Dear MPFF and Local Officers,
After weeks of intense negotiations between Governor Dayton and Republican legislative leaders, a framework agreement to balance the budget and end the state shutdown was finally reached. Governor Dayton subsequently called a special session for July 19th. The Legislature met in a marathon session that began at 3:00 p.m. on Tuesday the 19th and didn’t end until after 3:30 a.m. Wednesday. In the end, ten omnibus appropriations bills, a bonding bill, and a pension bill were passed, ending the government shutdown and allowing state employees to return to work.
The following are the issues we tracked during the special session:
1. Local Government Aid (LGA) Cuts. The final tax bill agreed to during the Special Session (Laws of Minnesota 2011, First Special Session, Chapter 7) cuts $102 million for LGA and $36 million in county program aid (CPA) for pay 2011 and 2012 from what was included in last year’s tax bill. $100 million in cuts in LGA to first class cities that was contained in the tax bill vetoed earlier by Governor Dayton was restored, and LGA for first class cities is not eliminated by 2014 as the regular session bill did. Cities will now receive the lesser of paid 2010 or certified 2011 LGA amounts. In other words, the new law provides essentially the same amount of LGA and CPA that cities and counties received this year; local governments will not receive the increases that were contained in last year’s tax bill, but cities were spared even more draconian state aid cuts in the future.
The tax bill also eliminates the market value credit program (MVC, formerly known as the Homestead credit) after 2012. For pay 2012 and thereafter, MVC is replaced with a provision that excludes a portion of the market value of a homestead when determining its net-tax capacity based tax. This new system is supposed to provide substantially the same benefit to homestead property as the credit, but no calculations are yet available as to how this new system will impact cities. Attached is a spreadsheet detailing the amount MPFF member cities will lose in LGA and MVC in the next year versus what they would have received under last year’s tax bill.
2. Interest Arbitration. No legislation impacting interest arbitration was brought up during the Special Session.
3. State Pension Aids. No changes were made to pension aids.
4. Fire Safety Account. The omnibus Public Safety and Judiciary appropriations bill passed during the Special Session (Laws of Minnesota 2011, First Special Session, Chapter 1) cut $3,719,000 for the biennium from the Fire Safety Account, rather than the $8.5 million that was transferred to the General Fund in the bill passed during the Regular Session.
5. Public Employee Pensions. The pension bill passed during the Special Session (Laws of Minnesota 2011, First Special Session, Chapter 8) authorizes the consolidation the Minneapolis Police and Fire Relief Associations into PERA P&F. Provided that PERA, the respective relief association boards and memberships, and the Minneapolis City Council approve each merger, the funds will be consolidated into the larger statewide plan later this year.
The omnibus pension bill also contained several individual pension related provisions, but it did not include more controversial policy items such as converting public employee pensions from defined benefit to defined contribution plans.
6. Right to Work. No right to work bills or constitutional amendments were brought up during special session.
7. Public Employee Insurance Program (PEIP). This issue was not brought up during Special Session.
8. Sprinklers in New Residential Housing. This issue was not addressed during Special Session.
9. Collective Bargaining for Changes in Benefits (“Aggregate Value”). This issue was not brought up during Special Session.