Dear Friend,

This past Sunday at midnight the 2018 Legislative Session came to an end after three months of discussions, meetings, committee hearings, floor sessions, and negotiations. After months of work, both the House and Senate passed major bills and sent them onto Governor Dayton for his consideration.

Unfortunately, we learned earlier today that Governor Dayton vetoed two of the most critically important bills we passed this session: the tax conformity bill and the supplemental spending bill.

The news of the Governor’s vetoes is incredibly disappointing and the impact will be felt deeply in many different ways.

Minnesotans who will be affected by the vetoes of these two bills include:

• Victims of elderly abuse
• Victims of opioid addiction, and medical professionals
• Minnesotans who need mental health support
• Minnesotans with disabilities, and their care givers, who would be affected by a 7% cut to the Disability Waiver Rate System
• Minnesota students and school districts who will not receive additional safe school funding
• Minnesota Taxpayers who are likely to see an increase in their state taxes next year
• Minnesota CPAs and tax professionals who will be dealing with the extremely complex tax filings following the federal tax bill passing last December likely seeing a rise in their state taxes.
• Minnesota vehicle owners who have to continue to deal with the MNLARS debacle
• Minnesota Deputy Registrars whose businesses are suffering terribly following the MNLARS debacle
• Minnesotans who care about transparent pricing for health care and prescription drugs
• Minnesotans who need job training
• Minnesota businesses who need skilled workers
• Minnesota Low-income working families who rely on federal child care subsidies
• Minnesota voters concerned about election security
• Minnesotans concerned about privacy, data breaches and cyber security
• Minnesota farmers and businesses that need 179 conformity for equipment depreciation
• Minnesota startup businesses that look to the Angel Investor Tax Credit to grow here
• New Minnesota teachers who need licenses, and schools who want to hire them
• Minnesota Children enrolled in Head Start programs
• and more…

Once again, the news of Governor Dayton’s vetoes are incredibly disappointing. However, since we are adjourned for 2018, and no longer in session for the remainder of year, the legislature will have to look to 2019, which will include a new Governor and Administration to work with the legislature to address these critical issues facing our state.

Please read further to see additional information on some of the major bills that were passed on the final weekend of the 2018 legislative session.

Best regards,

Paul T. Anderson
State Senator

Tax Relief and Conformity

Tax conformity and relief was one of my top priorities for the 2018 legislative session and the veto of this legislation is a huge blow to taxpayers across the state of Minnesota.

As I have mentioned in previous newsletters, the federal government’s recent changes to the tax code presented us with an historic and complex situation as it significantly complicated Minnesota’s state tax code. With Governor Dayton’s veto of our tax bill earlier today, many Minnesotans will endure higher state taxes, and nearly every taxpayer will experience extreme difficulty when it comes to preparing their 2018 state tax returns beginning next January.

This legislation targeted working families for relief through cutting the bottom rates, preserving important deductions our hard working Minnesota families rely upon, and included a state personal and dependent exemption. Without these reforms, over 900,000 Minnesotans could end up paying more in their state income taxes.

The tax bill also authorized $225 million in spending for schools meant to avert layoffs and program cuts in some districts. $50 million was newly allocated money meaning more money for the schools in the Hopkins, Minnetonka, Osseo, Robbinsdale, and Wayzata school districts.

This bill also included provisions that I worked hard as the chief author to pass including the reinstatement of the Angel Tax Credit Program. This program provides a tax credit to individuals who invest in “startups”, or new companies, that focus on developing new technology or products. Since the start of the program just eight years ago, more than $421 million of private investment in Minnesota companies has been tied to the credit.

Also included in the legislation was a sales and use tax exemption for the City of Minnetonka. The $850,000 in tax relief would have helped the City of Minnetonka as they construct a new fire station, and to repurpose the existing police and fire facilities into a remodeled police station. The project is estimated to cost $25 million in total. More information on the project can be found by clicking here.

As a member of the Tax Conference Committee, we passed a very good tax bill for the people of Minnesota and I believed Governor Dayton would have taken appropriate action, avoiding mass confusion and headache for Minnesota taxpayers, and signed it into law. Unfortunately, that did not happen.

Safe and Secure Schools

Protecting our students was another top priority of the 2018 session.

We can all agree that we need to do all we can to make sure that our students are safe each and every day. Due to some good work over the years, those of us in Senate District 44 are fortunate that the vast majority of the schools in our communities already have safe and secure buildings with good plans in place to keep kids safe. But we can, and should, do more.

Each school around the state has unique needs and the legislature adopted a comprehensive approach to facilities security and mental health that preserves local control. We passed legislation that provided flexible funding that could have been used for school counselors and mental health, as well as remodeling and equipping schools with security modifications like cameras, public announcement systems, and secure entryways.

The legislature provided Minnesota public schools $25 million in grants for structural improvements to their facilities through the 2018 capital investment bill. Individual districts can choose to use these grants for upgrades to entryways and other safety-related facility upgrades to prevent school violence.

Through the supplemental appropriations bill, the legislature included $27.5 million for safe schools that can be used for a variety of things including mental health, school counselors, school resource officers, bulletproof glass, security cameras, professional structural safety audits of local schools, and more.

In the previously mentioned tax relief and conformity bill, we included $50 million in funding for safe schools. Local school boards can also use this funding for any purpose they deem necessary. Also included in that bill, the legislature freed up over $175 million in local school funds by lifting state mandates in the next school years.

In total, the legislature delivered over $100 million in new safe schools funding during the 2018 session, and waived state mandates on $175 million of already existing school revenue.

Once again, due to Governor Dayton’s veto of the supplemental spending bill, none of these provisions and funding will take place.

Investment in Infrastructure

The legislature passed a bipartisan “bricks and mortar” infrastructure bill that includes investments in critical road and bridge repairs, statewide sewer and water infrastructure, safe schools, care for the elderly and our veterans, and assistance for people with mental health emergencies. The legislature built on last year’s historic investments into roads and bridges by providing an additional $542 million for transportation infrastructure.

The bonding bill includes two provisions in the bill that I worked especially hard to be included in the legislation.

The first was the replacement of the Rockford Road bridge over I-494 in Plymouth. I was the chief-author of the legislation authorizing the project. The bridge was built in 1965 and at the time handled about 1,500 trips per day. Today, with nearly 40,000 vehicles per-day traveling over the 53-year-old Rockford Road bridge, the congestion and public safety of the bridge are a major public safety hazard.

The interchange is a vital link to the regional transportation system and plays an essential role in supporting our economy. This project’s inclusion will not only improve the quality of life for residents of Plymouth and our surrounding communities, but also benefit business and job growth throughout the metro area and our state. For more on the project, you can find information by clicking here.

Another project contained within the bill that I chief-authored was the construction of a new statewide Second Harvest Heartland charitable food distribution facility located in Brooklyn Park. The bipartisan project would invest in the construction of a food bank warehouse and distribution center that would serve as a statewide “food bank hub” for food shelves across the state. The new facility would result in the creation of 100 new jobs in the region and generate 68 million more meals for hungry Minnesotans in every one of our 87 counties.

Additionally, the project leverages private funds to complete the facility, creating a true private-public partnership. Local foodbanks IOCP and ICA will benefit greatly from the new project. The Star Tribune’s editorial board expressed support for the project as well. For more on the great work that Second Harvest Heartland does across the state of Minnesota, you can find information by clicking here.

The bonding bill also continues a bipartisan commitment to caring for our Heroes – the men and women who selflessly served our country in the armed forces – with full funding for three proposed veterans homes in our state. The homes would provide housing for hundreds of at-risk veterans.

Further, men and women facing urgent mental health struggles will receive more effective treatment and better results thanks to an investment to establish regional mental health crisis centers throughout Minnesota.

Another important piece of the bonding bill was more low-income Minnesotans will be able to find affordable housing thanks to $90 million for the Housing Finance Agency, including $30 million to provide specific assistance to people with behavioral and mental health needs.

You can read more about the bonding bill that was passed here. The bipartisan bill is currently on Governor Dayton’s desk to either sign, or veto.

Update on Minnesota Child Care Assistance Fraud

By now, you have likely seen reports on television and elsewhere concerning fraud and abuse within Minnesota’s state child care assistance program. For those of you who have not, currently ten child care providers are under active investigation by the Minnesota Department of Human Services (DHS) for child care assistance fraud. The Senate Human Services Reform Finance and Policy Committee held a hearing which I attended on Tuesday, May 15 and can be viewed in its entirety here.

How does the fraud work? A child care provider recruits low-income families who qualify for state child care aid. They fill out all the proper paperwork, but instead of dropping their child off for care, they either check in and leave, or don’t drop them off at all. Meanwhile, the provider bills the state for full-time care anyway. Then the provider takes the state aid and uses couriers to ship it overseas, with kickbacks going to the families and anyone else involved. The couriers routinely carry up to a million dollars in cash as carry-on luggage on commercial aircraft. Their destinations are often countries in Africa or the Middle East that have little to no formal banking structure, and in some instances, are under terrorist control.

During the recent Senate hearing to investigate this issue, a DHS whistleblower testified the fraud is rampant – perhaps as much as 80% of all child care assistance. He estimates more than $100 million in fraud last year alone.

The problem is, fraud within the DHS is not an isolated issue. There have been recent reports highlighting various types of fraud and oversight failures within DHS and the Minnesota Department of Health (MDH), including:

• Millions of fraudulent payments from the Child Care Assistance Program
• Millions of fraudulent payments to fake Personal Care Assistants
• Hundreds of millions in fraudulent Medicaid benefits to people who were ineligible
• Over 20,000 elder abuse complaints that went uninvestigated for months

In response to this, the Senate proposed the creation of an independent agency responsible for discovering and eliminating fraud in government assistance programs implemented by DHS. In Omnibus Supplemental Appropriations bill conference committee report adopted by the House and Senate, the legislation does the following: 1) Directs DHS and MDH to consider consolidating into one state agency the licensing, background study, and related oversight functions currently within each agency, and 2) Requires the commissioners of the respective agencies need to work together to provide draft legislation to the legislature for their consideration.

On Friday, May 18, Jim Nobles, the Minnesota Legislative Auditor also stated that he is opening an investigation into the scale of day care fraud in Minnesota.

We will keep you updated on this issue as the investigation continues and there are further developments.

Update on MNLARS

As may know, the Minnesota’s new automotive Licensing and Registration System (MNLARS) has been a disaster for Minnesotans. What began as a multi-year initiative of the Dayton Administration and the Driver and Vehicle Services (DVS) to replace its 30-year old legacy IT system, the motor vehicle portion that was implemented on July 24th, 2017, has been plagued with functionality problems ever since. After initially spending $93 million in taxpayer dollars to create the system, deputy registrars – the small businesses responsible for vehicle registration and licensing in Minnesota, find themselves with an unworkable system that is costing them massive profit losses – through no fault of their own. This was a failure of the state, and deputy registrars across Minnesota had no choice but to use the failed software, resulting in increased costs and longer wait times. These are locally-owned small businesses; they shouldn’t have to pay for the state’s mistakes. And, neither should the hundreds of thousands of Minnesotans that have been inconvenienced because of the administration’s MNLARS failure.

The legislature took a series of actions this session to remedy the mess. The issue was first tackled in March with the passage into law of an oversight and initial appropriations bill. The legislation appropriated emergency funds to continue to fix the system, as well as added safeguards and additional oversight of the department to assure this sort of massive failure does not happen again.

The legislature also included legislation within the supplemental budget bill that allocated an additional $13.7 million for MNLARS fixes. Additionally, we made sure the money dedicated to fix MNLARS could only be used for contracted staff and technology costs, and was subject to the legislative oversight changes passed earlier in the session. We wanted to guarantee that MNLARS was fixed in a timely manner and there was no more unnecessary spending for a project that doesn’t work. Unfortunately, the Governor vetoed the bill, thus preventing these fixes from being implemented.

Additionally, the legislature passed overwhelmingly a bipartisan bill for reimbursing the deputy registrars directly for their losses caused by the failed MNLARS system. The Governor also vetoed this bill.

The legislature will continue to work to find a satisfactory fix for Minnesotans and deputy registrars. Unfortunately, we may have to wait until next January when the legislature is back in session to address the situation further.

Rabbi David Locketz gives opening prayer for Senate in final week

Senior Rabbi David Locketz, from Bet Shalom Congregation in Minnetonka, gave the opening prayer in the Minnesota Senate on Wednesday, May 16. Each day the Minnesota Senate is in session either the Senate Chaplain, or a member of the Minnesota faith community, opens the floor session with a prayer. Rabbi Locketz’s unifying prayer was a welcome message in the final days of the 2018 legislative session.

Thank You

To each of you who took time to reach out during the session, thank you! Whether you traveled to the State Capitol to see me in person in my office, or placed a call, or sent an email to let me know your thoughts on issues important to you, it is appreciated.

I always greatly appreciate seeing and hearing from each and every one of you whether we agree or disagree on an issue.

It is a true honor and privilege to represent the greatest cities and people in the state of Minnesota.

Minnesota Senate Building, Office 2103

My office is located in the Minnesota Senate Building, Office 2103.

One of the great responsibilities serving as your state senator is assisting constituents with issues with state agencies, questions on legislation, and planning visits to the State Capitol.

Please contact my office at (651) 296-9261 anytime if I can be helpful.

Minnesota Senate Committee Assignments, 2017-2018 Biennium, Ninetieth Legislature

It is an honor to serve as the Vice Chairman of the Jobs and Economic Growth Finance and Policy Committee. In addition, I am also serving as a member of the following Committees: E-12 Finance, E-12 Policy, Higher Education Finance and Policy, and Taxes.

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