One Major Point About the Revenue Forecast Don’t Forget About Inflation

During each of their Press availabilities, Governor-elect Tim Walz (DFL-MN) and Speaker Elect-designee Rep Melissa Hortman (DFL-36B, Brooklyn Park) stressed the lack of an inflationary figure in the November Budget Forecast, which by most calculations would cut the $1.544 billion figure in half.

If inflation were to have been included on the expenditure side of the formula the figures for FY 2020-21 would be $1,162,000 and FY 2022-2023 $2,907,000.

The discussion about trade policy uncertainty, which is shorthand for the Trump Administrations role in Trade Policy, relations with China and tariffs, means the factors outside of our state and their impact on the export market is a significant factor, but not one we could get State Economist Laura Kalambokidis to pin down. The best we received is the impact is projected to be a tenth of a point in the economy.

Important items we pulled out of the Press Conference were, the surplus is up to $70 million for not conforming to the Federal Tax Law, a lower prison population, and lower health care costs.

We again asked our favorite question which is what is the state’s current debt capacity based on the Revenue Forecast and we were told by Management and Budget Commissioner Myron Franz the figure was $3 billion.

In Legislative Politics, There is Definitely an Adults and Children’s Table

When the legislature convenes on January 8th, 2019 There will be a distinct difference in the rhetoric and impact from both sides of the aisle in the state House. As current Speaker Kurt Daudt (R-30, Crown) shifts from the Speaker’s rostrum to the microphone on the right side of the legislative chamber his tone will become shriller and the impact and affectedness far less. Comparatively, the voices of Speaker Elect-designee Rep Mellissa Hortman (DFL-36B, Brooklyn Park) and House Majority Leader Rep Ryan Winkler (DFL-46A, Golden Valley) will gain relevance and gravitas.

We believe every story should be written taking into account the weight of the person in the political arena, and truthfully Daudt luster has waned and his words should be seen far less often.

In fact, a perfect example is evident in the Press Release on the Revenue Forecast which quotes Daudt “This surplus shows that the Republican approach of lowering taxes and restraining runaway spending works. Democrats predicted doom-and-gloom when we passed our tax bill last session, but instead, our state’s budget picture is stronger than ever.” This is comparable to the Rooster claiming credit for a sunrise.

What the Republican Tax Bill did do was reduce the height of the surplus and feathered the nest of people favorable to Republican philosophy. The affluent and those with greater wealth at the expense of the rest of the state’s population. Making a “No New Taxes” pledge is a mistake made by President George H W Bush (R) but the problem is people view the needs far greater than his pledge to placate the Reaganomics crowd, which we will remind you Bush called “Voodoo Economics.”.

With Minnesota the sole state in the nation with a bifurcated legislature controlled in the Senate by a mere one vote margin, Senate Majority Leader Paul Gazelka (R-09, Nisswa), who by most indications is a reasonable person in negotiations, but still a Republican will have his hands full maintaining Majority Rule. He will be held hostage on every vote his caucus takes to make sure all members make it to their respective committees for key votes and to the floor to hold sway. If anyone member wants to freelance or bargain with the Senate Minority they are well positioned to do so and we know Senate Minority Leader Tom Bakk (DFL-03, Cook) will keep a sharp eye on the lookout for such an opportunity.

During yesterday’s Press Conference we asked a question of Speaker Elect-designee Hortman if she would work with Winkler to craft legislation the targets Senators in districts in which they wrestle away control in the last elections and she disagreed with the premise of the question and expressed her desire to work constructively with Majority Leader Gazelka where possible. Aw yes, lest we forget it is the honeymoon period. Our question about tactics won’t be appropriate until late April or May.

Governor Dayton’s Reflection

During what we believe may be his last Press Conference we asked Governor Mark Dayton (DFL-MN), who was the Commissioner for the Department of Energy and Economic Development under Governor Rudy Perpich (DFL-MN), “What would you say to Governor Perpich at this moment?”

He said, “He taught me a lot. He taught me about how works that make things happen. He taught me about jobs, jobs, jobs, that’s what we have here 318,400 more jobs in Minnesota in the last 8 years. Yes, we have had economic upturns, but our policies have supported that, our investments in education will help sustain that. That’s what it is all about. It’s about people working and having better lives and being part of that. He was engaged fulltime and I learned a lot from that. “

What Senators Will be Under the Gun This Season, i.e. Session

There are two state Senator’s who will clearly be in painful positions this legislative session and their respective House colleagues will be in opportune positions to test their pain thresholds. Senators Paul Anderson (R-44, Plymouth) and Dan Hall (R-56, Burnsville) both have two DFL House members in their district following November’s election.

We expect Rep-elects Ginny Klevhorn (DFL-44A, Plymouth) Patty Acomb (DFL-44B, Minnetonka) along with Rep-elects Hunter Cantrell (DFL-56A, Savage and Alice Mann (DFL-56B, Lakeville) to carry substantial pieces of legislation this session. Mann as a Physician is perfectly positioned to carry forward Health Care legislation, Acomb’s broad experience with the DNR, the Met Council, local government and water resource groups makes her a great candidate to carry Environmental legislation and we expect incoming Environment and Natural Resources Finance Division Chair Rep Rick Hansen (DFL-52A, South St Paul) a Soil & Water Board Alum will likely have many ideas to share with her. In fact, we wouldn’t be surprised if she were tapped for the Vice-Chair position on the committee.

Klevhorn and Cantrell also can be a thorn in the side of their respective Senators though as a mediator Klevhorn and may seek a more conciliatory path, we will point out this is a different arena and sharp elbows and calling people out are the rules of the game.

There are six Senator who have split seats with the House members. Senators Jerry Relph (R-14, St Cloud), Senate President Jeremy Miller (R-28, Winona), Warren Limmer (R-44, Maple Grove), Roger Chamberlain (R-38, Lino Lakes), Karin Housley (R-39, St  Marys Point) and Assistant Minority Leader Eric Pratt (R-55, Prior Lake). If our thoughts are valid the leadership team will be seriously under fire this Season, i.e. Session.

December Revenue Forecast Postponed One Day

The Minnesota Department of Revenue will postpone the announcement of the December Revenue Forecast until Thursday out of respect for the funeral of the 41st President George H W Bush (R).

Here is the formal announcement.

ST PAUL – In respect and remembrance of President George H.W. Bush and in observation of the National Day of Mourning on Wednesday, Dec. 5, Minnesota Management and Budget (MMB) has rescheduled the release of the Minnesota November Budget and Economic Forecast to Thursday, Dec. 6. Revised details for Thursday’s announcement are included below.

What: 2018 November Budget and Economic Forecast
When: Thursday, Dec. 6 at 1:15 p.m. (NEW DATE!)
Where: Room 15, Minnesota State Capitol, 75 Rev. Dr. Martin Luther King, Jr. Blvd., Saint Paul, MN 55155

Note to press: We will email you a summary of the 2018 November Budget and Economic Forecast on Dec. 6 at approximately 10:15 a.m. and post full materials on MMB’s website at 11:45 a.m. To receive this information:

Persell Survives Recount

Former Rep John Sterling Persell Jr (DFL-05A, Bemidji) will return to St Paul in January for his fifth term after surviving a razor-thin recount against Rep Matt Bliss (R-05A, Pennington). On election night the margin between the two was 8 votes in favor of Persell and after the recount conducted in Beltrami County stretched the lead to 11 votes.

This makes the DFL House majority 75.

MGRC Annual Networking Party

The annual gathering of lobbyists and advocates is set for December 6th 4:00 pm at Fitzgerald’s on Cathedral Hill.

Date: Thursday, December 6, 2018

Time: 4:00pm – 7:00pm

Cost: Free for all attendees

Location: Fitzgerald’s – The Zelda Room
173 Western Ave N
St. Paul, MN 55102

MGRC has extended invitations to legislative and campaign staff from the four legislative caucuses. There is no cost to attend, it will be a cash bar and MGRC will provide appetizers. MGRC members and nonmembers welcome. No need to register – just attend with your business cards, updated resumes, and a smile.

We also encourage you to share this information with anyone you think may be interested – all are welcome. We hope to see you on 12/6/18!

MN House Realigns Itself

On Wednesday afternoon, the MN House put out a press release identifying the new committee structure, the chairs or the respective legislative committees, the leadership staff. We expect with the holiday forthcoming not everyone has received the news and so we will provide.

They have even offered a draft committee schedule.

Committee Name

Chair

Agriculture and Food Finance & Policy Division

Poppe

Capital Investment Division

Murphy

Commerce

Halverson

Education Finance Division

Davnie

            Subcommittee on Early Childhood Finance & Policy

Pinto*

Education Policy

Youakim

Environment and Natural Resources Finance Division

Hansen

            Subcommittee on Water

Fischer

Energy and Climate Finance & Policy Division

Wagenius

Environment and Natural Resources Policy

Persell

Ethics

Murphy

Government Operations

Freiberg

            Subcommittee on Elections

Dehn

            Subcommittee on Local Government

Masin

Greater Minnesota Jobs and Econ Dev Finance Division

Pelowski

Health and Human Services Finance Division

Liebling

            Subcommittee on Long Term Care

Schultz

            Subcommittee on Early Childhood Finance & Policy

Pinto*

Health and Human Services Policy

Moran

Higher Education Finance & Policy Division

Bernardy

Housing Finance & Policy Division

Hausman

Jobs & Economic Development Finance Division

Mahoney

Judiciary Finance & Civil Law Division

Lesch

Labor

Sundin

Legacy Finance Division

Lillie

Public Safety and Criminal Justice Reform Finance & Policy Division

Mariani

            Subcommittee on Corrections

Considine

Rules and Legislative Administration

Winkler

            Subcommittee on Legislative Process Reform

Pelowski

State Government Finance Division

Nelson

Taxes

Marquart

            Property and Local Tax Division

Loeffler

Transportation Finance & Policy Division

Hornstein

Veterans and Military Affairs Finance & Policy Division

Ecklund

Ways and Means

Carlson, L.

* Subcommittee of two divisions

 

Speaker-designate Hortman also appointed the following leadership staff to serve the DFL Caucus:

Sean Rahn, Executive Director, Majority Caucus

Susy Bates, Legislative Director to the Speaker

Brynn Hausz, Executive Assistant to the Majority Caucus

Susie Merthan, Director of Communications & Public Affairs

Ted Modrich, Press Secretary to the Majority Caucus

Kevin Labenz, Coordinator of Legislative Outreach

 

Minnesota House of Representatives 2019-2010 Draft Committee Schedule

Monday Tuesday Wednesday Thursday Friday

8:00am 9:30am

State Gov Fin (B) Taxes (5) Capital Investment (10) SC E.Childhood(120 Cap) Jobs and Econ Fin (200)
State Gov Fin (B) Taxes (5) SC Water (10) Housing Fin (200)

State Gov Fin (B) Taxes (5) Capital Investment (10) SC E.Childhood(120 Cap) Jobs and Econ Fin (200)

No Regularly Scheduled Meetings

9:45am- 11:15am

Ways and Means (200) Gov Ops (B) Education Finance (5) Jud. Fin & Civil Law (10) Energy (120 Cap) Ag Fin (200)
Elect/Local Gov. Div (B) Education Finance (5) Jud. Fin & Civil Law (10) Enviro Policy (200)
Gov Ops (B) Education Finance (5) Jud. Fin & Civil Law (10) Energy (120 Cap) Ag Fin (200)
11:30am12:30pm

Break

12:45pm- 2:15pm
SC Corrections (B) Legacy Finance (5) GR MN Econ Fin (10) SC Long-term Care (200)
Public Safety Fin (B) Enviro Fin (5) Transportation Fin (10) HHS Finance (200)
Public Safety Fin (B) Property Tax Div (5) GR MN Econ Fin (10) HHS Finance (200)
Public Safety Fin (B) Enviro Fin (5) Transportation Fin (10) HHS Finance (200)

2:30pm- 4:00pm

Pre-session Caucus 2:45 Session 3:30pm
Commerce (B) Education Policy (5) Higher Ed Fin (10) Vets Finance (120 Cap) HHS Policy (200)
Commerce (B) Education Policy (5) Higher Ed Fin (10) Labor Policy (120 Cap) HHS Policy (200)

Pre-session Caucus 2:45 Session 3:30pm

4:15pm- 5:15pm

Caucus

SC=Subcommittee Rules and Legislative Administration and Ways and Means meet at the call of the chair

Does Wisconsin’s Loss of Walker Reopen Opportunity for High Speed Rail?

Elections have consequences. In 2010, Congressman Jim Oberstar (DFL-MN08) was the Ranking Member of the House Transportation and Infrastructure Committee and had proven time after time an ability to bring money home to Minnesota for infrastructure projects. In 2007, just days after it’s collapse he delivered $250 million to rebuild the I-35W bridge.

That year Oberstar lost to Chip Cravaack (R-MN08) and Scott Walker (R-WI) was elected to his first term as Governor. Shortly after his inauguration, Walker voiced his opposition to a high-speed rail line from Washington DC to Minnesota effectively killing the idea.

Now with Walker gone and a shift in focus of a divided Congress to infrastructure maybe this idea could be revived and if it is it should be named after Oberstar.

If our state had another means to travel eastward it is assured we will have low airfare rates and it would be a strong incentive for people to move to our state just as we have seen a benefit to growth along the light rail corridor in Minneapolis and St Paul.

Legalization of Cannabis and Revenue Opportunities

The 2018 election, brought about significant changes in the Minnesota political landscape. The Governorship remains in DFL hands, the State House has a strong DFL majority after two terms of Republican rule and the eight Congressional seats are still a five-to-three DFL/Republican mix, but they have changed to where the DFL represents all of the seats with ties to the Metro/Suburban area and also retained one rural seat, with a long-term incumbent in Rep Collin Peterson (DFL-MN07) set to Chair the House Agriculture Committee. Republicans retain the barest of majorities in the state Senate with one vote, which makes Minnesota the only state in the nation with a divided legislature. Peterson has been an advocate for Hemp production in the Farm Bill and would likely be interested in seeing another cash crop produced here in Minnesota.

As people prepare to come to St Paul, people are beginning to discuss the opportunities the composition of this new configuration creates. One of the first issues addressed by Governor-elect Tim Walz (DFL-MN) and Speaker-designate Melissa Hortman (DFL-36B, Brooklyn Park) is the legalization of cannabis/marijuana for recreational use. The stage is set for Minnesota to pass this issue by legislation and not a referendum.

Since there will be two new major parties, both with the topic of legalization in their names (Grassroots-Legalize Cannabis and Legalize Cannabis Now) there is a mounting force to contend with this issue. Since Walz has pushed for marijuana use for Veterans with PTSD at the federal level and on the campaign trail for governor has stated his support for legalization. Additionally, the endorsement of Congressman Keith Ellison (DFL-MN05) for Attorney General by his opponent Noah Johnson (Grassroots-Legalize Cannabis) late in the campaign may have buttressed Ellison’s election.

The greatest benefit to legalization, which may even appeal to conservative Republicans in the State Senate is the amount of new revenue this crop has the potential to bring into state coffers and the variety of inputs it can make.

Minnesota is probably best allied with Colorado when looking at the financials because these two states are quite similar in population. Current, census predictions place Minnesota at 5.577 million and Colorado at 5.607 million. In 2017, Colorado generated $247,368,473 and the amount for 2018 (Jan-Oct) is $223,300,334.

Colorado has a 10% excise tax and a 15% sales tax, while other states have different levels of collection. We have assembled is listing of the different collection methods for the eight states which have legalized recreational marijuana. Now granted Minnesota has shown itself to levy a high tax amount of “sin taxes,” and we expect cannabis/marijuana would fit neatly into this category. The state of Washington has made this linkage because the regulatory body that oversees this new green product is the Liquor and Cannabis Board.

The question over where the money goes will be an interesting discussion. Walz has already said publically, Colorado pumped $100 million into education. We think the natural tie is to health care and revenues from cannabis/marijuana should be targeted to fully funding Minnesota Care and allow for a universal buy-in for every person in the state based on a sliding fee scale. This funding resource coupled with the Health care Providers tax and $.01/ounce tax on high fructose corn syrup beverages will provide the resources necessary to pay for prevention programs and treatment of all health care concerns. This might be a well-financed route to single payer health care and could remove obstacles from out of the way for free-market purists.

State Population Excise Tax Sales Tax 2017 Revenue 2018 Revenue (Q1-Q3) $/Person (2017) $/Person (2018 Q1-Q3) Notes
Alaska 739,795 $50.00/oz buds and flowers $15.00/oz Trim % Retail Tax pending 1,700,000 11,000,000 2.30 14.87
California 39,540,000 $9.25/oz flowers and $2.75/oz leaves 15% N/A 228,240,257 N/A 5.77 Did not begin retail sales until 2018
Colorado 5,607,000 15% 10% Change to 8% 2017 247,368,473 223,300,334 44.12 39.83
Maine 1,336,000 Flower and mature marijuana plants – $335 per pound marijuana trim – $94 per pound immature marijuana plants and seedlings – $1.50 per immature plant or seedling marijuana seeds – $0.30 per marijuana seed 10% N/A 83,400,000 N/A 62.43 Did not begin retail sales until 2018
Massachusetts 6,860,000 3.75% N/A 1,600,000 N/A 0.23 Did not begin retail sales until 2018
Nevada 2,998,000 15% 10% State Sales & Local Sales Tax 1,207,000 0.00 0.40
Oregon 4,143,000 17% 6,519,687 777,600,000 1.57 187.69
Washington 7,406,000 37% 1,000,000 0.00 0.14

Knoblach Not Seeking Reelection

Rep Jim Knoblach (R-14N St Cloud) announced today he is withdrawing from his candidacy for reelection citing an MPR story in which his daughter Laura alleges an abusive relationship since the age of nine. For the record Checks & Balances is the first media resource to...

NPR Censors Opposition Comments on RCV

The NPR show 1A ran a program on Ranked Choice Voting today, and Checks & Balances Publisher Shawn Towle sought a spot on the panel. When called back by producer Andi McDaniel he was informed the panel was full but could submit a comment through the voicemail which...

The Two Realities of Tim Pawlenty

During his administration, Governor Tim Pawlenty (R) created consistent deficits. Each year he controlled the budget the numbers didn’t add up. In response to the first deficit, his fiscal wizardry decided to rob the Tobacco Settlement and use the endowment, as...

Absentee Ballot and Early Voting Numbers

We have obtained the Absentee Ballot and Early Voting numbers from the Secretary of State's Office. More votes came in on Election Day. We believe any ballot cast and postmarked on Election Day should be accepted, because the person did vote on the day in question,...

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The Lessons from Trump

When Republicans took the State House Majority in 1999 they dramatically changed the services available for the DFL Minority. They provided the DFL with a far smaller budget and it resulted in the number of Legislative Assistants going from one for every two...

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DFL House Majority Set to Defines Itself

Tonight, the DFL House Majority will meet at 7:00 pm in the State Office Building to vote on its leadership for the 2019-20 legislative session. House Minority Leader Melissa Hortman (DFL-36B, Brooklyn Park) is expected to stand and be elected as Speaker, but the...

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Run Carly Run

When Congressman Rick Nolan (DFL-MN08) announced he was ending his campaign for reelection the first name we thought of was former Rep Carly Melin (DFL-Hibbing). She is currently the Executive Director for Minnesota State Building and Construction Trades Council. She...

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Fact: It’s the Size of the Base that Matters

As we listen to the number of attendees at Donald J Trump (R) rallies across the nation there is an interesting assumption—one we are skeptical about—that comes along with media reports, and that is the Republican voting base is equal to or competitive with the...

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