Tax bill highlights three-party legislative session

This article submitted by Aaron Ziemer and Michael Jacobson on 5/26/99.

Passing the largest one-time tax rebate and the greatest permanent tax cut in Minnesota history while working with three political parties were the potentially historic accomplishments of the 1999 legislative session.

In addition to the $2.9 billion tax rebate and tax cut package, the legislators also approved increased spending for K-12 education, established health-related endowment funds with the tobacco settlement money, and provided some property tax relief.

From the comments of the six legislators who represent people in this area, here are some of the highlights of the recent legislative session.

A three-party process
For the first time, three political parties led the legislative process. The House was controlled by the Republicans, the Senate by the DFL, and the governor belongs to the Reform Party.

Sen. Steve Dille (R-Dassel) said it worked out just fine, considering that Governor Jesse Ventura had little experience with how the Legislature worked. Dille also found the new governor to be more approachable than his predecessor. "He's controversial in a lot of ways," said Dille. "My own contact with him was good."

Sen. Dean Johnson (R-Willmar) called it a grand experiment in democracy. "For the most part, it went okay," he said. A lot of negotiations were finished in the last 48 hours.

"It worked out well," said Rep. Bob Ness (R-Dassel). "It was tougher to reach a consensus, but the decisions that were reached are better decisions."

Sen. Michelle Fischbach (R-Paynesville) said it took a while for the Legislature to work out a new rhythm this year. There was change in the governor's office and in the leadership of the House, with the Republicans in majority. Those changes might have meant a slower start, but the work was done. "We always go to the last minute," Fischbach said, "and we always finish."

Rep. Doug Stang (R-Cold Spring) thought working with the three-party system was more interesting. "There are three different groups and interests that need to come together and compromise," he said.

Rep. Al Juhnke (D-Willmar) thought things started slow because it took some time for everyone to get to know each other. With a new governor and a new speaker of the house, it took time to adjust to each other.

"In the end, everything came together," said Juhnke.

Tax rebates and cuts
The state will be returning $2.9 billion of the state surplus through a one-time sales tax rebate and a permanent income tax cut. The rebate checks will be mailed after the state's fiscal year ends in July. Taxpayers should receive them in August or September.

For a single filer, the minimum rebate is $204. With an income of $25,000, a single filer will receive $515; and with an income of $50,000, a single filer will get $776.

For joint filers, the minimum is $358. With an income of $25,000, the rebate is $690; and with an income of $50,000, the rebate is $969. The tax cuts and rebates were made to benefit the middle class the most.

Fischbach joked that some legislators were volunteering to deliver the rebate checks personally.

The income tax cut will be a one-half percent for low and high incomes (under $25,000 or over $100,000). Those in the middle, with incomes between $25,000 and $100,000, will have their state tax rate reduced by three-quarters of a percent.

"I think the winners are, deservedly so, the taxpayers of Minnesota," said Johnson.

Dille said legislators were lucky to be in office when the state's economy made them look so good. "I think the real credit belongs to the hard-working citizens of Minnesota who ran businesses, made money, and gave us the surplus," he said.

After seven years of surpluses, Fischbach said the state needs to avoid future ones. "The income tax reduction is a big step towards doing that," she said. "We shouldn't be having (surpluses). We shouldn't have to worry about returning taxes."

Darrel McKigney, president of the Minnesota Taxpayers League, agreed, "Clearly, the taxpayers won a big victory in starting to reduce Minnesota's onerous income tax rates--which have been the second highest in the nation. However, even with this cut, we still likely rank in the top five highest income tax states, so there's much more to be done next session in terms of tax cuts."

Tobacco endowments
The $968 million in one-time tobacco setllement money was allocated to three health-related endowments. Forty percent will be used for tobacco prevention. Thirty-nine percent will go for medical education and research, and the other 21 percent will be used to support local health programs.

In addition to the endowments, the state has considerable reserve funds. Dille said the state's fiscal health is reflected in its AAA bond rating by all three major bond rating companies. Only a few states have top ratings by all three companies, he said.

The Taxpayers League of Minnesota wanted the state to return the entire projected $4 billion surplus to taxpayers. "The biggest disappointment of this session was the failure to return the entire surplus to taxpayers," said McKigney. "The main reason taxpayers are not getting all of their money back is that Governor Ventura broke his promise and pushed for spending the surplus on light rail and 'endowments' instead of returning it to taxpayers."

Education issues
Funding for K-12 education was increased from $7.1 billion for the current two-year period to nearly $7.9 billion over the next two years.

The most significant increase was in the per pupil formula. The current rate is $3,530 per pupil unit. The rate will be $3,740 for fiscal year 2000 and $3,875 for 2001. Contingent on the state's budget forecast for 2001, an additional $50 million could be available in 2001, bringing the rate to $3,925.

The Legislature also allocated $94 million for class size reductions. The goal is to have a ratio of 17 students to one teacher in grade levels K-3. About $15 million was allocated for all-day, everyday kindergarten, which is already being done in the Eden Valley-Watkins School District. And $5.9 million was provided for school breakfasts. Johnson said it was important that these three programs are not mandated by the state. Local districts can choose whether to pursue them or not. The Legislature set aside money to help.

In another major educational issue, the Profile of Learning was not changed. The House and the Senate passed revised versions of the standards, with the House's version cutting more of the current requirements. The House wanted teachers to have more control of what they did. An agreement was not reached in conference committee though, so the existing requirements still stand.

"Clearly things need to be changed in the Profile of Learning," said Ness.

All three area representatives agreed that some changes needed to be made to the Profile of Learning.

"They're going to be lots of folks who are going to be disappointed," said Fischbach, of the failure to revise the Profile of Learning. She supports improving the standards and said, "I can't imagine this is going to die."

Dille said the commissioner of education would try to improve the standards by modifying rules, thereby possibly avoiding the need for legislative action.

Farm issues
Farmers will be getting aboutt $4 per acre in emergency property tax relief. The total price tag on the emergency funding is $70 million.

Also passed was some permanent tax relief for farmers. The state approved $53 million so the local tax burden for farmers would be reduced.

"I am still a little concerned about farm economy," said Juhnke. "Since we are not a federal government, there wasn't much we could do about raising prices, but we tried to help by lowering taxes."

Juhnke did believe that the tax cuts would benefit all of the farmers across the board, just at different capacities.

Dille hoped to have some regulatory releif approved. His bill would exempt farmers from air standards when cleaning out their barns and would reduce the animal unit thresholds necessary to make an Environmental Assessment Worksheet (EAW)mandatory when a feedlot is expanded. Dille said the Minnesota Pollution Control Agency already has the authority to require an EAW on any farm with more than 100 animal units and doesn't need to make them mandatory. "Especially with this farm economy, I find that very inappropriate," he said.

The bill has passed both the House and Senate, but, as of Monday, Governor Ventura was still deciding whether to sign it into law or veto it.

Johnson voted against the bill in the Senate and said, "I think agriculture needs to move ahead and compete, but we need environmental balance, too."

Other issues
*Dille said he was glad the state increased funds for cost-sharing wastewater treatment plants by $20 million.

*The proposed electricity plant that would be fueled by turkey droppings received $200,000 for continued study, not the 1.5¢ per kilowatt subsidy requested. That subsidy would cost $4.2 million a year for ten years. Instead, Dille hoped turkey waste would be included as biomass in the state's agreement with Northern States Power that would allow the company to contract for power from the plant.

*Both Fischbach and Johnson said they regretted that nothing was done about reducing either license tab fees or the provider tax. Fischbach was the author of one proposal to reduce license tab fees, but she'd vote for someone else's plan. "I will support anything to get it reduced because I think it's way out of line," she said.

The provider tax is on health care services. "You're taxing people to go to the doctor," said Fischbach.

*Nursing home workers will get over a four percent wage increase in 1999 and three percent in 2000. For operating costs, nursing home facilities will be compensated by more than three percent this year and more than two percent next year.

The Health and Human Services Bill passed the House still containing some pro-life amendments. The governor threatened to veto any bill that contained any pro-life language which was taken out of the bill so it could pass, because it was a very important bill.

*Stang was a little skeptical of the Light Rail Transportation Bill for the metro area. Although it may be the next step for the Twin Cities, Stang is afraid that it may cut into the funding of the highway projects in rural Minnesota, such as the Highway 23 project.

Stang said the total costs of the light rail transportation are not known yet, but he said light rail transportation systems are very expensive to build and very expensive to maintain.

*Issues that might return to the Legislature when its next session starts in February were: license tab fees, Profile of Learning, a Twins stadium in St. Paul, property taxes, the provider tax, abortion bills, and possibly lowering the state sales tax, depending on the economy during the next year.

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