Minnesota Legislation Update July 22nd, 2019
Turmoil at the Department of Human Services
After a week in which the top two Deputy Commissioners at DHS resigned with little explanation, former State Senator and Commissioner Tony Lourey met with Governor Walz a week ago and presented his own letter of resignation. In a GOP Press Conference initially intended to focus on the long delayed but pending investigation of the DHS Inspector General, House Minority Leader Kurt Daudt suggested there is a scandal brewing and called for greater transparency from the largest state agency. DHS has a budget of $17.5 billion and serves 1.2 million Minnesotans.
GOP Senator Jim Abeler, Chair of the Senate’s Human Services Reform and Policy Committee said the departure of the top three leaders at DHS was “absolutely the biggest crisis the agency has ever seen.” He added, “ This is a giant iceberg, there is something just below the surface that none of us knows about.” Legislators from both parties are not the only ones expressing concerns with the happenings at DHS, advocates for those served by the agency are also asking for a thorough and public discussion about what is taking place.
The sudden resignation by Commissioner Lourey is especially hard to understand given the effort he put forward last fall to lobby Governor-elect Walz for the position. The appointment was troubling to DFL Leadership in the Minnesota Senate which was unable to maintain his seat in a special election. The loss gave the Senate GOP some breathing room and doubled their slim one-seat margin during the just completed Legislative Session.
When asked about the resignation, Governor Walz claimed he did not ask Lourey to resign. Governor Walz acknowledged his Chief of Staff had met with the two Deputy Commissioners to discuss their sudden resignations. Last Monday, Governor Walz appointed Pam Wheelock as the Interim Commissioner while he seeks a permanent replacement. Wheelock is not new to state government. She served as the Commissioner of Finance in the Ventura Administration, has held numerous leadership positions in both the public and private sector and is viewed as a “fixer” when brought into difficult positions.
The story continued last week with Stacie Weeks, DHS Chief of Staff announcing her decision to leave the agency. Commissioner Wheelock also informed DHS staff that Deputy Commissioners Claire Wilson and Chuck Johnson were rescinding their resignations and returning to the agency at least through her tenure. We should expect a handful of hearings on the situation in the coming weeks.
Minnesota Management and Budget released their monthly revenue review for June, and discovered net general fund revenues for FY2019 are 2.8%, or $636 million, higher than expected. Income tax withholding and estimated payments for calendar year 2019 are already $129 million over the forecasted amount. Across the board, tax revenues of all kinds outpaced the February forecast. According to the report, net individual income tax receipts are up by 3.8%, or $450 million; General sales tax revenue is up by $68 million; corporate franchise tax revenue is up by $79 million, and other miscellaneous revenues increased by $40 million. FY2018 revenues are also $282 million more than expected.
Management and Budget believes that, while slowing, the continued U.S. economic expansion is the reason for these numbers. Now the longest economic expansion on record, state consultants from IHS Markit expect GDP growth to slow considerably over the next year due to the potential effects of new tariffs and a decrease in inventory buildup. Their most recent prediction is that average growth will slow to 2.6% for 2019. Down the road, their predictions show a considerable drop-off in growth through 2022. They expect total GDP growth to be 1.8% in 2020, 1.7% in 2021, and 1.6% by 2022.
In another report from the Bureau of Labor Statistics (BLS), unemployment is down 0.3% from this time last year, to 3.7%. IHS analysts believe that the unemployment rate has a floor of about 3.5%. Additionally, BLS reported that employers added 224,00 jobs across the country in June, but only 72,000 jobs in May.
The next official comprehensive forecast will be the November Budget and Economic Forecast. That forecast will determine how much additional funds will be transferred from the state’s budget surplus to the budget reserve accounts. The November forecast will also be used by the Walz Administration to establish their 2020 Legislative agenda.
No Good Deed Goes Unnoticed – Minneapolis Wage Theft Ordinance and Labor Mandates
With the outcome of the 2018 elections, there was a renewed interest by the Walz Administration and the newly elected House DFL Majority in several labor mandates and proposals. The proposed mandates included Paid Family, Pregnancy, Bonding and Serious Medical Conditions Leave, Wage Theft, an overhaul of existing Sexual Harassment provisions, earned Safe and Sick Time, prohibition from requiring disclosure of past wages and an increase in the Minimum Wage.
In the end, the business community worked with proponents of the proposed wage theft provisions to pass what has been hailed as the strongest wage theft protection bill in the nation. The legislation increased penalties for businesses found guilty of wrongly withholding earned wages. The legislation added staff to the Department of Labor and Industry, increased record keeping and postings for employers and made it a crime to wrongly withhold earned wages.
Before the ink has even dried on Minnesota’s new state law, members of the Minneapolis City Council have begun the process of moving ahead a Minneapolis specific ordinance with new penalties, added reporting and additional mandates on Minnesota Businesses with employees working in Minneapolis. Business groups throughout the state have expressed great frustration with the Minneapolis City Council and proponents of the ordinance for what is viewed as bad faith negotiations during the legislative session. The newly enacted state law is extremely complex and adding further complexity to the situation seems to add little benefit to workers.
The Minneapolis City Council will begin conducting hearings on the ordinance later this month. The Council is also considering a yet to be released ordinance targeting freelance or independent contractors. According to recent comments the ordinance will be like proposals in other cities and will largely target employees in the new gig-economy.
New Laws Going into Effect
Despite tense end of session gridlock between the Governor, the House, and the Senate, multiple bills, including a budget, were sent to the Governor’s desk for his signature. Starting July 1st, many of these newly passed laws will go into effect.
- Opioids (HF400)
Starting this month, registration fees will increase for drug manufacturers, wholesale drug distributors, and various pharmacy staff.After a hard-fought battle in conference committee, both the House and the Senate agreed to increase fees across the board, specifically targeting opioid manufacturers. Due on June 1st of each year, these fees will raise $21 million annually, and will fund various efforts to combat opioid addiction through the state and local subdivisions of government.
The fee structure is as follows:
Wholesalers (All) – $5,000
Manufacturers (All) – $5,000
Manufacturers (Opioids) – $55,000
For sellers of over 2 million units of opiates – $250,000.
This law also makes changes to prescribing protocols for doctors. While allowing for several exceptions regarding chronic or terminal illnesses and cancer, this bill limits the amount of opioids that can be prescribed for acute pain. Adults will be allowed a seven-day supply and minors will only be allowed a five-day supply. For Dental procedures, only a four-day supply will be permitted.
- Wage Theft (HF6)
Wage theft laws were also a large issue of debate in the legislature this year. Until now, there had been no provisions defining wage theft as a crime in Minnesota statute.In addition to making wage theft of any kind a gross misdemeanor, wage theft exceeding $1,000 will be a felony offense. The primary concern on both sides of the issue was the implications of a wage theft bill on labor trafficking and the unfair business advantages garnered through that practice. In the end, both sides agreed upon a bill that they believe will be a significant deterrent against wage theft, while protecting employers from unjust repercussions due to honest mistakes.
The bill also provides protections for workers who report alleged wage theft to the Department of Labor and Industry by outlawing retaliation.
- Correctional Officer Hiring Surge
Following a spree of assaults and the deaths of two correctional officers in the last year, lawmakers appropriated $10 million to the Department of Corrections for a surge in officer hiring.Currently, there are about 4 inmates for every correctional officer in the state. With this funding, the Department of Corrections is seeking to fill the 50 current officer vacancies, as well as hire 78 other officers.
- MNLARS Replacement
In addition to the $13 million reimbursement that was allocated to the Deputy Registrars in the omnibus transportation bill, both houses and the governor agreed on pursuing a replacement for the MNLARS system to the tune of $52.7 million in this fiscal year.The company that will develop the new Vehicle Titling and Registration System (VTRS) was picked on July 1st, and will be announced publicly in the near future. While MNLARS is only able to process license tabs and plates, this new system will be able to handle tabs, plates, and driver’s licenses. A full implementation of the new VTRS system is expected by the Fall of 2021.
- Rare Disease Council
In an increasingly uncommon unanimous vote in both bodies, the legislature appropriated $150,000 over four years, for the University of Minnesota to create a council on rare diseases, or diseases that affect less than 200,000 across the country. This council will consist of 18 members from across the state, and will make recommendations regarding research, treatment, diagnosis, and general education about these diseases.
- Hands-free – (effective date August 1, 2019)
Minnesota’s current prohibition of texting while driving will be expanded to prohibit the use of a cellphone while operating a motor vehicle, unless the phone is being used in a hands-free setting. The law will go into effect on August 1st and adds Minnesota to a long list of states prohibiting talking, texting or surfing the web while driving.
With the 2020 Caucuses and elections just around the corner we will start to see several announcements regarding the formation of campaign committees and retirements. In 2020, the Minnesota Legislature will be the primary election focus with all 201 members of the Legislature on the ballot. In a rare Sunday announcement, GOP Senator and Physician Scott Jensen announced on Facebook he will not be seeking a second term in 2020. The GOP leaning district should remain in GOP hands, no announced candidates have come forward. Sen. Jensen became a critical voice on issues related to healthcare reform and wasn’t afraid to have conversations which pushed his colleagues and challenged the traditional thought process.