Wednesday, July 21, 2010

2010 Legislative Session Results

The business community’s results were a combination of offensive and defensive victories again this year. On the tax front, businesses emerged from the session largely unscathed as the Governor insisted on balancing the budget without raising general fund taxes. That’s the good news. But the challenge will be even greater in 2011 as policy-makers tackle a projected shortfall approaching $6 billion for FY 2012-2013.

The budget again will be the top priority in 2011. The urgency for changes to the spending and budgeting processes cannot be ignored as Minnesota faces significant demographic changes with more people demanding public services and fewer people paying for them. Businesses and households don’t have the ability to collect higher taxes to fund their wish lists. Government must follow suit by seeking greater efficiencies in its operations and focusing on truly statewide priorities.

2010 Session – Local Results
Southeast Minnesota Rail Alliance

The Olmsted County’s request for $8 million in bonding funds to prepare design and engineering documents to construct a new rail line around the City of Rochester did not make it in the final bonding bill. On the passenger rail front the January released state wide rail plan named the Rochester-Twin Cities corridor as a Priority 1 corridor.

Mayo Civic Center Expansion

Funding was in the final bonding bill sent to Governor Pawlenty but was line item vetoed. The Governor followed through on his promise and commitment to not sign a bonding bill in excess of $700 million. Using his line item veto authority this was one of the projects shaved out of the $319 million cut. The $34 million bonding ask would have paid for 50% of the construction of additional ballroom/event space at the Mayo Civic Center. The other half would be paid for locally.

Multipurpose Corridor Acquisition

One million was granted to the City of Rochester for the purchase of an abandoned rail bed that would connect he Douglas trailhead to the pedestrian bridge that is being constructed over Hwy 14 near the intersection of Hwy 52 and Hwy 14.

Rochester MnDOT facility upgrade

The district six maintenance facility located in Rochester received $26 million for the construction of additional office space and equipment maintenance and storage space.

National Volleyball Center

This long sought after project received $4 million in bonding dollars to construct additional locker room, bathroom, and volleyball court space at the National Volleyball Center that is attached to Century High School. Construction is slated to begin sometime in 2011.

2010 Session – State Results
  • Minnesota’s new angel investment tax credit is intended to stimulate private investment in emerging businesses and encourage job creation. It provides tax incentives to investors or funds that put money into start-up businesses that are focused on high technology or new proprietary technology. The bill allocates $17 million for angel investor credits in FY 2011, $12 million in FY 2012 and $11.9 million in FY 2013.

  • Three changes were made to the research and development tax credit. First, the first tier of the credit was increased from 5 percent to 10 percent. Second, it is now a refundable credit. Third, partnerships and S-corporations are eligible for the credit.


  • The more than $2.96 billion shortfall in the state’s general fund for FY 2010-2011 was resolved without raising general fund taxes. The session began with a $994 million shortfall, but that changed in the final weeks when the Supreme Court ruled that Governor Pawlenty did not have authority to make his unallotments in the summer of 2009. In the end, the Legislature ratified the lion’s share of the Governor’s unallotments and payment shifts – but still proposed raising $434 million in higher taxes. The Governor vetoed the tax increase. Most of the increased revenue would have been generated by creating a fourth-tier income tax bracket for high-income individuals. The rate would have been 9.1 percent starting at $200,000 income for married joint filers and $113,000 for single individuals. The bracket would have gone away only if the 2013 February Forecast showed a general fund surplus of more than $500 million. This tax would have hit small businesses especially hard as 57 percent of the filers in the proposed bracket have small-business income. Research also shows that high personal income-tax rates are a clear deterrent to investment and hiring by the state’s entrepreneurs. In addition, some high-income individuals have left states that have adopted tax brackets targeted at them. The bill also would have eliminated the state tax benefit of some federal tax deductions for high-income individuals one year earlier than Congress is expected to do. This was known as “accelerated conformity.”

  • Proposal to repeal the foreign royalty deduction and foreign operating corporation provisions and define corporations that are incorporated or do business in so-called “tax haven” countries as domestic corporations. These provisions would increase the corporate tax liability of employers that have significant operations in the state and sell nationally or worldwide.

More work to do in 2011:

  • As difficult as it was to balance the budget for this biennium, the Legislature faces an even more foreboding task for the next biennium. Lawmakers left a projected $5.8 billion shortfall for FY 2012-2013. It is imperative to take immediate steps to slow the growth in spending if we are to avoid future financial crises.

  • The budget compromise contained two provisions to help the state avoid borrowing to manage its cash-flow needs. Both provisions, however, place a strain on cash flow for the affected businesses. First, those retailers subject to the June accelerated sales tax provision have to remit at least 67 percent of sales tax collections in the same month or must remit at least 90 percent of the collection six days earlier in the month following the collection. Though compromise language that was accepted, this is still bad policy. Second, capital equipment and corporate income tax refunds will be delayed for 180 days and is expected to generate about $152 million of one-time savings.

Environment and Natural Resources

  • Initial steps toward streamlining environmental review and permitting processes. Key provisions are: a goal of issuing Department of Agriculture permits within 150 days of application; e-licensing applications; customized environmental assessment worksheets for specific industries/projects; no duplication in the review and permitting processes; coordination among state agencies in the permitting and review processes.


  • Proposal for legislative approval of permits. This would have created additional time, cost and uncertainty for applicants.

  • Requirement that companies provide additional financial assurances on nonferrous mines. Current rules and regulations are sufficient.

More work to do:

  • Additional streamlining of environmental review and permitting processes, including a goal of issuing Department of Natural Resources and Pollution Control Agency permits within 150 days and a measure that any appeals would bypass the district court and go directly to the Court of Appeals.


  • Proposal to create a Nuclear Waste Storage Commission. Xcel Energy ratepayers still would have paid an assessment for permanent storage of spent fuel, but the money would have been diverted from a federal to a state fund. There would be no assurance that the on-site waste will ever leave Minnesota or be adequately stored on-site. In addition, there was the risk that ratepayers would have to pay two assessments – one to the state and another to the federal government.

  • Measure to repeal a modified moratorium on additional nuclear power. The moratorium would go away only if the utility demonstrates it is not seeking cost recovery for planning, design, safety, environmental or engineering studies, or cost recovery for obtaining regulatory approval for a new plant. The onerous conditions placed on utilities would have made the existing moratorium even worse.

More work to do:

  • Continue to seek removal of the ban on additional nuclear power. The moratorium is one of the most stringent of all states because the Public Utilities Commission cannot issue a permit under any circumstances.

Education & Workforce Development

  • Measure that would have allowed local school boards to renew existing operating levy referendums up to10 years without putting the issue before voters. These are levies that were originally approved by voters for a specified number of years.

  • Measure that would have permanently lowered the standards for high school graduation math requirements. Minnesota continues to graduate large numbers of students who are not ready for college or careers.

More work to do:

  • The Rochester Area Chamber will continue to advocate for alternative licensure for teachers. Studies show that second to parents, quality teachers are the top predictor of student success. The measure had broad bipartisan support but DFL leadership blocked votes on the House and Senate floors.

Health Care

  • A plan that the state spend $188 million to expand its medical assistance program for low-income Minnesotans to tap into $1.4 billion in federal money. Instead, an agreement was made where the governor and the next governor would have the authority to opt into the program. That authority would expire January 15, 2011.

  • Medical Assistance surcharge on HMOs – a tax on health care plans that would be passed through to policy-holders.


  • Campaign finance reform that changes current law to allow independent expenditures by corporations. It also modifies penalties associated with the new expenditures and requires corporations that desire to do an independent expenditure to register via a new type of independent expenditure Political Action Committee. The new entities are subject to the same reporting requirements as current PACs. There are several new reporting periods for all PACs, but candidate committees and party units are exempted from the new reports. The bill allows “associations” – including corporations – that contribute to an Independent Expenditure Political Fund to protect the identity of member contributors.


  • Requirement that employers with more than 10 employees provide one hour of paid sick time off for every 30 hours worked up to a maximum of 72 hours, and a maximum of 40 hours for employers with fewer than 10 workers.

  • Measure that would have mandated the specifics of “break time” – meal and work breaks – that employers provide employees.

  • Measure that would have expanded the definition of misconduct, making it easier for workers fired from their jobs to receive unemployment benefits.

  • Measure that would have allowed the commissioner of the Department of Employment and Economic Development – on sole authority without legislative approval – to increase the workforce development fee.

  • Measure that would have prevented employers from considering job applicants’ credit scores as a condition of employment. Though uncommon, employers do use credit background as a tool for certain positions where confidential information is accessible or financial discretion is required.

More work to do:

  • Workers’ compensation reform to streamline the dispute resolution process. Doing so helps injured workers find solutions sooner and saves legal costs.


  • Measure that allows individuals to purchase an enhanced driver’s license as an alternative to purchasing a Passport, as required under federal law, to benefit those individuals who cross the Canadian and Mexican borders on a regular basis.

  • The Minnesota Department of Transportation and the Metropolitan Council are required to provide a planning document every two years to key members of the Legislature describing the overall health of transit operating funds both at present and in the future. The document will help legislators and stakeholders better understand the long-term financial impacts and needs brought on by each new railway.


  • Proposed street utility fee that would have allowed cities to establish “utility districts” for infrastructure improvement projects, and would have allowed cities to expand the improvement project assessment area beyond the area where the work was being completed.

More work to do:

  • The Rochester Area Chamber supports the recommendations of the Strategic Management and Operations Advisory Task Force as a step toward greater efficiencies in the Minnesota Department of Transportation operations and projects. Taxpayers must be assured they are receiving the greatest value for their tax dollars.

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