Our Top Takeaways from the 2018 Minnesota Legislative Session

The Minnesota House and Senate adjourned late Sunday night, and brought the 2018 legislative session to a close. With Governor Mark Dayton likely to follow through on threats to veto key pieces of legislation, the complete book on the session is still being written.  

Here are quick takes from North Star’s three policy experts on what did—and didn’t—happen this year at the State Capitol:

Photo: Tony Webster

Katie Hatt, Executive Director:

Wins for working people are good public policy and good for Minnesota’s economy. Bills that stabilize Minnesota’s public employee pensions for the next 30 years and that increase benefits for injured workers passed unanimously in both the Minnesota House and Senate. Governor Dayton is expected to sign both pieces of legislation. The House and Senate also finally ratified state employee contracts, which provide modest raises to public workers: 2% now and 2.25% when the new state fiscal year begins July 1.

Additionally, a robust—if imperfect—bonding bill overwhelmingly approved by both legislative bodies would support tens of thousands of jobs in Minnesota on nearly 200 public works projects throughout the state. The most recent economic model by the U.S. Bureau of Economic Analysis projects that every $1 million in construction spending in Minnesota generates 15 jobs.

Urgently needed transit investments were again ignored by legislative majorities. The legislature’s failure to act again this year imperils our state’s continued economic prosperity and the changing mobility needs and preferences of young and older Minnesotans alike. Calls from business leaders to make investments in the bonding bill that would help expand the fledgling but already successful arterial bus rapid transit (A-BRT) network in the metropolitan area went unanswered. Transit investment is a statewide issue: in greater Minnesota, demand for transit is anticipated to increase by 40% over the next seven years. Minnesotans of all ages and all walks of life rely on transit to get to work, to school, to medical appointments, and to see family and friends, but could not rely on the 2018 Legislature for much-needed funding.

Photo: Metro Transit, www.metrotransit.org

An “Everything But The Kitchen Sink” approach to legislating prevented meaningful action on urgent issues important to everyday Minnesotans, but the interests of multinational corporations got plenty of attention. The insistence by legislative majorities to tie up action on urgent policy issues—including elder abuse, school safety, and the opioid crisis—in controversial mega-bills satisfied corporate interests. Standalone bills would have earned overwhelming bipartisan support to meaningfully address the health and safety of Minnesotans. Proposed tax legislation supported throughout the entire session by House and Senate majorities prioritized corporate tax cuts over targeted relief to low- and moderate-income working families—on the heels of federal tax changes that will bestow a $1.5 billion windfall for Minnesota corporations in 2019 alone.

Jeff Van Wychen, Fiscal Policy Fellow:

No one knows when or if tax conformity will happen. The Legislature made state conformity to the federal tax changes enacted in the “Tax Cuts and Jobs Act” (TCJA) its principal tax policy objective during the 2018 session. Unfortunately, policymakers failed to seal the deal. Conservatives in the House and Senate wanted to use the revenue generated by conformity to reduce income tax rates, with the largest rate reductions reserved for corporations. Governor Dayton, by contrast, emphasized tax relief for working families and middle-income households through increases in the Working Family Credit and a new personal and dependent tax credit. These households have the highest state and local effective tax rates, according to the most recent Minnesota Tax Incidence Study.

Meaningful new school funding was left on the table. At least 59 districts confront budget shortfalls next year, and nearly every other district experienced a substantial decline in real per pupil state aid over the last 15 years. Governor Dayton emphasized the need for one-time emergency school aid throughout the session. On the last day of session, the legislature passed a bill that reshuffles school money (including redirecting separate teacher training funds), but does not provide the new resources the Governor sought.

Governor Dayton is serious about fiscal stability. Governor Dayton entered office in January 2011 facing a $6.2 billion deficit—the result not only of the Great Recession, but also years of short-sighted fiscal management and accounting gimmicks necessitated by “no new tax” dogma. He can be credited with righting state finances through responsible and progressive tax increases and fiscal restraint. These policies have provided a balance between state revenues and spending, and also enabled new investments in all-day kindergarten and early childhood education.

The Governor made clear throughout this legislative session that he does not want to leave the state with a fiscal mess like the one he inherited. Reasonable budget projections beyond the current state planning horizon indicate potential future budget deficits after 2021 that are modest in magnitude and easily manageable—but they won’t be if the state indulges in large tax cuts now. The tax cuts proposed by legislative majorities this session ramp up over time, diminishing the impact in the current biennium, but contributing to growing revenue losses in the future.

Peter Teigland, Energy Policy Fellow:

Xcel Energy will not be able to recoup expenses at the Prairie Island nuclear plant for upgrades outside of the normal Minnesota Public Utilities Commission (MN-PUC) process. A proposal that would have allowed Xcel to get pre-approval to charge ratepayers $1 billion for upgrades at its nuclear plant near Red Wing passed the Minnesota Senate, but ultimately did not receive a vote in the House or get to the Governor’s desk.

Monticello Nuclear Generating Plant. Nuclear Regulatory Commission, at https://www.flickr.com/photos/nrcgov/8613623282/in/photostream/

One additional pending issue: Minnesota’s three nuclear reactors at two facilities (Prairie Island and Monticello) provide about 23% of the power for the state. Waste from those reactors is stored in on-site dry casks. Since the early 2000s, Xcel has had to pay a per-cask fee to a special fund dedicated to renewable energy. The omnibus supplemental finance bill (aka #OmnibusPrime) sent to the Governor would charge a flat fee that will decline to $20 million by 2022.

Legislators tried to kneecap the best community solar program in the country with the removal of one word: “financing.” The 2013 community solar law mandated Xcel Energy to offer a community solar gardens (CSG) program that would work, and the MNPUC to review and approve it.

Source: https://pbs.twimg.com/media/Ddf0xD4VQAEUAoE.jpg

The CSG program has been so successful that Minnesota solar jobs grew by almost 50% in 2017, which was the 2nd-highest growth rate in the country. This robust growth occurred even as the solar industry nationwide lost jobs last year in the shadow of uncertainty around new federal tariffs on solar panels. By 2017, Minnesota’s CSG program added enough solar energy to power what 32,000 homes consume annually.

Minnesota gets ready to board the energy storage train. The legislature approved funding for a cost-benefit study that will be an important first step to capitalize on the economic and environmental benefits of this emerging technology. Earlier this year the Federal Energy Regulatory Commission (FERC), which regulates interstate electricity sales and transmission, ordered regional grid operators—like MISO here in Minnesota—to coordinate rules for grid-sized batteries. The state study could recommend important policy options that comport with FERC’s order, such as how Minnesota utilities incorporate storage into future resource plans. Energy storage is the next big thing in energy. It could both create thousands of Minnesota jobs, and make the grid more efficient, cleaner, and cheaper.