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PAGE 1 ............................... z.:: := . ............................ March J 1 O, 2016 2016 Session Preview By MicheUe Fischbach Minn. State Senator As the start of the 2016 legisla- tive session quickly approaches, I wanted to let you know about some of the important issues for the upcoming session. This year, session will begin on March 8. It will be a short session and things will likely be fast-paced. Please feel free to contact my office with any questions or concerns. Forecast Update In November, the Minnesota Management and Budget Office (MMB) forecast reported a $1.871 billion surplus for the fiscal year 2016-17 budget. By law, $71 mil- lion was used to repay 2015 bud- get shifts, and an additional $594 million was added to statutory reserves. The remaining avail- able balance was $1.206 billion. Total projected spending for fiscal year 2016-17 was lowered to $41.6 billion. Last month, MMB released their Fe.bruary forecast which cut the surplus by $306 mil- lion to $900 million. A weak- ened U.S. economic outlook and lower wage growth reduced pro- jected revenues by $27 million. Nearly three-quarters of that total reflects lower projected sales tax. On the spending side, $129 mil- lion in lower projections is mainly from reduced Health and Human Services Medical Assistance spending. 2016 Bonding While the focus of the 2015 ses- sion was enacting a new budget, ultimately a bonding bill did pass in the special session. The spe- cial session bonding bill provided for $180 million in new General Obligation bonding authority, and total direct appropriations for $373 million. Priorities for the special session bill included fund- ing for Capitol restoration out of scope items and security, avian flu research, flood mitigation and disaster relief. The 2016 bonding cycle ramped up with the release of Governor Dayton's required recommenda- tions. Governor Dayton released his $1.4 billion proposal, which included more than $200 mil- lion for water quality and infra- structure; $300 million of the University of Minnesota and MnSCU; emphasis on local proj- ects to support regional cen- ters; rail and pipeline safety, and fish and wildlife projects to sup- port walleye and pheasant popu- lations. Notably lacking was any significant funding for statewide transportation priorities, except for two metro area bridges. The legislature will be focusing on the bonding bill this session. Education With a large projected state budget surplus, it is likely that school districts will seek to sup- plement already the existing funds, passed in 2015, for current and upcoming school years, such as: Per pupil allowance. This amount was already increased by two percent in the current school year and will go up another two percent next year. Special education "cross-sub- sidy." This refers to the amount schools take from general edu- cation budgets to pay for special education services not covered by state and federal aid. State "equalization" aid. This helps to pay many school district bond and referendum approvals. Districts with weak property tax bases, and districts that consist of a great deal of farmland, argue that state aid is not at proper levels to offset local levy burdens. School board renewal of ref- erendums. In the 2013 DFL tax bill, school boards were allowed to bypass voters and unilaterally approve up to $300 per pupil of ref- erendum revenue. New proposals would allow boards to renew refer- endums of any amount. Lessarfl-Sams Outdoor Heritage Funding The Lessard-Sams Outdoor Heritage Council has recom- mended funding 40 projects total- ing $115 million for fiscal year 2017 from the Outdoor Heritage Fund. This fund represents 33 percent of the sales tax reve- nue from the Clean Water, Land and Legacy amendment. This is $15 million more than fiscal year 2016. If passed as recommended, the bill would provide $31.65 mil- lion for prairie acquisition and restoration, $20.34 million for for- est acquisition and restoration, $20.34 million for forest acquisi- tion and restoration, $19.95 mil- lion for habitat acquisition and restoration, $4.167 million for wet- lands, and $9.4 million for phase VII of the Conservation Partners Legacy Grant Program. Judiciary As new technology becomes available for law enforcement and government agencies to use, it is important that the Legislature keep up with the policy of how these technologies are used. Last year, the Senate passed a first attempt at regulating police body cameras that the House rejected. The Data Practices Commission and relevant House and Senate committee have been meeting over the interim to continue work- ing on the topic. Additionally, drones are another form of tech- nology that the Legislature may address in 2016. Taxes It is likely that the legislature will consider a number of tax proposals to help families, vet- erans, students, and encourage job growth. As an example, pro- posals to exempt all or a portion of Social Security income from the Minnesota income tax has been a priority issue in the past. Proponents in both the Senate and House note this is increas- ingly a competitive issue among the states. In 2015, 38 states either had no income tax or did not tax social security benefits. We may see a push for tax conformity this session. Since the passage of the 2015 tax conformity bill, three additional federal laws have been enacted with Minnesota tax con- " formity implications. More nota- ble is the Protecting Americans from Tax Hike Act of 2015. It is pos- sible that there will be an early ses- sion push for conformity. Transportation Funding Reaching an agreement on a comprehensive transportation finance package will once again be the focus of the Transportation and Public Safety Committee. Last year, the Senate DFL passed a 10 year plan that relies on a ne,~ wholesale fuel tax, expanded metro sales tax, and increased license tab and registration fees to infuse more money into the system. The House passed a bill that uses a combination of exist- ing General Fund revenues, bud- get surplus, carry forward money, and bonding to achieve a 10 yeai comprehensive plan. The confer- ence committee on HF 4 will likely be reconvened at the beginnin~ of the session in hopes that a deal can be reached. REAL ID Passed by Congress in 2005, the REAL ID Act sets standards fm the issuance of driver's licenses and identification cards as recom- mended by the 9/11 Commission. Starting January 22, 2018, airline passengers with a driver's license issued by a state not in compliance with REAL ID will need to show an alternative form of acceptable identification for domestic airline travel. Starting in October 2020, every airline traveler will need a REAL ID compliant license, oi another acceptable form of identi- fication, for domestic travel. It is likely that the Legislature will quickly repeal the por- tion of the 2009 law prohibit- ing the Department of Public Safety from planning for REAL ID. This will give the Department o] Public Safety time to provide the Legislature with cost estimates ot compliance, logistics, and other statutory changes necessary te comply with REAL ID. Final action would be to repeal the remaining portion of the law prohibiting Department of Public Safety from implementing REAL ID. ~m ............................. A leading provider of high quality custom kitchen and bath cabinets, mantels, entertainment centers and bars. 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