Minnesota legislators were putting the finishing touches on the state’s $38 billion two-year budget during late-night debates that paved the way to adjourning by midnight Monday, May 20, the deadline for the session.
By Sunday night, lawmakers had passed seven of the eight spending bills that make up the budget, and the House had started what was expected to be a long discussion on the tax bill that will pay for that spending. Senate leaders planned to take up the tax bill shortly after the DFL-controlled House voted on it.
The final spending bill on the agenda pays for state agency operations. Lawmakers plan to vote on it Monday.
Earlier Sunday, the House and Senate sent a $15.7 billion K-12 education bill — the largest bill of the session — to Gov. Mark Dayton for his signature.
The tax bill would raise Minnesota’s income tax rate for the first time in 26 years. It would raise $2.1 billion by boosting taxes on high-wage earners, smokers and corporations.
House Taxes Committee Chair Ann Lenczewski, DFL-Bloomington, said the income tax increase would make the state’s taxes fairer because the highest-earning Minnesotans now pay a smaller share of their income on state and local taxes than middle-class taxpayers.
The top 2 percent of wage earners — about 54,000 taxpayers — would pay about $1 billion more under the bill. Their tax rate would go up 2 percentage points to 9.85 percent on taxable income over $150,000 for singles and $250,000 for
couples. That would give Minnesota the fourth-highest state income tax rate in the nation.
Republicans warned that the income tax increases would drive some job creators out of the state, discourage others from moving here and make it harder for businesses to complete for professional talent.
Cigarette taxes would go up $1.60 per pack, and taxes on other tobacco products also would increase sharply. But taxes won’t rise for beer, wine or liquor.
“We are closing corporate tax loopholes,” Lenczewski said. The bill eliminates $424 million in business tax write-offs, mostly for foreign operations.
Businesses would get an upfront exemption from sales taxes on capital equipment, resulting in an $81 million tax break.
But the bill extends sales taxes for the first time to commercial warehousing and storage services, electronic equipment repair and telecommunications equipment, resulting in a $214 million tax increase for businesses.
Lenczewski said the legislation provides “massive property tax relief.”
Thousands of homeowners and renters would become eligible for property tax refunds for the first time and thousands more would get larger refund checks.
It also provides indirect property tax relief. The measure exempts cities and counties from state sales taxes, resulting in $172 million in savings on top of a $130 million increase in state aid to local governments. The bill puts a 3 percent cap on local property tax levy increases next year.
A backup funding source for the new Minnesota Vikings stadium is tucked into the tax bill. It deposits a one-time, $24.5 million cigarette tax windfall into a stadium account and closes a corporate loophole to provide about $20 million a year in future years, if needed. Dayton and lawmakers crafted the backup plan after the main source of stadium funding — electronic pulltab and bingo tax revenue — fell short.
In addition, the bill provides hefty tax breaks to promote Mayo Clinic’s $6 billion “Destination Medical Center” economic-development project in Rochester, the Mall of America’s planned expansion, 3M’s planned new research and development facilities in Maplewood and incentives for Baxter Healthcare Group to locate in Brooklyn Park.
The $15.7 billion K-12 funding bill is on its way to the governor after the House passed it early Sunday morning by a 78-56 vote and the Senate followed suit in the afternoon.
All the House DFLers voted yes, plus five Republicans.
The Senate vote was 41-26, with all the DFLers except Ann Rest of New Hope in favor of the bill. Three Republicans supported it as well.
The bill represents more than 40 percent of the state general fund budget.
It adds $158 per pupil — about $238 million — onto the basic school funding formula. About $134 million is allocated to fund all-day kindergarten, and another $46 million for early childhood scholarships.
The education bill spends $485 million more than the forecast amount.
Sen. Patricia Torres Ray, DFL-Minneapolis, called it a “long overdue investment in our kids.”
Senate Minority Leader David Hann, R-Eden Prairie, said the bill spends a lot of money without locking in measures to improve student achievement. “I think we failed,” he said. “We better get this figured out.”
But Sen. Chuck Wiger, DFL-Maplewood, the bill’s chief sponsor, said the money is being spent on high-quality initiatives that will put every child on the path to career- and college-readiness. “This is genuine reform,” he said.
Republicans continued to hammer on a change in the bill that does away with the high-stakes GRAD test and replaces it with a “suite of assessments” aimed at career- and college-readiness. GOP members argue that it waters down the high school diploma.
“Life is a high-stakes test,” said Sen. Dave Thompson, R-Lakeville, and the sooner high school students learn that the better.
Sen. Paul Gazelka, R-Nisswa, summed up the bill as follows: “We’re spending a lot more, and we’re expecting less.”
Lawmakers won’t be getting a pay raise this session.
The DFL-led Senate wanted to raise their $31,140-a-year salaries to $40,890 by 2015, but the House refused to go along.
But a state agency funding bill does include raises for the governor and his department heads. The governor’s $120,303 annual base pay would go up 3 percent in 2015 and again in 2016. It also allows some commissioners to make more than the governor, a move Dayton has supported to keep high-level managers in the public sector.
The state also would hire a consultant to conduct a comprehensive study to analyze pay and benefits for top positions in the executive branch to make sure they’re competitive with similar work in the private sector.
But that doesn’t mean discussion has ended on lawmaker pay. The House on Friday approved putting a constitutional amendment on the ballot that would have an outside council — not legislators — decide how much state lawmakers should be paid.
If the Senate agrees to put it on the ballot and voters approve, it would create a legislative pay council appointed by the governor and the chief justice of the state Supreme Court. The amendment wouldn’t go on the ballot until 2016.
With gas prices soaring, lawmakers decided to forgo a proposed 5 cents-a-gallon gas tax increase. They also rejected a half-cent sales tax increase for Twin Cities-area bus and rail transit.
Instead, the House and Senate on Sunday passed a so-called “lights on” transportation funding bill that maintains the status quo.
Article source: http://www.twincities.com/politics/ci_23280007/spending-bills-clear-time-talk-taxes