income level would see their taxes go up. In addition, the tax changes would make Minnesota's tax code more regressive by increasing the tax burden of low and middle-income Minnesotans significantly more than those with higher incomes.

More budget bills ahead

Several other omnibus finance bills to fund other parts of the next state budget are waiting in the wings to come up for discussion. Look for more as we make our way through those proposals.

Regards,

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