House Approves $320 Million Supplemental Budget Bill

Many of the major finance and tax bills are nearing completion, and will next go to conference committees to resolve differences between the House and Senate.
(Published Apr 7, 2014)

The full House on April 3 approved a 462-page supplemental budget bill that will adjust funding for state agency operations for the balance of the fiscal year (FY) 2014-2015 biennium, which will end on June 30, 2015.

The bill, HF 3172, includes budget amendments to state agencies and a variety of state programs ranging from economic development and broadband initiatives to K-12 education spending initiatives. In total, the bill will increase state program spending by $322.6 million for the balance of the current biennium.

The state budget for FY 2014-2015 was originally approved by the Legislature and Gov. Dayton during the 2013 session, but it is typical that in the even-year session, the Legislature adjusts the budget to reflect new or emerging initiatives or budget deficits or surpluses. Based on the February state budget forecast and under last year’s enacted budget, the state is expected to have a budgetary surplus of $1.233 billion by the end of the current FY 2014-2015 biennium.

Tax bills affect budget
Earlier this session, the Legislature and governor approved an early session tax bill that repealed several business taxes enacted last year and also adopted language that conforms Minnesota’s income tax system to federal definitions. That bill, now Chapter 150, reduced state revenues by $446.7 million and increased the state’s budget reserve by $150 million. (Read related story.)

The second tax bill—approved on the House floor on April 4—uses another $103.3 million. Within the House plan, the largest share of the remaining projected state surplus is earmarked for capital projects that will be paid with cash. (Read related story.)

The Senate Finance Committee has been meeting to compile its version of the supplemental budget bill. That bill as well as the Senate version of the omnibus tax bill are expected to be finalized this week.

What budget bill means for cities
The House supplemental budget bill includes a variety of provisions that will impact cities.

Broadband development
As approved, the bill establishes the Broadband Development Grant Program through the Department of Employment and Economic Development. It includes $25 million for the program as well as $450,000 to continue broadband mapping services in the state.

Road funding for potholes
The bill includes a $15 million additional appropriation for city and county road funding needs related to the severe winter weather and road degradation. The funding will be allocated to all counties and to municipal state aid (MSA) cities (those over 5,000 in population) on a comparable basis to the way state aid is distributed currently.

Using this formula, counties will collectively receive about $11.5 million, and MSA cities will collectively receive about $3.5 million. The League is aware that this legislation does not address problems in non-MSA cities, and has been advocating that the Legislature provide funds for this purpose.

Environmental funding
The bill includes an additional $7 million of SCORE grants for local government recycling programs, and language waiving state water appropriation fees on projects that are using stormwater as their water source. It also creates a new multi-departmental center at the University of Minnesota to study terrestrial invasive plant and pest species.

Workers’ compensation fix
The bill initially contained a correction to the workers’ compensation statutes to address a reinsurance issue created by last year’s inclusion of post-traumatic stress disorder injuries as a covered injury within the state’s workers’ compensation statutes. On the floor, Rep. Tim Mahoney (DFL-St. Paul) offered an amendment to strip the workers’ compensation article from the bill. The article language was identical to HF 2658, and that bill has now been scheduled for House floor action on April 7.

Railroad and pipeline safety
The bill establishes a process for railroad and pipeline safety response assistance and facilitation with local emergency response entities, including specifying additional responsibilities in emergency planning and preparedness for railroad and pipeline owners, identifying agency duties, increasing the number of state rail safety inspectors, and allocating assessment funds.

The bill initially transfers $2.5 million in FY 2015 from the general fund into a new railroad and pipeline safety account. The ongoing funding is achieved by assessing railroad and pipeline companies $2.5 million annually over five years for training and preparedness on oil and other hazardous materials spills.

Economic development-related transportation funding
The bill includes $10 million for road projects under the Corridors of Commerce Program. The 2013 Legislature created the Corridors of Commerce program by authorizing the sale of up to $300 million in new bonds for the construction, reconstruction, and improvement of trunk highways (2013 Session Law, Chapter 117).

The program has two major goals: to provide additional highway capacity on segments where there are currently bottlenecks in the system, and to improve the movement of freight and reduce barriers to commerce. The funds provided in the supplemental budget bill “may be used for right-of-way acquisition.”

The bill also provides an additional $4 million for the popular Transportation Economic Development (TED) Program, a joint effort of the Department of Transportation and the Department of Employment and Economic Development. The program’s purpose is to fund construction, reconstruction, and improvement of state and local transportation infrastructure in order to create and preserve jobs, improve the state’s economic competitiveness, increase the tax base, accelerate transportation improvements to enhance safety and mobility, and promote partnerships with the private sector. The program provides state funding to close financing gaps for transportation infrastructure improvement construction costs.

Disaster assistance
The bill includes a process for disaster assistance that requires the state to pay 100 percent of the non-federal share of Federal Emergency Management Agency (FEMA)-eligible disaster costs for state agencies, local units of government, and American Indian tribes. It also creates a new disaster contingency account to capture expiring appropriations from prior disasters and to statutorily appropriate money to the Department of Public Safety to pay the non-federal share for state agencies, local units of government, and American Indian tribes, and to award state disaster assistance grants to local units of government and American Indian tribes.

This bill also establishes a new disaster relief program for local units of government and American Indian tribes that are not eligible to receive FEMA assistance or corresponding state disaster aid under chapter 12A, but sustained eligible damages that on a per-capita basis are greater than or equal to 50 percent of FEMA’s county per-capita impact indicator.

Airport development assistance
The bill increases the FY 2014 appropriation for airports fund to $14.6 million (an increase of $1 million) and the FY 2015 appropriation to $16.6 million (an increase of $3 million) for airport construction projects. The new language permits the commissioner of Transportation to establish alternative local contribution rates for funded airport projects compared to what is otherwise required in state statute.

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