State Senate Democrats proposed a new fuel tax of 6.5 percent per gallon, along with a hike in license tab fees and a one-cent sales tax increase in the seven-county metropolitan area, as a way to raise about $800 million in additional state money every year to upgrade Minnesota's transportation system.
"This is a serious problem that requires a serious solution," said Sen. Susan Kent, DFL-Woodbury, who appeared with a handful of colleagues at a Monday morning news conference to unveil their plan. The Democrats, many of whom represent swing districts, acknowledged the political difficulty of a proposal that would demand more money from the pockets of every Minnesota driver.
"I can't think of another path," said Sen. Vicki Jensen, DFL-Owatonna. "I can't find another path" to raising the kind of money needed to repair and replace thousands of miles of crumbling roads, hundreds of aging bridges while also increasing road capacity with a few key projects.
The proposal, authored by Minneapolis DFL Sen. Scott Dibble, has as its centerpiece the sales tax on gas at the wholesale level of 6.5 percent a gallon. That would be on top of the existing 28.5-cents-per-gallon state gas tax, so drivers would definitely pay more at the pump.
That's identical to a proposal from Gov. Mark Dayton, who has identified a big transportation spending boost as one of his top priorities of the new legislative session. Dayton has also advocated a license tab fee increase and a metro sales tax.
Dayton and DFL senators have repeatedly cited the work of a transportation panel, convened by Dayton in 2012, that produced a report stating the state needs to raise about an additional $6 billion over 10 years in order to keep its roads and bridges in decent working order.
Republicans, who hold the House majority, have also called fixing roads and bridges a priority; but GOP lawmakers have been much more reluctant to sign on with tax increases. Last week, House Republicans proposed an additional $750 million in transportation funding in the next four years, a figure Dayton blasted as not nearly sufficient.
The DFL and GOP are also likely to square off over transit funding. The one-cent metro sales tax increase in the Senate plan would raise about $250 million in 2016, or an estimated $1.30 a week for the average metro resident.
A flashpoint could be the ongoing Southwest Light Rail project, which requires $121 million from the state in order to proceed. Dibble said he'd like to see that money come from the metro sales tax, which Dayton has already suggested. But Republicans, including House Speaker Kurt Daudt, have repeatedly emphasized their opposition to spending any state dollars on the project.
Gov. Mark Dayton slammed a proposal by House Republicans to pay for fixing Minnesota’s roads and bridges through $200 million from the state’s projected budget surplus, calling it “pure fantasy.”
“That’s not a solution. That’s not a short-term solution, that’s not a long-term solution, and it demonstrates that they don’t understand the problem, and they certainly don’t have any serious interest in finding a real solution.” Dayton told reporters at a news conference Friday, one day after the House GOP laid out their legislative priorities. He added that their plan to devote a total of $750 million to transportation over four years through cost savings elsewhere is money out of “La-La Land,” at the cost of other projects.
The plan contrasts sharply with Dayton’s initial proposal to devote $6 billion in new spending for transportation during the next 10 years through a wholesale gas tax and an increase in license fees. He said he’s not even willing to discuss the Republican proposal “until they decide to get real about it and offer a real approach.”
In a statement, House speaker Kurt Daudt expressed confidence that he could convince Dayton the plan will work.
"Minnesotans elected a divided government with the expectation that we’d work together to move our state forward," he said. "I’m disappointed in Governor Dayton’s tone today, but I’m going to keep working on him. I will win him over because I believe we can work together to solve the problems Minnesotans care about.”
The DFL governor’s proposal, will be funded mainly though a 6.5 percent-per-gallon tax on gasoline at the wholesale level — one he’s estimated would cost drivers about an additional 12 cents per gallon at the pump. He acknowledged Friday that their projection of $5.8 billion was based on the assumption that gas would cost $3.25 per gallon, and that there will be a shortfall if gas prices continue to hover around $2.25 per gallon. He said it was too early to say whether he would propose a supplemental tax to make that up.
“Let’s get this one started,” he said.
Dayton’s transportation frustrations included the proposed Southwest light rail project and its most recent delay: A request for more engineering studies, incurring more costs and delays, and potential loss of federal funding, which has already dropped by 10 percent.
“If I’m in the position of a federal allocator and I’ve got a dozen other communities that are vying for this same money that are cohesive on their goals and are ready to go, it’s pretty obvious to me that these shenanigans are going to place Minnesota’s proposal back at the end.”
The studies could have been completed years ago, he said, with objections to the project crossing park land taking place back then, “saving everybopdy an enormous amount of time and energy and money on something they were going to come and object to anyway.”
“It’s pure fantasy to think that 10 or 15 years ago you’re going to build a light rail line from Eden Prairie to downtown Minneapolis and there won’t be any disruptions on people’s homes and properties and public lands and waters.” He said. “If that was the absolute dealbreaker that there was going to be any kind of disruption, we’ve been fooling ourselves.”
Dayton said he sympathized by private homeowners whose properties would be disrupted by construction and operation of the SWLRT, but “that the public bodies that have been sitting around all this time certainly could see the writing on the wall, and brought a pencil and eraser five years ago and start to work on something better.”
Senate Minority Leader David Hann, R-Eden Prairie, said he was skeptical of legislation offered today by the DFL majority. (See prior post on the bills.)
In particular, Hann said plans to offer universal pre-K child care education and free tuition at state community and technical colleges would cost hundreds of millions of dollars, swallowing up the entirety of the state's current surplus.
He also questioned why the programs are available to all Minnesotans, even the wealthy.
Finally, he said neither program deals directly with the larger problem: Lack of academic achievement in the K12 education system.
Minnesota’s municipal liquor stores broke sales records for the 18th consecutive year, selling more than $332.8 million in 2013, according to a report by Minnesota State Auditor Rebecca Otto.
Otto’s annual report on municipal liquor store operations showed an increase in sales of $3.2 million, or 1 percent over 2012. The stores, which were originally opened to control sales of alcohol, have since provided extra cash for communities, as well as access in areas that may not attract privately-owned businesses.
In 2013, 205 Minnesota cities ran 237 municipal liquor stores. Of those, 111 operated both on-sale and off-sale establishments, while 94 cities were off-sale only.
Highlights from the report include:
- Sales at individual outlets ranged from $125,051 in Round Lake to $15.4 million in Lakeville.
- The top nine sellers were located in the greater Metro area. The 10th and 11th largest sellers, Fergus Falls and Detroit, represented western Minnesota.
- Despite record sales, the stores’ $26.8 million combined net profit dropped $500,522, or 1.8 percent, from 2012.
- In 2013, Minnesota’s municipal liquor stores transferred $18.6 million in profits to other city coffers. This represents a decrease of 19.2 percent from total net transfers in 2012. Net transfers totaled $7 million in the metro, compared to $11.6 million in greater Minnesota.
- Metro operations are larger and more profitable than outstate. Although 19 of the 205 cities running municipal liquor operations are in the metro, they represent 37 percent of sales and 36.5 percent of municipal liquor operations’ net profit. Metro sales averaged $3.2 million in 2013, compared to $1.1 million in all of outstate Minnesota.
- More Minnesota cities reported net losses in 2013. This year, 33 reported losses compared to 25 in 2012. All cities with losses were in greater Minnesota.
View the entire 62-page report, complete with maps, graphs and each store’s performance, here.
Top priorities on the Minnesota Chamber of Commerce’s 2015 legislative wish list include tax relief for small and midsize businesses, rolling back automatic increases in the minimum wage to account for inflation, and adjusting how transportation infrastructure is funded in the state.
The chamber’s policy team on Thursday laid out priorities in five areas, including tax relief, education and workforce development, health care, transportation and labor and management.
Tax Reform: Chamber officials say Minnesota ranks nearly last in a survey of tax-friendly states. Tax relief for small businesses—which employ more than half of Minnesotans in the private sector--could promote economic growth, they say. Eliminating the taxing of “phantom income,” or income that is taxed even if it is reinvested in the business, is a start, said Beth Strinden Kadoun, the Chamber’s director of tax and fiscal policy. Other proposals include reducing Minnesota’s corporate tax rate, which at 9.8 percent is third highest in the nation, and enhancing the state’s research and development tax credit. Although Minnesota was the first state in the nation to pass such a tax credit, the rate has since been surpassed by other states.
Transportation: The Chamber ‘s goals for transportation funding—the likely hallmark issue of the 2015 legislative session, include passing a 10-year funding plan to improve the state’s infrastructure, and funding it through more than fuel taxes, vehicle registration and the motor vehicle sales tax. Bentley Graves, the Chamber’s director of Health & Transportation Policy, said 33 states use money from the general fund to pay for roads and bridges, and that Minnesota should be among them.
“We’re not suggesting that any dedicated sources go away, we’re talking about how to get additional investment in the system,” he said.
Other ideas include “value capture” mechanisms, which would place more of the cost of road construction projects on property owners who would benefit most.
“The idea is to have a very close tie between those who pay and those who benefit, rather than just a blanket approach,” Graves said.
Chamber representatives will argue against a wholesale gas tax increase, but wouldn’t say directly whether they were opposed to a standard gas tax increase.
Labor Management: Increases in the state’s minimum wage should be decided by the Legislature, not set to automatically increase, said Ben Gerber, the chamber’s manager of Energy and Labor/Management Policy. Gerber said Minnesota will be the only state in the upper Midwest
“We see a real problem with setting things on autopilot,” Gerber said. “We elect legislators, we hold elections to put people in office to make these tough decisions, especially on an issue like the minimum wage, that legislators should be making that decision and it shouldn’t be put on an automatic index.”
While the automatic increase doesn’t take effect until 2018, Gerber said the increases could largely impact rural businesses and border communities. Minnesota is the only state in the upper Midwest with indexing and could lose business to neighboring states, he said.
Other targets include exploring ways to reduce the rising costs of the worker’s compensation system.
Education and Workforce: The chamber’s goals include ensuring access to college credit programs for all high-school students, reforming teacher tenure to allow administrators to pick their teams regardless of seniority, reforming struggling charter schools and reducing standardized testing, while requiring basic skills in reading, writing and math for graduation.
Healthcare: In Minnesota, where 80 percent of Chamber members are small businesses with less than 100 employees, the Chamber supports a state-based exchange like MNsure, Graves said. However, the organization backs reforms to increase oversight, seizing upon the expertise of business and health industry experts when governing the system and ensuring employers have as many options as possible.
Read an outline of the Chamber's goals here:
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