The 2019 regular legislative session officially adjourned Monday, May 20, 2019 at midnight with legislative leaders and Gov. Tim Walz having come to a global agreement on the 2020-2021 budget in the final days of session, but without enough time to process the 10 appropriation bills. While the last day of the legislative session usually features long floor sessions, aside from the higher education finance bill, no other budget bill passed the Legislature on Monday.
With joint budget targets for the individual conference committees assigned on Sunday evening, committee chairs and commissioners worked around the clock to reconcile the differences between the House and Senate versions of the different budget bills. The higher education conference committee wrapped up their work around 8:30 p.m. Monday.
The Legislature is now headed into overtime. Only the governor has the authority to call a special session, but the timeframe for adjourning a special session is in the hands of the Legislature. While legislative leaders and Gov. Walz said they hope for the special session to last only one day, it may take more than one day to pass all the remaining budget bills off the House and Senate floors. A new two-year state budget must be signed into law before July 1, when the fiscal year begins.
At the time of this update, when the special session will take place and how long it might last are still to be determined, although legislative leaders have indicated they are aiming for the end of this week.
As for the budget agreement reached Sunday, one of the biggest areas of disagreement was the Tax bill. The Senate and House tax proposals varied significantly heading into conference committee, and caused difficult negotiations between the Governor and legislative leadership. The House tax proposal would increase the gas tax $.20, and continue the health care provider tax, while the Senate proposal provided tax cuts totaling $800 million. The Senate bill reduced the second-tier income tax rate by a quarter of 1 percent, as well as provided tax breaks for business owners, investors, charitable gaming organizations, farmers and senior citizens.
The final agreement did not include any increases in the gas tax that Gov. Walz and the House DFL originally proposed. The agreement does repeal the sunset of the 2% healthcare provider tax and reinstated it at 1.8% permanently. The bill also includes a reduction of 0.25% in Minnesota’s second-tier tax bracket.
Another sticking point was the E-12 education finance bill. Both the House and the Senate budgeted for an increase in education spending for the 2020-2021 biennium. The House proposed increasing the basic funding formula by $521 million which would allow for a 3% increase to the formula in the first year and an additional 2% the following year, mirroring Gov. Walz’s request. The Senate proposed increasing the formula by less, .5% in the first year and .5% in the second year.
Both the House and Senate have acknowledged the importance of increasing special education aid, ensuring schools are safe, investing in early learning scholarships, recruiting and training more teachers of color, and working to close the achievement gap. The differences were in exactly how much money was set aside to fund each priority. The House plan also included some significant policy changes, specifically regarding the tiered teacher licensure program that was implemented just over a year ago. The Senate put a large share into funding school safety initiatives.
The final budget agreement reached Sunday evening includes putting $540 million in new E-12 education spending and increasing the basic funding formula 2% both years of the biennium. Conferees will need to finish negotiations and send the bill to the floors in the special session.
The conference committee for the agriculture and housing budget bill did finish their work, and the bill passed the Senate, but not the House, where it was tabled. Included in that bill is $50,000 each year of the biennium in one-time funds for additional community outreach on farms and rural mental health services including the 24-hour hotline, service availability, and mental health forums. Of this appropriation $12,000 each year is to provide professional development training for Farm Business Management instructors in the Minnesota State system.
There is also $250,000 each year of the biennium to Minnesota State for the statewide mental health counseling support to farm families and business operators through the Minnesota State Agricultural Centers of Excellence. South Central College and Central Lakes College shall serve as the fiscal agents. The bill will have to be addressed in the special session.
As for bonding, a capital investment bill is generally reserved for the second year of a biennium. However, smaller bonding bills have traditionally passed during the odd-numbered session, which is focused on passing a two-year state budget. Given that, the Board of Trustees put forward a $150 million HEAPR request, which illustrates the strong need the colleges and universities have in fixing what they already have, including roofs, HVAC systems and sidewalks.
The House Capital Investment committee met throughout session and heard about every need in every corner of the state. With a new chair at the helm, Rep. Mary Murphy, DFL-Hermantown, the committee hit the ground running learning about the state’s capital investment needs. In the end, the committee put together a $1.5 billion bonding bill that included $150 million in HEAPR for the Minnesota State colleges and universities.
Governor Tim Walz also put together a large bonding package at $1.27 billion, which also included the system’s $150 million HEAPR request. The Senate was quiet on bonding issues throughout session, and the Senate Capital Investment committee did not hold a hearing.
In the final budget agreement; however, Gov. Walz and legislative leaders provided a target of $500 million in bonding, $440 million in general obligation bonds and $60 million in housing infrastructure bonds. We will know more about the bonding outcome after the special session.
Once the special session is wrapped up, a final 2019 legislative summary will be provided. Mark your calendars, the 2020 legislative session is scheduled to convene on February 11, 2020.
Higher Education Bill
The higher education conference committee met in a 14-hour negotiations session between the conference committee Co-Chairs Rep. Connie Bernardy, DFL-New Brighton, and Sen. Paul Anderson, R-Plymouth, and Higher Education Commissioner Dennis Olson. The conference committee passed the agreed-upon report Monday evening, and shortly thereafter it passed out of both chambers. The bill passed the Senate by a vote of 62-3, and then the House passed the bill by a vote of 84-49. The bill is headed to the Governor’s desk.
Conferees had their work cut out for them. Headed into conference committee, the House and Senate took different approaches to fund higher education for the 2020-2021 biennium. Specifically for Minnesota State, the Senate was proposing to appropriate $46.9 million. The appropriation would cover a lot of areas, including $22 million for Next Gen, the critical technology infrastructure project; $15 million for workforce development scholarships; $3 million to support the Board of Trustee’s workforce request; $4 million for campus support; $500,000 to support the Z-degree textbook program; $1 million for leveraged equipment; and $1.2 million in new funding for supplemental aid for operations and maintenance at non-metro two-year colleges. The Senate bill also froze tuition at 2% both years at the universities, and 2% and 1% at the two-year colleges.
In comparison, the House bill proposed $159 million for Minnesota State. $149 million was intended to pay for a tuition freeze, $10 million was to fund Next Gen, and there was $250,000 for a mental health program at two-year colleges, as well as $200,000 to expand the work on open educational resources with a focus on textbook affordability for students.
On Sunday evening of the final weekend of the regular session, conference committees received their targets. Higher education was given a target of $150 million, and they immediately got to work assembling a bill both the House and Senate could agree on.
The final bill includes $81.5 million in new funding for Minnesota State. The funding is appropriated in the following way:
- $64.5 million for campus operating support
- $8 million for the Next Gen technology infrastructure project. The Next Gen project is a critical technology replacement of the twenty year-old outdated ISRS data system that will benefit all students, faculty and staff across the state.
- $1 million in onetime funds for workforce partnerships. Local partnerships must be comprised of campuses and local businesses, and may also include K-12 school districts, trade associations, local chambers of commerce, and economic development authorities. Funds are to be used to develop new and accelerate existing employer-led workforce exposure programs, technical education pathway programs, dual-training programs, internships, youth skills training programs, and other industry-recognized programs in high-growth, high-demand industries.
- $7 million for workforce development scholarships. This program was developed by the Legislature in the 2017 legislative session. Minnesota State developed a scholarship program to incentivize new students to enter high-demand occupations upon graduation with scholarships in the amount of $2,500. This bill increases the amount for scholarships, as well as makes changes to the program. The changes include students returning from the workforce will now be eligible, early childhood and transportation programs were added to the list of eligible programs, students can attend not only a two-year college, but now also a university. Also, beginning in 2020, ten percent of the appropriation is to be withheld to be distributed to institutions that successfully leverage private matching funds from local businesses, resulting in additional scholarships by partnering with the local business community.
- $500,000 in onetime funding for textbook affordability, specifically for developing and offering courses to implement the Z-Degree textbook program. Three additional colleges are required to offer the opportunity to earn a Z-degree by the 2020-2021 academic year. In addition, Minnesota State is to develop a program to offer a Z-degree at three additional colleges by expanding the use of open educational resources, including custom and open textbooks. A report is required back to the Legislature by January 13, 2021.
- $500,000 in onetime funds for leveraged equipment acquisition. Equipment must be used for instructional purposes for programs determined would produce graduates with skills for which there is a high employer need within the state. An equipment acquisition may be made using the appropriation only if matched by cash or in-kind contributions from non-state sources.
- $250,000 in onetime funds for mental health services on college campuses. Up to five state colleges are to contract with one or more independent mental health organizations to provide mental health care, including by use of telemedicine, on campus. To be eligible to apply for the program, the college must employ one or more faculty counselors.
The bill caps tuition at 3% each year of the biennium. Under the provision, tuition rates cannot exceed the prior academic year rate by more than three percent at both the colleges and universities. Differential tuition charges are permitted in both years of the biennium where costs for course or program delivery have increased due to extraordinary circumstances beyond the control of the college or university. This does not include differential rates for online courses.
The online language that was in the Senate bill and required any online differential tuition rate to be reduced to a comparable on-campus class, was not included in the final bill. There is however, language that freezes the differential tuition rate for online courses for both years of the biennium. There is also language in the bill that requires a report to the Legislature regarding an analysis of online tuition differential, and a plan to achieve parity related to tuition rates.
In regards to the State Grant program, the final bill includes an increase to the program of $18.2 million. The changes to the State Grant include reducing the assigned family contribution (AFR) by two additional percentage points. This will benefit families with an expected financial contribution. The bill also increases the living and miscellaneous expense account (LME) to 106% of federal poverty guidelines from 101%.
There is language in the bill that establishes student loan debt counseling. The program is to be established at the Office of Higher Education to provide a grant to a Minnesota-based nonprofit qualified debt counseling organization to assist borrowers to understand their loan and repayment options, manage loan repayment, and develop a workable budget based on the borrower’s full financial situation regarding income, expenses and other debt.
The final bill includes the Hunger Free Campus Designation provision. Under the bill, a Hunger Free Campus designation for Minnesota State community and technical colleges is to be established. In order for a campus to be awarded the designation, a campus must meet minimum criteria, such as having an established on-campus food pantry or partnership with a local food bank to provide regular, on-campus food distribution. The statewide student association representing the community and technical colleges shall create an application process and a nonmonetary award, and provide final approval for the designation at each college.
The bill includes $2 million for the Minnesota Reconnect program. This is a program focused on adult learners who have previously completed a minimum of 15 credits to finish their degree, diploma or certificate at a two-year institution within Minnesota State.
Both the House and Senate bills included policy language that requires providing notice to sexual assault victims of the availability of a campus or local program providing sexual assault advocacy services and information on free legal resources and services available to them. This provision was included in the final bill. The final bill also includes language that requires Minnesota State to provide a report to the Legislature detailing how Minnesota State defines, categorizes, and accounts for administrative costs. The report must identify measures taken to use innovation and cost efficiencies to lower administrative costs.