Iron Range public school students are about to get $38 million in new computers and other school improvements, the single-largest infusion of money for upgrades to the area’s schools.
Iron Range legislators led an effort at the Capitol to allow the local economic development agency to sell bonds to pay for upgrades in 15 school districts in northeastern Minnesota.
The debt will be repaid through a tiny fraction of the region’s taconite tax that mining companies pay instead of property taxes. The money does not come from the state general fund.
“It’s a good deal up here for our schools,” said Tony Sertich, commissioner of the Iron Range Resources and Rehabilitation Board.
School districts throughout the state regularly sell bonds to pay for new schools, computers and other improvements. But Sertich said Iron Range schools are at a disadvantage because mining companies don’t pay property taxes like homeowners and business owners do, restricting the amount of money local school districts have to repay debt.
Legislators devised the idea to ensure Iron Range schools can compete with districts in the rest of the state, Sertich said. Improving the region’s schools has a direct impact on the board’s mission of improving economic development on the Iron Range, he said.
“It is the biggest investment that the local legislators have done in school bonding,” Sertich said. “This was an initiative by Iron Range legislators to reinvest in our schools.”
The IRRRB did a similar bond sale about six years ago for half the amount.
Moody's Investors Service, one of the nation’s premier credit-rating agencies, gave the IRRRB’s school debt proposal a good rating and deemed it a low credit risk.
Moody’s analysts said their only concerns were uncertainly surrounding future demand for taconite and the lack of a debt service reserve fund.
The IRRRB is expected to sell the bonds next week.
Tax revenue officials from Minnesota and Wisconsin said they do not expect a new income tax reciprocity agreement between the two states anytime soon.
Minnesota revenue officials said the latest offer from Wisconsin would leave Minnesota short about $6 million a year, due in part to the border state’s higher incomes tax rates for middle-class taxpayers.
“Why would Minnesota want to subsidize the higher tax rates in Wisconsin?” Minnesota Revenue Commissioner Myron Frans asked at a forum Monday with his Wisconsin counterpart.
The two states failed to reach an income tax reciprocity agreement by the Oct. 1 deadline, which means that about 80,000 taxpayers who live in Minnesota or Wisconsin and work in the other state will have to file income taxes in both states for at least the 2014 tax year.
Under the previous agreement, residents would simply file income taxes in their home state and revenue officials would sort out which state is owed what. Since so many more Wisconsinites worked across the border, Wisconsin usually owed Minnesota tens of millions of dollars every year.
Former Gov. Tim Pawlenty ended the income tax reciprocity agreement with Wisconsin in 2009, frustrated that the border state withheld its payment to Minnesota for almost a year. When the economy sunk, Wisconsin withheld the payment even longer and made it harder for Minnesota budget officials to manage the state’s cash flow.
Richard Chandler, secretary of the Wisconsin Department of Revenue, said the two states finished separate studies that resolved the issues of the payment timing and gave a more accurate portrait of how many residents cross the border to work.
But those solutions didn’t tackle the $6 million problem for Minnesota.
Like most states, Minnesota offers a special tax program for employees of other states that gives those residents a tax credit of the amount of income taxes that the worker would pay in their home state.
Since Minnesota’s income tax rates are generally lower, Minnesota taxpayers would have to ante up to pay the higher tax rate for those who work in Wisconsin.
“We have no intention of changing it,” Frans said of the tax program, which has been around since 1961. “It’s a good rule.”
Frans said that is not fair for Minnesota taxpayers, and that it is up to Wisconsin to make it right.
Chandler said lawmakers back home call the $6 million payment a form of ransom, one they are not willing to pay.
Asked if they thought there was a way to broker a deal anytime soon, Frans and Chandler shrugged.
Chandler then joked that the relentless drive to lower taxes by his boss, Republican Gov. Scott Walker, might actually erase the $6 million deficit on its own.
Members of the Minnesota legislative commission tasked with overseeing the new Minnesota Vikings stadium said Thursday they are concerned they will not review the final agreements before they are approved and signed.
“I don’t want to have one of those oh-my-gosh moments,” when I read the morning newspaper, said state Rep. Joe Adkins, an Inver Grove Heights DFLer who serves on the oversight commission. “My concern over the past few months is that credibility of myself and the other commissioners is somewhat in jeopardy as we have not been meeting.”
Members of the Minnesota Sports Facilities Authority are scheduled to meet Thursday night to approve the final agreements for the stadium, which will spell out the operating terms for the stadium and divvy up millions in stadium revenue over the course of the 30-year lease.
Michele Kelm-Helgen, who chairs the authority, said the final details were still being worked out, just hours ahead of the 5 p.m. meeting.
The stadium agreement lawmakers passed was “very specific” and helps protect the state and taxpayers, Kelm-Helgen said.
Rep. Bob Barrett, R-Lindstrom, sat quietly during the hour-long hearing and later said state leaders need to scrap the current deal and re-open the stadium agreement next year.
“We learned today that the oversight committee provides no oversight,” Barrett said.
Barrett said the stadium agreement will allow the team to profit off the sale of personal seat licenses and other stadium revenue sources to pay their share.
“With the use of external funding sources in their back pocket, Vikings team owners will most likely make a considerable profit rather than a contribution toward stadium,” he said. “This should make Minnesotans very nervous.”
Kelm-Helgen released few details ahead of the meeting later in the evening.
The Vikings have agreed to pay about $10 million in rent, going up 3 percent every year to cover inflation, she said. The roughly $1 million-per-game rent will cover about 70 percent of the annual operating costs for the entire.
The goal, Kelm-Helgen said, is she never wants the authority to come back to lawmakers “hat in hand, and say we can’t pay for our building.”
A dispute about the number of personal seat licenses that will be sold in the stadium remained a sticking point that is likely to be one of the final issues settled in the closing moments of negotiations, Kelm-Helgen said.
“When I go back this afternoon, that’s one piece we are going to wrap up,” she said.
Once the authority debates the final proposals, Kelm-Helgen said, they expect to sign the agreement later in the evening or Friday morning, at the latest.
Later this month, the general contractor is expected to reveal its bottom line cost for the entire project, a price it cannot exceed. The Vikings are considering some modifications and improvements that the team will cover, Kelm-Helgen said.
In November, the state will sell bonds to pay its share of the roughly $975 million stadium.
Stadium officials expect to break ground around the same time and will begin dismantling the Metrodome after the last Vikings home game, early in 2014.
The longer the federal shutdown lasts, the more Minnesotans could feel the pain.
When Washington shut down, it shut off millions of dollars that should have been flowing into state agencies, services, schools and paychecks.
The governor has assembled an emergency task force to try to identify which state agencies and programs are in danger of running out of money first, and prepare Minnesotans for the potential loss of those services. State officials say there’s no way for the state to make up for that loss, so when the money starts to run out for things like the school lunch program, Minnesotans may have to do without.
“What we passionately hope is that the federal government will come together and figure out how to get its bills paid,” said Tina Smith, chief of staff to Gov. Mark Dayton. “We are not in a position where we can just fill gaps that are created by their political breakdowns.”
During a conference call with reporters, state officials pointed out just how closely federal funds are twined in the state economy.
Some 19,000 Minnesotans work for the federal government and more than 3,000 state employees are primarily funded by Washington. The longer the shutdown lasts, the longer those people will go without paychecks.
A quarter of the state budget comes from federal funds. More, in the case of agencies like the Department of Education, which gets 60 percent of its funding from Washington – including the funds that allow schools to offer free and reduced lunches and breakfasts to needy children.
Minnesota relies on federal funding for everything from meat inspections to salaries for the National Guard – more than a thousand Guard employees have been furloughed already.
Two days into the shutdown , it’s too early to say what effect the shutdown will have on Minnesota, or where the money will run out first.
“It will be an evolving situation. The problems we know about today today may not be the ones we have to respond to tomorrow. There are likely to be new ones each and every day,” said Minnesota Management and Budget Commissioner Jim Schowalter. “Part of the problem of the shutdown is the unpredictability.”
For now, every day of the shutdown is another day with thousands of Minnesotans out of work and countless state programs slowly running short of funds.
“Bad things happen when people go to school…hungry,” Smith said. “Bad things happen when don’t get the payments they have been counting on in order to make sure they can pay their rent. Bad things happen.”
The state’s economic recovery has been so robust that state leaders are able to pay down a giant share of the remaining debt to E-12 public schools, Gov. Mark Dayton announced Monday.
“This is a great success,” Dayton said. "It's a tribute to Minnesota's economy and its employers and its employees."
Minnesota will repay another $636 million to public schools, about $200 million more than predicted in July. The additional money came largely from unexpected savings in state spending, largely health and human services costs. The state's balance to schools is just $238 million.
Dayton and DFL legislative leaders made the announcement at a Capitol news conference, highlighting what they say is the freshest sign that the state has nearly crawled out of the worst recession since the Great Depression. The last economic downturn resulted in deep cuts in most areas of the budget, drained reserves and caused government leaders to resort to accounting shifts and borrowing from schools to balance the budget.
Republicans say the state’s economic rebound came as a result of the budgets that they crafted and fought for, not Dayton. They said that their insistence on not raising taxes kick-started the economic recovery and allowed the state to pay off schools faster. This is the same budget that led Dayton and Republicans to lead the state into a three-week partial government shutdown.
Senate Minority Leader David Hann, R-Eden Prairie, said the positive outcome of this budget was worth the acrimonious standoff with Dayton, even though it might have cost them majorities in the House and Senate in the next election.
“I think the long term effects are beneficial,” Hann said."No one likes to see a government shutdown, nobody likes to see the debate come to a place it got to, but what we are adamant about at that point is that we did not want to increase the tax burden on this economy."
Rather than impose deeper cuts or raise taxes, state leaders withheld $2.8 billion in school payments to balance the budget over the last two budget cycles. The lower payments caused cash-flow problems for some school districts, which had to borrow money to cover their financial obligations.
State law now requires any surplus to first go to repay any school debt. Only then can the money can be used to increase government spending or lower taxes.
Dayton and a new slate of DFL legislative leaders approved a new two-year budget that includes about $2.1 in new taxes, mostly in the form of higher income taxes for the state’s top earners and three new businesses taxes.