Minnesota farmland taxes expected to rise

By Don Davis

Many Minnesota property owners could see some tax relief this year, but farmers can expect higher taxes for at least the next two years.

“What I am hearing is it is making it much more difficult to do business as a farmer,” Rep. Paul Marquart, D-Dilworth, said of agriculture property tax increases.

Still, he said, the Democratic-controlled Legislature and governor’s office have slowed increases that have occurred for more than a decade.

A new, nonpartisan Minnesota House report shows that property taxes as a whole should fall $49 million this year, a 0.6 percent drop, although the cost for each property owner will be different. The tax cut may not be seen on property tax bills because the House figures in tax refunds that Democrats increased.

In 2015, property taxes should go up $238 million, a 2.8 percent increase, the House report predicted.

In both years, farmland property taxes are expected to rise: 8.1 percent this year and 4.7 percent next year.

Researchers emphasize that they are working off their best guess because they cannot predict factors such as how much local governments may raise property taxes and how much property may be worth.

The two major parties waged a news release battle soon after the property tax figures were released. Democrats emphasized this year’s predicted drop in most types of property taxes, while Republicans focused on the 2015 increases.

“We knew farmers and rural landowners were going to be hit hard with property tax increases, but now it appears that homeowners in all tax brackets can expect to pay more despite promises the Democrats made over the past two years,” said Rep. Paul Torkelson, R-Hanska. “Make no mistake, hardworking Minnesotans from all corners of the state are going to feel the impacts of this property tax increase.”

A news release from Democratic-Farmer-Labor Party lawmakers showed a different side, explaining that when Republicans were in charge, property taxes soared $370 million in 2012.

“The DFL-led Legislature made property tax relief a priority in our budget and, in particular, made direct property tax relief a priority,” the DFL reported, adding that Democrats approved $178 million in property tax relief in the past two years and more than 300,000 homeowners should receive larger property tax refunds.

Marquart, long an outspoken supporter of lowering farm taxes, said that at least agriculture taxes are not rising as fast as they would have under the policies in effect when Democrats took over in early 2013.

The rising taxes still bother him: “I don’t like that, but I think we are getting ag property taxes under control.”

Marquart said the main reason farm property taxes are going up is that farmland value is rising. While home values recently have gone up 6.8 percent, ag land is up 13.3 percent, he said. That shifts property taxes from homes to farmland.

Farmers complain that while land prices are rising, they do not benefit unless they sell their farms.

Marquart said farmers in his western Minnesota district report taxes that not long ago were $14 to $15 an acre now are $30 to $40. “It really has impacted the cost of production.”

Marquart said he does not have the answer to how to fix ag taxes, but said the Legislature and governor must tackle the issue next year.

“We still have a lot of work to do, absolutely,” Marquart said. “But we are moving in the right direction.”

Political notebook: Dems push rural issues

By Don Davis

Minnesota House Democrats want voters to know that most rural residents should pay lower property taxes on their homes after actions they took.

“We think it is good news for Minnesotans and Minnesota homeowners,” House Speaker Paul Thissen, D-Minneapolis, told a handful of greater Minnesota reporters on a Friday conference call.

After property taxes rose 84 percent in the past dozen years, he said, they now will drop 4.9 percent after actions during last year’s legislative session.

While numbers Thissen and colleagues released are overall statewide figures, Rep. Paul Marquart, D-Dilworth, said the overwhelming majority of rural Minnesotans’ home property taxes will fall.

That is not the case, however, with taxes on farm land.

House Property Tax Chairman Jim Davnie, D-Minneapolis, said he hopes to find a way to lower farmland tax in a second tax-cut bill the House expects to debate this legislative session. Also possible are bigger homeowner and renter refunds and fixing a formula problem that cost 11 counties state aid.

But Senate Tax Chairman Rod Skoe, D-Clearbrook, says there will be no second tax-cut bill. And $500 million in tax cuts the House approved Thursday cut deeper than the Senate will, he said.

Marquart said that rural Minnesota home taxes already are down $30 million, and any homeowner who otherwise would pay more could get a big enough refund to counter higher taxes.

It is obvious around the Capitol that House Democrats are worried about losing rural Minnesota seats in the November election.

Minutes after the House approved its $500 million tax cut, most rural Democratic members sent news releases out via email.

“These tax cuts will go directly to middle class families in Minnesota, including the business owners of main street store fronts and the folks who support them” Rep. Ben Lien, D-Moorhead, said, comments typical of rural Democrats.

“Our great state is on the right track and the way to continue that progress is to grow our economy from the middle out, starting with these middle-class tax cuts,” Rep. John Ward, D-Baxter, said in in his news release.

“The way to continue building on our progress is to expand middle-class economic opportunity,” Rep. Mary Sawatzky, D-Willmar, said.

Republicans were not buying it.

Senate Minority Leader David Hann of Eden Prairie echoed other Republicans’ views by saying that Democrats cannot declare victory in the last half of the Legislature’s two-year session. Last year’s $2.3 billion tax increase is cannot be counterbalanced by a $500 million cut, he said.

Democrats lose 2 votes

A tax-cut bill the House passed in record time, less than two weeks into this legislative session, gained support of all but two representatives.

Democratic Reps. Jason Metsa of Virginia and Ryan Winkler of Golden Valley put the only two red votes on the tally board, later saying the money used to finance the $500 million in tax cuts could have been better spent.

Metsa said he supports the part of the bill that matched Minnesota tax law to federal law, which not only would save money but also make tax returns simpler.

“I think the remaining dollars would’ve been better spent on additional property tax relief, support for our nursing homes and further restoring Minnesota’s commitment to our counties, cities and townships after a decade of funding cuts,” Metsa said.

Winkler said he voted against the tax cut because they were too large.

“I support some of the individual provisions, but think that we should not pass cuts within a year of enacting the first truly balanced budget in a decade,” Winkler said. “In addition, a surplus is a good thing to re-invest in Minnesota’s economy through early childhood education, lower higher education costs, higher pay for care providers, improved transportation, etc.”

More propane transportation

Upper Midwest U.S. senators are pushing legislation to make it easier to transport propane to people affected by shortage of the fuel and its high price.

U.S. Sens. Amy Klobuchar of Minnesota, Al Franken of Minnesota, John Hoeven of North Dakota and Tammy Baldwin of Wisconsin introduced a bill to extend the number of hours drivers can transport propane.

Minnesota U.S. Reps. John Kline, Erik Paulsen, Tim Walz and Rick Nolan have a similar bill.

The longer hours would be allowed through May 31.

“With winter weather still bearing down on Minnesota, we need to do everything we can to deliver relief to families who are feeling the impacts of the propane shortage,” Klobuchar said. “By letting truck drivers work longer hours for the rest of the winter, this legislation will help speed propane supplies to those who need it most and deliver some much-needed certainty to families across Minnesota.

Cash for projects?

Before Gov. Mark Dayton announced changes he wants to make in the state budget on Thursday, it appeared likely that money from a $1.2 billion surplus would be used to fund some public works projects.

However, Dayton tried to put an end to that as he opted against paying cash. He said borrowing money by selling bonds is a better way to fund public works projects such as fixing buildings and constructing new ones.

He included enough money in his revised budget to pay interest on bonds so the Legislature could approve a nearly $1 billion public works bill instead of $840 million legislative leaders want. Legislative leaders are open to paying cash for some projects.

Mute those reporters

Gov. Mark Dayton has been homebound after hip surgery, forcing him to dump news conferences in favor of conference calls with reporters.

When he announced his supplemental budget Thursday, the conference operator explained that reporters’ telephones were muted while Dayton talked.

“I kind of like these calls when all the reporters are on mute,” Dayton cracked.

Speaker’s rural initiatives feature tax cut

By Don Davis

Rural Minnesotans’ ears will be burning when state legislators return to the Capitol Feb. 25 for their 2014 session.

House Speaker Paul Thissen, D-Minneapolis, promises a variety of greater Minnesota issues will be debated, especially a provision to lower ever-increasing property taxes on some farmland.

Thissen’s list ranges from removing a tax on farm implement repair that costs Minnesota farmers $2 million a month to providing more greater Minnesota economic development assistance. The speaker, in a Forum News Service interview, could not say how much the Democratic initiatives would cost, other than most would be “in the millions, not tens of millions of dollars.”

The two most expensive proposals are eliminating the implement repair tax and increasing the ag property tax credit.

Rep. Paul Marquart, D-Dilworth, said the ag property tax issue he is leading may not help some small farmers, but most would get property tax reductions of up to $575.

The reduction would begin this year on taxes already partially paid, he said, and only apply to homestead farmland. That generally is farmland where the farmer or a relative lives.

Actions legislators and Gov. Mark Dayton took last year lowered property taxes for many Minnesotans, but not for farmers.

“Not everyone has seen that relief,” Marquart said of the 2013 tax actions. “In fact, farmers have seen big property tax increases.”

More services funded by property taxes, such as fire and law enforcement, are not more in demand just because today’s land prices are higher, he said.

“Land value does a farmer no good until he sells it,” Rep. Paul Anderson, R-Starbuck, said. “It is still the same productivity. The increasing value doesn’t give me a better operation in terms of what I produce.”

If a farmer pays $15 an acre in taxes, the $2 to $3 tax break Marquart proposes is significant, said Anderson, a farmer.

Every little bit helps, he added.

Early estimates indicate that the added farmland credit would cost the state $33 million this year.

Ending the farm equipment repair tax implemented last year would be another step to help farmers, rural lawmakers said.

“I am not so sure our metro colleagues understand how big those repair bills get,” Anderson said, adding that he has seen bills of up to $30,000 to fix self-propelled farm implements.

Thissen said he is sure the Legislature will vote to overturn the tax.

Thissen said some counties were left out when the state increased County Program Aid $40 million last year.

Nearly a dozen low-population counties with lot of farms lost state money in the deal. That should be fixed, he said.

Marquart said the cost to provide money they lost should come to less than $1 million.

“The new money (approved last year) is weighted more heavily toward the metro area,” Anderson said. “That is a path I don’t like to see us going down.”

Economic development aid also is in the legislative agenda.

“We still have not seen all the economic developments they saw in the metro area,” Marquart said.

Thissen suggested that lawmakers take action to improve fast Internet access, known as broadband, in rural areas. He said grants to fund Internet infrastructure construction could be considered and local governments may be given an easier route to borrow money for internet expansion.

The speaker also proposes several low-cost programs to provide aid for small businesses, mostly in greater Minnesota.

One would add money to a loan fund for businesses. Another would provide “innovation vouchers,” basically state subsidies to help manufacturers pay for private or college consultants that can provide specific expertise the business may not have.

Thissen said he wants state officials to find more funding for training workers. In many rural areas, jobs go unfilled because they cannot fine enough workers, such as welders, within commuting distance.

A long-term solution to high propane prices caused by an Upper Midwest shortage also is on the agenda, but Thissen said he does not have a specific plan.

Anderson, however, is working on a bill to eliminate sales tax for two years on propane tanks. The bill is his answer to the need to increase propane storage in Minnesota, so the fuel may be bought in the summer, when prices are low, and used during cold winter weather.

Thissen said long-term care funding will be discussed, but could not give specifics about what nursing homes and other elderly care organizations can expect. Officials in rural areas say nursing home pay is so low that they have to turn away residents for lack of staff.

Thissen said that it is important for even Twin Cities’ legislators to support greater Minnesota issues. At some point, he said, there will be too many rural Minnesotans moving to the Twin Cities, when it would benefit everyone for them to remain home.

‘People have a right to expect lower property taxes’

By Don Davis

The future of state aid that many local Minnesota governments depend on may be at stake in the next few weeks as property taxes appeared to be headed up.

By mid-December, city, county and other local officials decide how much property tax they will collect. Those decisions come on the heels of the Democratic Legislature and governor sending them large bundles of new money in the name of property tax relief.

If taxes go up, local governments may see less state aid in the future. That could lead to service cuts or property tax increases, much like Minnesotans have experienced for a decade.

“People have a right to expect lower property taxes,” state Rep. Paul Marquart, DFL-Dilworth, said.

But many Minnesotans probably will not see lower bills.

A state Revenue Department report earlier this month indicated that property tax levies statewide could rise nearly 2 percent statewide. Cities expect to raise tax levies 2.1 percent, counties 1.5 percent, townships 2.1 percent, schools 2.6 percent and other taxing districts 2.3 percent.

Democratic Gov. Mark Dayton and others are concerned that the preliminary numbers show 63 percent of cities and 77 percent of counties plan higher property tax levies.

Democrats did not think that would happen. They thought that millions of dollars in additional state aid they sent to local governments would result in property tax cuts.

“There will be a number of legislators who seize on any increase as evidence that local governments are (big) spenders and they will take every dollar and spend it and get more and more and they will take every dollar they can get,” Dayton said. “So they are going to undermine the case we have been making.”

With Dayton saying that increases will “seriously undermine our case,” Revenue Commissioner Myron Frans plans to talk to local government leaders who propose raising tax levies in the hope that they will trim their tax levies.

The latest Revenue Department numbers come from preliminary property tax levy decisions local officials have made. Each governing body needs to make a levy final decision by mid-December. State law does not permit preliminary levies to go up, only stay the same or shrink.

Statewide, preliminary levies always are higher than the final ones. They usually fall a percentage point or less, which if it happens this year tax means levies would rise a bit.

The preliminary levies are a mixed bag, Dayton said. “We reduced property tax increases, but our goal was to reduce property taxes.”

Senate Tax Chairman Rod Skoe, DFL-Clearbrook, said that even if levies increase, “the average property taxpayer probably will not see an increase.”

A higher levy does not always mean higher homeowner taxes. For instance, if business property value increases more than home value in a community, businesses would pay a higher percentage of taxes and home property taxes could fall. The situation is different in each community.

Frans and Dayton said that, despite their concerns, they understand the need for higher taxes.

Frans said that in Ada, for instance, he learned that when Local Government Aid was falling in the past 10 years, the city decided to buy a new police car every six years instead of every five years. With higher LGA coming, city officials plan to return to the old purchase schedule to try to prevent equipment problems.

Even if property taxes rise, Gary Carlson of the League of Minnesota Cities and those representing other forms of local government say that new money is needed after 10 years during which state aid often fell, or at least did not keep up with inflation.

The levies announced this month, at less than a 2 percent increase, easily could have been 6 percent or 7 percent hikes without the additional state aid, Carlson said.

Salary freezes, hiring caps and other cuts have hampered local governments, Carlson said. “At some point, and maybe it already has started, there is some pressure to fill some of those jobs, to undertake some of those projects, to kind of get back to the traditional flow of services.”

Local governments have held down property taxes for years, said Beau Berentson of the Association of Minnesota Counties. “We are still dealing with a decade of underinvestment, under funding.”

Skoe said his area is a good example of county-to-county differences.

Beltrami County’s preliminary 2014 levy is the same as the current one. But next door in Clearwater County, officials decided to sell a hospital and have related debt that needs to be paid, leading to a preliminary 14 percent levy increase.

One factor influencing higher taxes is that unexpected local aid cuts over the years have made local officials leery about trusting state government to come through with money that was promised.

“I have had that specific conversation on many occasions,” Frans said.

Given that lack of trust, some local budgets are built without counting on full state aid, possibly triggering larger-than-needed levy increases.

With increases looming, some say, there could be a fight to keep Local Government Aid and County Program Aid as is.

“I do think it makes it harder for local governments to make the argument that LGA is about property tax relief,” House Speaker Paul Thissen, DFL-Minneapolis, said.

Local Government Aid was created in 1971 to give cities without much property wealth (and, thus, a harder time collecting property taxes) the ability to provide fundamental services such as police and fire protection. It has become critical for many cities, such as Minneapolis, St. Paul and Greater Minnesota communities.

A formula designed to determine financial need means most Twin Cities suburbs receive little, if any, LGA. Suburbs generally have more property wealth than communities that receive LGA, so they can collect more property taxes.

“A lot of suburban legislators are going to have doubt,” Marquart said. “’Is that the right investment to make?’ I’m going to be honest, that is a fair question.”

If the final levies next month show increases, Marquart said, the news will “send a very clear message and determine the future of Local Government Aid.”

“The state of Minnesota is watching,” Marquart warned.

Democrats “came through” for local governments, said Larry Jacobs from the University of Minnesota’s Humphrey School of Public Affairs, “and the taxes still go up. I think this was an overreach on the part of local governments. I think they might have lost an ally in the Capitol.”

Most importantly for local governments, Jacobs added, “this could be an end to what had been a pretty nice gravy train.”




New money the governor and Legislature approved sending to local Minnesota governments next year:

– $140 million in homestead credit refunds and renters’ credits, which goes directly to Minnesotans

– $129 million in sales tax exemptions for cities and counties (a figure cities and counties say actually will be half that size)

– $80 million increase in Local Government Aid, raising the total to $507 million in 2014

– $40 million increase County Program Aid, raising the total to $105 million next year

– $10 million in township aid, a new program


Property taxes, mostly levied by local governments, increased from $4.4 billion in 2002 to $8.3 billion this year.

Divide remains between rural Republicans, House leaders

Murphy, Marquart

By Danielle Killey

House Majority Leader Erin Murphy and Rep. Paul Marquart stood side-by-side Tuesday introducing House Democrats’ education funding plan.

Murphy, DFL-St. Paul, praised Marquart’s work as education finance chairman: “He has done such a fantastic job.”

Indeed, politics can make unexpected allies.

Marquart, DFL-Dilworth, had challenged Murphy to lead the House Democratic-Farmer-Labor caucus after last November’s elections. Rep. Paul Thissen of Minneapolis was elected House speaker, and Marquart said he wanted to make sure rural Minnesota was represented in leadership.

Marquart lost the leadership contest, but said he was pleased to land the job as education finance chairman. His committee decides the budget for the state’s largest spending area.

Marquart said he was relieved when he saw many other rural members named to committee leadership spots as well, allaying some concerns about a lack of input from greater Minnesota that many members outside the Twin Cities metropolitan area raised as the legislative session began.

“I thought, ‘here’s where the balance is,’” Marquart said.

Some rural lawmakers still are not convinced.

“I think we’re left behind, definitely,” Rep. Debra Kiel, R-Crookston, said of rural Minnesotans under Democratic budget plans.

She said the proposals do not address real needs outside the Twin Cities area and could hurt small businesses and farmers.

“I think they need to re-examine their priorities,” Rep. Rod Hamilton, R-Mountain Lake, said of Democrats. “I definitely have concerns.”

Many rural Republican lawmakers cited recent approval of the environment and agriculture finance bill, which included water usage fee increases, an example of plans they say will disproportionately impact greater Minnesota.

Before the legislative session began, Republican lawmakers said agriculture funding would be overshadowed by other issues when it was joined with environment and natural resources for finance talks, and they were not happy with the result.

The bill passed without any Republican votes.

“I think this is one of the first times we have had a lack of bipartisan support there,” Rep. Paul Anderson, R-Starbuck, said. “I just don’t think this is a common-sense approach to how things work in rural Minnesota.”

Murphy said Democrats intentionally aimed for significant rural committee leadership overall to ensure those voices would be heard and said the budget plan reflects that.

“I think Minnesota as a whole will experience the benefits,” Murphy said. “We pay a lot of attention to different areas of the state.”

“We said we’re not going to play games with the budget anymore,” Marquart said. “That leads to balancing it on the backs of rural Minnesota often.”

Marquart said those Republicans concerned about rural Minnesota should look at the difference from the past two years, when the GOP controlled the Legislature.

“Rural Minnesota took a hit,” Marquart said. “We reversed some of those things.”

“I think the overall budget is excellent for rural Minnesota,” he added, citing his education finance bill, property tax relief and a 3 percent increase in funding for nursing homes. “I would say, look at the results.”

Thissen said a possible public works borrowing bill also would include funding toward important projects in rural Minnesota.

Kiel acknowledged some rural cities might see more state funds from changes to Local Government Aid and property tax relief plans. But she said proposed alcohol and cigarette taxes, the water fee increases, education requirements and other policies would cost more than any benefit those communities might see.

“Even if we raise LGA, we’re going to turn around and spend it and charge more money,” she said.

Kiel said other Democratic proposals such as raising the minimum wage will hit rural Minnesota harder than the metro as well. “That’s going to be detrimental to businesses.”

Leaders “truly think they’re trying” to keep rural Minnesota in mind, Kiel said.

Murphy grew up around agriculture and said she has farmers in her family. She said she understands the ag industry’s strength is essential to the state’s success.

But top concerns are different from rural to metro areas, Kiel said, and it is hard to advocate for both.

“If everything’s a priority, nothing’s a priority,” Hamilton said.

Marquart said he thinks Thissen and other leaders have “made a concerted effort to make sure the results are beneficial for rural Minnesota.”

“We know if greater Minnesota succeeds, we’ll all succeed,” Thissen said.

Hamilton said the final results of the session remain to be seen in the last few weeks, and Democratic leaders still will be in place next year, the second of a two-year legislative session.

More policy issues likely will come up then, Anderson said, and the impacts on the state outside the metro area might be clearer.

“There could be a lot more issues that are near and dear to rural Minnesota,” Anderson said. “It’s kind of a two-year trial here.”

 Reporter Don Davis contributed to this story.

Update: Education debate about more spending, better economy

By Don Davis

A debate about education funding goes beyond helping individual students: There is widespread agreement that a better education system would help the economy.

However, there is less agreement about how to achieve those improvements.

Rep. Paul Marquart, DFL-Dilworth, tied the economy and education together Tuesday as the Minnesota House voted 83-50 to approve a $15.7 billion, two-year funding bill for schools. Many Republicans opposed the bill, saying it would place too many mandates on schools and remove a state law requiring students to pass a test before graduating.

Much of the $550 million of increased spending would go to early-childhood education, including all-day kindergarten, a concept that Marquart said is the basis of improving Minnesotans’ education.

“We are going to get every single child to the starting line on time,” said Marquart, House education finance chairman.

Education does not end there, he said. “When our students leave high school, on Day 1 they will be ready for success.”

Marquart, whose bill picked up some Republican votes but mostly was backed by Democrats, said the vote was for historic education finance reform. “No ambition is too bold, no goal is too high.”

The chairman quoted Federal Reserve officials as saying the Minnesota economy could get a $5 billion-a-year boost if what he sees as a more effective education system is implemented. And, he said, the early years are when to start strong education practices.

“Economically speaking, early childhood programs are a good investment …” Fed Chairman Ben Bernanke said in a speech last year. “Studies show that the rest of society enjoys the majority of the benefits, reflecting the many contributions that skilled and productive workers make to the economy.”

A coalition of Minnesota businesses agrees with Marquart and Bernanke that early-childhood education is important for the economy, but has taken to the airwaves fighting the House bill’s provision overturning the graduation test.

Coalition leader Charlie Weaver called the Marquart plan “the elimination of state expectations for student achievement on the state’s reading, writing and math standards to earn a high school diploma.”

Added Rep. Sondra Erickson, R-Princeton: “I think we are dumbing down the diploma.”

Among the major goals Marquart laid out is to make sure every student graduates from high school by 2027.

Minnesota schools carry a 76 percent graduation rate, the chairman said. The Marquart plan would require school districts to prepare plans with a goal of graduating every student.

The state would check progress districts make to graduate all students, have all students reading by third grade and see better achievements for minorities. If a district fails three straight years, the state could take over school administration.

Marquart said the current graduation test is not working, citing a large number of college students who need to take remedial classes.

His bill would require school districts to begin in middle school preparing students for college or a job by the time they finish high school.

The House bill provides enough money for every school district that wishes to establish all-day kindergarten with state funds.

However, Rep. Dean Urdahl, R-Grove City, said some districts do not have the room for all-day kindergarten, so they would be left out.

Overall, Rep. Kelby Woodard, R-Belle Plaine, was not happy with the House bill, saying it includes too many mandates. “We need to stop acting as the state school board.”

Erickson said the bill makes the Minnesota Education Department a “command and control center.”

Education spending, the largest single part of the Minnesota budget, would rise $550 million in the next two years under the House Democratic plan.

Among items in the House bill are those:

– Increasing per-pupil payments to school districts by $209, which is 2 percent more in the school funding formula each of the next two years.

– Adding $50 million to various early-childhood programs.

– Taking steps to close the gap between districts that have high revenue and those with less revenue potential.

– Preventing schools from firing a coach purely on parental complaints.

State House poised to pass $15.7 billion education funding bill


By Don Davis

Education funding, the largest single part of the Minnesota budget, would rise $550 million in the next two years under a House Democratic plan being debated this afternoon and tonight.

Early-childhood education, including funding all-day kindergarten statewide, is the foundation of the $15.7 billion, two-year plan.

“We are going to get every single child to the starting line on time,” said Rep. Paul Marquart, DFL-Dilworth, House education finance chairman.

Among items in the bill representatives are expected to pass:

– Increasing per-pupil payments to school districts by $209.

– Adding $50 million to various early-childhood programs.

– Paying back schools $850 million in loans by adding a surcharge on the richest Minnesotans’ income.

– Replacing the existing graduation test with a new system of evaluation beginning in middle school.

Among the major goals Marquart laid out is to make sure every student graduates from high school by 2027.

Minnesota schools show a 76 percent graduation rate, the chairman said, but students of color achieve a far lower rate.

To increase graduation rates, the Marquart plan requires school districts to prepare plans with a goal of graduating every student. The state would check to see how districts are doing and if a district fails three straight years, the state could take over district administration.

The plan would replace current law that requires high school students to pass a test before graduating.

A coalition of businesses support the existing test and in a letter to representatives coalition leader Charlie Weaver called its elimination “devastating.”

Weaver called the Marquart plan “the elimination of state expectations for student achievement on the state’s reading, writing and math standards to earn a high school diploma.”

Half the states have such tests, Weaver said. “Minnesota is poised to return to the time when we had no common expectation for high school graduation.”

However, Marquart said, Federal Reserve officials say the state’s economy could get a $5 billion-a-year boost if what he sees as a more effective education system is implemented.

Legislative notebook: Tax talk divided

By Don Davis

A parade of lobbyists picked apart proposals by House and Senate tax committees Tuesday while others gave the plans their blessings.

Among dozens of testifiers was Frank Orton of Walker, whose company owns 15 northern Minnesota convenience stores. Ones in East Grand Forks and Moorhead would be hurt by a proposed $1.60 per-pack increase in cigarette taxes, he said.

“It is going to affect all border cities drastically,” he added, not just those bordering North Dakota like two of his stores.

“We are competing with two hands behind our back when competing with North Dakota,” Orton said, and if taxes increase “you might as well cut the hands off and our legs as well.”

Orton also told Gov. Mark Dayton about his concerns when Dayton visited Moorhead recently.

Minnesota liquor lobbyists complained that a House provision to raise alcohol taxes could add $2 in tax onto the cost of a 12-pack of beer.

Minnesota-based brewers would get a tax break, but imported drinks would cost an average of 7 cents more.

City leaders praised a provision to simplify and add money to Local Government Aid, a program that provides state funds to cities.

“This is, in our view, a very historic reform,” said lobbyist Tim Flaherty of the Coalition of Greater Minnesota Cities.

But Sen. Paul Gazelka, R-Nisswa, complained that the bill would reduce the percentage of LGA going to rural cities.

Flaherty said the formula is fair because it would give LGA to many suburbs that now receive none. But, he added, more money is needed than now is spent on LGA.

“We only support the formula with the additional $80 million,” Flaherty said. “To cement this reform into the future, we are going to need to see moderate increases in the future.”

Sen. Julianne Ortman, R-Chanhassen, complained that there has been no estimate about the full cost of a proposal to begin taxing clothing, a part of the Senate tax bill. She said if clothing is taxed, fewer people will visit Minnesota — especially Mall of America — which would affect other sales such as airline tickets and motel rooms.

911 calls protected

The Senate unanimously approved a bill to allow criminal charges against those who call 911 under false pretenses.

Sen. Susan Kent, DFL-Woodbury, said her bill “creates the option for a prosecutor to charge an individual with a felony if the individual intentionally reports a fictitious emergency with the intent of getting an emergency response, and if an emergency responder or someone else is seriously injured or killed as a result of the emergency.”

The bill also makes it a felony to use communications devices to interfere with, overload or otherwise prevent the emergency call center’s system from functioning properly.

Education bill advances

A bill increasing public school spending has passed the House Taxes and Ways and Means committees.

The bill by Rep. Paul Marquart, DFL-Dilworth, supports a goal of by 2027 reaching 100 percent high school graduation, 100 percent literacy by third grade and 100 percent career and college readiness by graduation.

The bill would provide money for all-day kindergarten statewide and appropriate $50 million for pre-school scholarships. Also, basic state school funding would increase 4 percent.

“This bill is going to have a significant positive impact on the economic future of this state,” Marquart said. “Investments in proven programs like all-day kindergarten and early childhood scholarships combined with additional resources for our schools will put our children on the path to the world’s best workforce.”

The full House is to vote on the bill next week.

Judiciary funded

Senators Tuesday approved 47-18 spending nearly $1.8 billion on judicial, corrections and related purposes for the next two years.

That is $88 million more than is being spent in this budget cycle. The increase includes giving judges and justices 3 percent raises on July 1 and 4 percent increases the following year.

Funding also includes new personnel for the Tax Court and increased technology spending.

The Corrections Department, which operates state prisons, would get $487 million of the budget.

Border city aid

The House tax bill moving through committees includes $1.5 million to help Moorhead, Dilworth, Breckenridge, East Grand Forks and Ortonville compete with lower-tax North Dakota.

For years, the cities have received help to lower taxes for new and expanding businesses. For instance, businesses could receive sales tax exemptions for new equipment investments, get tax credits for hiring new workers or expanding facilities and receive property tax credits on new or expanded facilities.

“Our border communities are in a very unique situation,” said Rep. Jay McNamar, R-Elbow Lake. “Obviously, we are working hard to provide options for all of the communities in Minnesota, but when you’re neighboring another state, you deal with a whole different set of circumstances.”

Decker highway named

Gov. Mark Dayton Tuesday signed a bill naming a portion of Minnesota 23 in Stearns County as Officer Tom Decker Memorial Highway.

The bill was brought by Rep. Jeff Howe, R-Rockville, and Sen. Michelle Fischbach, R-Paynesville, to honor the police officer who died in a Nov. 29 shooting. Decker, whose family attended the bill signing, was a six-year Cold Spring Police Department veteran.

Businesses want test

A coalition of businesses is buying broadcast, online and other advertising urging lawmakers to keep a test high school seniors must pass before receiving their diploma.

“We don’t like to get rid of the consequence,” said Charlie Weaver, representing the coalition.

Legislative Democrats propose doing away with the test that first was required in 2000. Known as the Basic Skills Test, Weaver said it especially helped minority students graduate.

Weaver said businesses are concerned because they are worried about having enough educated employees. He said the businesses are spending “six figures” to finance the statewide campaign.

House DFLers set high education funding goals


By Don Davis

Goals of 100 percent high school graduation, every third-grader being able to read, ending an achievement gap and all students being ready for careers or college after graduation are lofty, but House Democrats say their sights are set on those accomplishments by 2027.

Rep. Paul Marquart, DFL-Dilworth, said Tuesday that the $15.7 billion House Democrats want to spend on education in the next two years would “actually make a difference in the life of every single student of this state.”

The House education financing plan closely follows one released by Democratic Gov. Mark Dayton, but takes a new approach to improve education.

Marquart said schools would be required to submit plans to show how they would achieve the major goals. Once approved by state officials, schools then would be required to make annual progress toward the goals.

If a school did not make good progress in meeting the goals three straight years, the state could step in and maybe even take over a school.

Marquart said state Education Department officials would be the judges about whether schools are making adequate progress.

Schools would receive an additional per-student payment of $104 each of the next two years “to give schools the resources … they need to meet those goals,” Marquart said.

The plan calls for spending $15.7 billion in the next two years, the largest part of a proposed $38 billion budget, a bit more than in Gov. Mark Dayton’s budget plan. The Senate has yet to announce its school budget.

Current education spending is $15.5 billion.

Rep. Kelby Woodard of Belle Plaine, the top House education Republican, said Democrats are off to a good start, but tax increases they propose are not needed to fund schools.

“It is disappointing, however, Democrats propose spending new money to create new layers of government bureaucracy while thrusting even more unfunded mandates on our schools,” Woodard said. “Those are key areas we need to address before we gain wholesale bipartisan support.”

House Speaker Paul Thissen, DFL-Minneapolis, said that education improvements, especially for young children, are “the best way to build a strong middle class.”

Minnesota used to be the top education state, House Majority Leader Erin Murphy, DFL-St. Paul, said. “We have slipped to the middle of the pack in the last 10 years.”

Marquart, House education finance chairman, said his bill would fix the problems Murphy mentioned. He said proven tactics would be used by Minnesota educators, particularly new efforts in early-childhood education.

About $50 million would go to providing scholarships to families with 3- and 4-year-olds to attend public or private preschools, Marquart said. They would need to have incomes less than 185 percent of the federal poverty level to qualify for the state-issued scholarships.

Marquart estimated that 8,000 students would get the scholarships, but that only is a quarter to a third of those who need them. The average scholarship would be $7,400 a year.

Marquart said he expects every Minnesota school district to take advantage of the all-day kindergarten money.

New general money available to schools could be used as districts wish, but Marquart said they would need to use it to reach the main education goals.

The portion of the education plan to require continual progress should be treated like coaching, Marquart said. “It is coaching and working with the excellent staffs in the state.”

Political notebook: Boomers to cost


By Don Davis

Baby boomers will make writing the state budget harder, reduce the Minnesota labor force and cause state health care spending to soar, State Demographer Susan Brower said.

“Aging pressure” is how Brower termed the issue.

The demographer said aging boomers will “place new pressures on the state budget, especially in the areas of health and long-term care.”

An older population means more money would be needed for a Medicare supplement program, she said, as well as programs that fund health care needs of elderly, poor and disabled Minnesotans.

One of the big issues will be state funding for long-term care, such as nursing homes. Brower presented numbers showing that a third of baby boomers do not know how they would pay for long-term care and nearly 20 percent expect to just rely on government-paid programs.

If the state is to pay health expenses, she said, legislators need to understand that those costs rise dramatically as a person ages. Annual health care costs are $6,500 for those ages 45 to 64, she said, but soar to $10,700 for those older than 65.

While baby boomers head to retirement and wait in doctors’ offices for care, they will leave behind a gap in the state workforce.

Brower said the nearly 1.5 percent annual growth in the workforce size from the late 1990s will shrink to 0.2 percent by 2025. As that creates a worker shortage, Brower said, education needs to pick up the slack to train more efficient workers.

Rep. Paul Marquart, DFL-Dilworth, said what population growth there is will come from minorities such as Hispanic and black Minnesotans, so the state education system needs to make sure they learn as well as white students.

“That will be huge for economic competitiveness,” Marquart said.

 Budgets coming

The rest of April will be packed with numbers as House and Senate Democrats release their budget plans piecemeal.

In coming days, the Senate will announce its state department, transportation and judiciary budget plans.

The House expects to see its health and human services funding bill soon, too.

“We’ve shifted into high gear on the budget,” said Senate Majority Leader Tom Bakk, DFL-Cook.

The way things work at the Legislature, each budget committee chairman is in charge of drawing up a budget in his particular area after legislative leaders decide how much is available to spend.

There is general agreement among Democrats who control the Legislature and Democratic Gov. Mark Dayton to spend about $38 billion in the next two years. But they differ on specifics about how much to spend in each area.

Bakk said the DFL budget outlines, being filled out this month, are good starts, but not the end of budget changes. “This is going to take more than one budget cycle to get us where Minnesotans want us to be.”

 Bonding announcements set

Two of the three public works funding bills are due out soon, with plenty of questions about whether they can pass.

Gov. Mark Dayton plans to let Minnesotans know early in the week how he would spend money borrowed for public works projects around the state. The House expects to release its public works plan Tuesday, but senators’ suggestions will come later.

Their bills are expected to propose spending $750 million to $800 million, to be paid by the state selling bonds.

Republicans say a bonding bill is about the only place where they have a say since Democrats control the Legislature and governor’s office, and they generally do not want to borrow the money. The state constitution requires bonding bills to pass with a three-fifths vote, meaning Democrats cannot pass the bill on their own.

Dayton is expected to ask for more than $100 million to begin a state Capitol renovation project that eventually is expected to cost more than twice that.

Republican leaders said Friday that they want the Capitol work, but would not commit to supporting a bonding bill this year.

“The bonding project I want to do is the Capitol,” said Senate Majority Leader Tom Bakk, DFL-Book.

 Hospital changes eyed

Minnesota officials are keeping a close watch on proposed changes to Fairview Health Systems.

Attorney General Lori Swanson scheduled a Sunday hearing about South Dakota-based Sanford Health’s proposed Fairview takeover. The next day, University of Minnesota President Eric Kaler set a meeting to discuss the possibility of the university running Fairview.

Fairview is home to the University of Minnesota Medical Center and clinics.

“We are looking closely,” Deputy Senate Majority Leader Jeff Hayden, DFL-Minneapolis, about the situation.

However, he added, it is too soon to know if the Legislature needs to get involved. “It’s a fluid situation.”

Beyond the university situation, Swanson is investigating the nonprofit health organization. Nearly a year ago Fairview said it would hunt for a new chief executive officer, but that position remains open, Swanson said.

Swanson, who regulates charities, said she is concerned that a Minnesota charity could be run by an out-of-state organization.

Sanford operates hospitals, clinics, nursing homes, pharmacies and other health-related facilities in South Dakota, Nebraska, Iowa, North Dakota and Minnesota.

Bakk likes work

Senate Majority Leader Tom Bakk’s recent vacation made him realize he is not quite ready to retire.

Bakk and his family traveled to Argentina over the Easter-Passover break and the end of March, where he said he and his wife had a successful hunting excursion — including him shooting a water buffalo.

He said the vacation was great but also made him realize how much he loves his job.

On his way home, Bakk took time to reflect. At nearly 59, he said thoughts of retirement hover, but he realized he was looking forward to getting back to work.

“I started thinking, ‘If I didn’t have a job to go back to, what would I do?’ ” Bakk said. “I think I’ll quit thinking about retirement.”

Social media frustrating

Former U.S. Sen. Norm Coleman says social media take too much time.

“I must confess to almost giving up on Facebook,” he wrote on his Facebook page. “Between all the obligations of the real world — family, work and life — as opposed to the virtual world — Facebook and Twitter become so, so time consuming. My humble apologies to all my Facebook friends for not being very responsive.”

Danielle Killey contributed to this report.

DFL House plan would raise taxes on rich for school aid


By Don Davis

Minnesota schools would be the biggest beneficiaries of a state House Democratic budget proposal that goes beyond the governor’s plan to increase taxes on the rich.

Minnesota House Speaker Paul Thissen, DFL-Minneapolis, unveiled a budget outline Tuesday that accepts Democratic Gov. Mark Dayton’s plan to boost taxes on the richest 2 percent of Minnesotans, and he went further by suggesting a temporary surcharge, probably on those earning more than $500,000.

DFL leaders said the surcharge would bring in $854 million needed to repay schools money the state borrowed from them over recent years. Thissen said the surcharge would disappear in two years.

House Republican Leader Kurt Daudt, R-Crown, said he was reminded of an old saying: “There is nothing so permanent as a temporary tax.”

The budget outline House Democrats released Tuesday is similar to a budget plan Dayton unveiled last week. Senate Democrats plan to release their plan today.

Democrats control the House, Senate and governor’s office for the first time in more than 20 years.

The House plan calls for a $37.8 billion, two-year budget.

Education Finance Chairman Paul Marquart, DFL-Dilworth, said that $700 million added to all levels of education is vital to improving the state’s economy. He said funds would especially help all-day kindergarten and other early childhood programs.

“When you invest early, you raise the graduation rate,” he said.

The House plan calls for enough money that every school district could institute all-day kindergarten. Dayton proposes some funds, but not enough to allow every school to be involved.

The DFL plan would boost public school funding by $550 million to $15.7 billion in the next two years. Higher education programs would get $150 million more, $11.2 billion total.

Most suggestions in the plan call for modest budget increases, but Democrats would cut $150 million from the $11.4 billion human services budget.

The biggest controversy likely will be around the proposal to increase taxes on the richest Minnesotans.

“Just as the state’s economy is beginning to recover, the House leadership is proposing increasing taxes to astonishing new levels, up to a rate of 11 percent on the state’s top wage-earners,” Senior Vice President Laura Bordelon of the Minnesota Chamber of Commerce said. “Roughly 20,000 small- and mid-sized businesses in Minnesota that pay their taxes through the personal income tax will be subject to these significant increases. We question how this proposal will improve economic competitiveness and job creation in Minnesota.”

Thissen, however, said Minnesota’s rich need to pay “their fair share.” Had they done that over the years, he said, schools would not be short of money.

He said Dayton’s proposal to raise taxes on couples with a $250,000 annual income and individuals earning $150,000 “is not enough” to raise enough money for what Democrats want to spend.

Thissen could not say exactly which taxes would increase, but said he expects elimination of what some see as loopholes corporations use to avoid taxes.

The speaker said that he would not expect a major sales tax increase like Dayton originally proposed, but he left open the possibility of some sales tax hikes.

The return of a homestead tax credit, which lowers most homeowners’ property taxes, is one of the Democrats’ priorities.

Tax increases would hurt Minnesotans, Republicans said.

“They would definitely show up in the budgets of average Minnesotans,” said Rep. Mary Liz Holberg, R-Lakeville.

Daudt said that more money for education could come from cutting other budgets. “What we showed the last couple of years is you can do things without tax increases.”

Taxes remain topic as Minnesota budget deficit shrinks


By Danielle Killey

Talk of tax increases continues even as economists anticipate a smaller state budget deficit.

“Tax reform is important for Minnesota’s future,” Senate Majority Leader Tom Bakk, DFL-Cook, said. “I don’t think this will even slow that down.”

Bakk’s comments came shortly after Minnesota Management and Budget reported Thursday the state will face a $627 million shortfall in the next two years, down from $1.1 billion predicted in late 2012.

The state also has a surplus of $295 million for this year, most of which will go to repay money the state borrowed from public schools.

Democratic Gov. Mark Dayton and lawmakers will use Thursday’s budget forecast to set the state budget during the final three months of the legislative session.

“The forecast really sets the table for where the issues are,” Commissioner Jim Schowalter of Minnesota Management and Budget said.

House Speaker Paul Thissen, DFL-Minneapolis, said the forecast is positive, but there is work to be done.

“We still have a deficit,” he said. “We still have a big chunk to deal with just to get back to zero.”

Republicans argued the lower deficit means Dayton should rethink plans to increase taxes.

“If Gov. Dayton and DFL legislators are looking for a reason to raise taxes, they won’t find one in this budget forecast,” House Minority Leader Kurt Daudt, R-Crown, said.

Dayton suggested the better outlook could lead to tax cuts, such as an increased renters’ credit. He did not say he will change proposals to raise income taxes on the richest Minnesotans or sales tax changes. The income tax increase is expected to bring in an extra $1.1 billion and sales taxes changes would result in a $2 billion net increase in revenue.

The governor’s original budget proposal would spend $38 billion over the next two years. He said he will make more concrete decisions about his budget in the coming days and release an updated plan the week of March 11.

The forecast Thursday included about $297 million more than previously expected from income taxes.

Daudt said that is evidence the state’s economy is improving.

“You don’t need to raise the rate to raise revenue,” he said. “You need to get more people back to work.”

Sen. Dave Thompson, R-Lakeville, said Republican policies of not raising taxes and “restraining the size of government” have contributed to the better outlook.

“I’m hoping the governor adjusts his path,” he said, adding tax increases are not only unnecessary but “damaging.”

Dayton said the forecast was good news for Minnesota and a step in the right direction, but “it is not progress anyone is satisfied with.”

Schowalter said the economy is being hurt, in part, because federal budget issues remain unresolved. The economy is “making steady progress, but not nearly enough,” he said.

“We have a new forecast, but a relatively old story,” Schowalter said.

Thissen said he hopes lawmakers can get out of the cycle of deficits.

“We also need to raise new revenue if we want to invest in the things that will improve the quality of life for Minnesota families: education, infrastructure and property tax relief,” Bakk said.

State Economist Tom Stinson downplayed the economic impact of massive federal budget cuts due to begin Friday, but said it could slow state economic growth.

“There’s more going on than just Minnesota policies,” Stinson said.

A state budget must be set by July 1 to avoid a state government shutdown. Democrats, who hold the majority in the House and Senate, have said they will not allow a shutdown.

The state technically is not allowed to have a deficit, so it would have to offset that by raising taxes, cutting spending or a combination.

“Over the coming days and weeks budget discussions will pick up and the task of improving our education system and future workforce will continue,” Rep. Paul Marquart, DFL-Dilworth, said.  “We need to think big again and go in a new direction that puts the middle class first.”

“Today’s forecast is good news, but our state is still not on stable financial footing,” Rep. Mary Sawatzky, DFL-Willmar, said. “Minnesotans deserve an honest budget balanced without gimmicks that funds our priorities and lays the foundation for a stronger economy, a stronger middle class, and a stronger future.”

“The improved forecast is definitely better than the alternative,” Rep. Roger Erickson, DFL-Baudette, said. “But we can’t let this small improvement cover up the fact that we’re still faced with a $600 million budget deficit. The only way we can move forward from this past decade of budget deficits is to help make a fair tax system that lets us invest in things like education, property tax relief and job creation.”

“I’m pleased that our deficit is shrinking, but it’s still another in our decade of deficits,” Rep. John Ward, DFL-Baxter, said. “Minnesotans deserve a budget that is balanced honestly without gimmicks, one that funds the things we value as Minnesotans and keeps us economically competitive.”

“We have less of a mess to clean up, but a mess nonetheless,” Rep. Joe Radinovich, DFL-Crosby, said. “We need to close this deficit and begin re-investing in Minnesota’s future.”

“Today’s forecast numbers are encouraging, but we must remember the need for a sustainable and honest solution,” Sen. Roger Reinert, DFL-Duluth, said. “With these numbers in hand, the real budget work begins.”

“Overall, this is encouraging news,” Sen. Kent Eken. DFL-Twin Valley, said. “It shows Minnesota continues to move in the right direction and that our economy keeps improving. But it also highlights the work we still have to do. The next few months will consist of looking closely at every penny of spending.”

“It’s vitally important the Legislature make responsible budget decisions to ensure we don’t disrupt this positive economic progress and that we keep Minnesota on the right track,” Sen. Lyle Koenen, DFL-Clara City, said. “Using a sensible balance of spending cuts, responsible new revenue and targeted government reforms is the combination needed to solve the deficit and support continued economic recovery.”

“With Minnesota’s budget outlook greatly improving, Gov. Mark Dayton has lost all justification for raising taxes on haircuts, car repairs and certain clothing items,” said Ben Golnik, Republican activist and Minnesota Jobs Coalition chairman. “The bottom line is that Minnesota’s deficit is now manageable enough to solve without raising taxes on anyone.”

“While today’s news shows improvement, the state still faces a $627 million budget shortfall,” Minnesota DFL Chairman Ken Martin said. “Leaders need an honest budget that gets Minnesota off the financial roller coaster of the last decade and makes investments to move Minnesota forward.”