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:
Minnesotans paid more than $1.3 billion in state taxes in November, about $2 million more than state budget officials predicted in its most recent forecast.
The November forecast, released last week, projects that lawmakers will have a $1-billion surplus with which to craft a budget for the 2016-17 biennium.
The Minnesota Management and Budget Office on Wednesday said that the monthly revenue report was in line with the overall budget and economic forecast from a week ago.
Individual income tax collections were $517 million, or 2.2 percent more than projected. Sales taxes hit their target, coming in at $432 million as previously expected.
Other form of revenue beat targets by $8 million. The state has taken in $7.3 billion for the 2015 fiscal year, about $2 million more than November projections.
Minnesota budget officials urge caution in interpreting revenue numbers, which can fluctuate wildly from month to month.
Minnesota lawmakers and the governor will have a nice cushion with which to craft a budget after the Minnesota Management and Budget Office on Thursday reported the state will see a $1-billion surplus.
The surplus, though expected, will set the table for the start of the upcoming budget process as Minnesota legislators figure out what to do with the windfall.
State budget officials said Thursday that the surplus is the result of higher tax revenues, mainly in sales and individual income tax collections, and reduced spending in health and human services. Moreover, the budget surplus from the 2014-15 fiscal year, which ends in June, was projected Thursday to be $373 million after diverting a portion of it to the state's budget reserve.
Budget officials said the drop in spending on health care is largely because of a different composition of enrollees receiving medical assistance.
State budget director Margaret Kelly on Thursday said that though the number of enrollees in medical assistance grew slightly from a previous forecast, the uptick of enrollees have been largely adults without children. Since that forecast, the rate of familes with children and individuals with disabilities enrolling in medical assistance has also dropped.
Since February, when the Minnesota Management and Budget agency published its last forecast, the state’s economy has expanded largely as projected, aided by stronger employment growth. The job gains have shrunk the unemployment rate to its lowest level in more than eight years — 3.9 percent.
Minnesota's economic outlook, however, was downgraded Thursday from the February report. State economist Laura Kalambokidis said that despite a turnaround in the labor market, wage growth is now projected to grow more slowly in 2014. Furthermore, it's likely that millennials burdened by high student-loan debt are not buying homes, which is reducing the rate of household formation.
Still, the budget forecast shows that the the state's fiscal picture has brightened considerably since February 2013, the last time the state faced a deficit, which stood then at $627 million.
Thursday’s forecast will guide the governor’s budget proposal, which Dayton has said he will present to the Legislature on Jan. 27. State lawmakers will craft their budget proposals based on a later February forecast, which includes updated economic data such as holiday retail sales and the country's fourth-quarter economic output.
Gov. Dayton has not yet gone into great detail on his priorities, but they are likely to include a request to fund child-care tax credits during next the next legislative session, set to begin next month.
“I’m not going to make any decisions until I see the revenue projections, but that’s still one I would give a high priority,” Dayton said Tuesday.
The tax credit would be intended to help families afford the cost of child care — a goal also supported by DFL legislators. The governor’s budget proposal may include funding requests for transportation, or a specific proposal may be introduced separately early next year. Dayton said during his re-election campaign that funding basic maintenance of the state’s infrastructure will be a key legislative priority.
The $1-billion surplus will likely make for a smoother session. Republicans are back in the majority in the House, but having extra money to work with would help the GOP, the DFL governor and DFL-controlled Senate create some common ground for compromise.
Dayton and legislative leaders on Thursday are expected to react to the complete report that was released at 11 a.m.
Net Minnesota tax collections were $1.687 billion in October, up nearly 5 percent from officials' projections in February, the Minnesota Management and Budget Office reported Wednesday.
Revenues collected from invidual and corporate income taxes and other miscellaneous revenues exceeded expectations for the month, officials said Monday. Sales tax receipts for October were down about $1 million.
For fiscal year 2015, tax collections are at $5.984 billion, up 0.5 percent from an earlier projection. Minnesota Management and Budget officials said in a statement that monthly revenue reports are preliminary and can vary wildly from month to month.
Minnesota 2020, a progressive think tank that DFL politician Matt Entenza founded seven years ago, is shutting its doors.
Stuart Alger, a Minneapolis attorney and board of directors chairman for Minnesota 2020, confirmed Monday that the board made the decision last week. Dave Colling, a veteran DFL operative who has frequently worked for Entenza, has been brought in to help the organization close down in an orderly fashion.
Minnesota 2020 delved into many public policy questions facing the state, producing lengthy and deeply researched reports on everything from transportation and energy policy to education and taxes. The group also frequently sponsored public forums featuring high-profile politicians and other civic leaders.
Alger said six to eight full-time employees would be laid off. He said most are writers, researchers and web specialists.
The organization is a 501c3 non-profit, and was funded in large part by donations from organized labor, foundations and private sources. "The funding just hasn't been there as it was in the past," said Alger, an attorney at Stinson Leonard Street in Minneapolis.
Entenza did not immediately respond to an interview request.
Entenza is a former state House minority leader from St. Paul. He founded Minnesota 2020 in June 2007, about a year after an unsuccessful bid for state attorney general.
Entenza tried to revive his political career in 2010 with a run for governor, but finished third in the DFL primary. He re-surfaced this year with a surprise primary challenge to DFL State Auditor Rebecca Otto, which he also lost.
With that last race, Entenza incurred the wrath of many in the DFL establishment, most notably state party chairman Ken Martin. But Alger said he had received no indication that anger toward Entenza led to the drop in donor support.
"We think Minnesota 2020 really provided a lot of good reliable content over seven years, and we're very proud of the work we've done," Alger said.