No vote was taken after Minnesota Management and Budget Commissioner Myron Frans presented Gov. Mark Dayton’s budget Monday to the House Ways and Means Committee—that gatekeeper for all budget-related bills.
Nonetheless, it was clear afterwards that a key provision of the governor’s proposed 2018-19 biennial budget—to preserve an expiring 2 percent health care provider tax known by Republicans as “the sick tax”—is dead on arrival.
“The provider tax will not be extended,” said Rep. Greg Davids, R-Preston, a key Ways and Means Committee member and chair of the House Taxes Committee.
His words have weight. As taxes chair, Davids has discretion to either move Dayton’s tax extension forward when it comes to his committee, or to strip it out altogether. Davids leaves no doubt what his choice will be.
“I will not move that forward,” he said.
Davids spoke in an interview several hours after listening to Frans spell out Dayton’s budget plan before Ways and Means. While he gives Frans kudos for a good presentation, Davids was otherwise unimpressed.
“The good thing about the governor’s budget proposal is that we do recycle the paper it’s written on,” the avuncular Republican said. “So it is not all for naught.”
What’s in there
Despite speaking for an hour and a half, Frans did not complete his presentation Monday on a budget that he says prioritizes jobs and the economy, education, reform and quality of life for Minnesotans.
Frans repeatedly was interrupted by comments and questions, many from skeptical Republicans. He did, however, manage to describe the budget’s broad outlines.
Its calculations are based on MMB’s November revenue forecast, which showed the state entering 2017 with an anticipated $1.4 billion surplus and $2.3 billion in reserves.
Dayton’s budget would spend $1.32 billion of that surplus. Reserves will also be drawn down; the Legislature has already agreed to use roughly $327 million of that money to pay for a $312 million insurance relief package and a $15 million continuity-of-care provision, both of which were included in the premium reform bill that Dayton signed last week.
The budget also includes $191 million in tax cuts, largely offset by $169.8 million in fee increases. The latter include a $65 million railroad safety fee assessment, a $16 million fee hike to upgrade the Department of Public Safety’s Minnesota Licensing and Registration System and $24.7 million in fee increases for the Department of Natural Resources’ various operations. That nets out to $55 million less in revenues for 2018-19 than the $45.3 billion figure forecast in November, Frans said.
Among its various other provisions, the budget plan would extend the 2 percent provider tax that currently is set to expire at the end of 2017.
Preserving the tax, Frans said, would help replenish the state’s Health Care Access Fund. Under Dayton’s plan, the fund would finance $733 million in health-care-related expenditures for 2018-9, including state money for Medical Assistance, a new public insurance option, further health market reforms and funds to alleviate what Frans called “agency operating pressures.”
If approved, the budget would leave a $79 million surplus budget balance for 2018-19, Frans said. It would also retain about $1.6 billion in reserves after premium relief, a $38 million stadium reserve and a $350 million “cash flow account” are subtracted from the total, Frans said.
‘A giant step’
There was much in the proposal to annoy Ways and Means’ Republicans, but the public option was perhaps the most controversial idea.
Dayton wants to allow residents to buy into the state’s MinnesotaCare program through the MNsure exchange. The governor said last week it would cost $12 million to launch a consumer-facing version of MinnesotaCare, but it thereafter would be financed entirely by premiums from consumers. In addition to legislative approval, the public option would require a federal waiver.
Rep. Matt Dean, R-Dellwood, blasted it as “a giant step toward single payer.” Dean, the chair of the House Health and Human Services Finance Committee, needled the Dayton administration for proposing such a liberal idea with Republicans controlling the Legislature.
“I thought I had just fallen asleep and had a dream and that we had President Hillary Clinton and Speaker Melissa Hortman,” Dean said. “I drove into work and I was very happy to find out that was not the case. But actually, the budget still reflects that.”
Rep. Jim Knoblach, R-St. Cloud, the Ways and Means Committee chair, also questioned the public option. He noted there is great uncertainty about what the federal government will do under President Donald Trump, but repeal of the Affordable Care Act and federal health spending funding cuts are not at all unlikely.
“To me, that is the reason not to be proposing a new public option and not be extending a new tax,” Knoblach said. “I am a little puzzled that [Dayton] is proposing these things now.”
Rep. Tina Liebling, DFL-Rochester, holds the opposite view.
It seems evident, Liebling said, that the Affordable Care Act will be repealed and possibly replaced—with nothing. If that happens, she said, Minnesota stands to lose $2 billion in federal funding. It could lose even more if the federal government turns Medicaid—known as Medical Assistance in Minnesota—into a block-grant program with slashed funding, as has been rumored.
Given all that, Liebling said in an interview, she can’t understand why Republicans are so determined to eliminate the 2 percent provider tax. While seen as a burden on providers, she said caregivers actually reap benefits because the tax provides funding to guarantee that more of their patients have health coverage.
Liebling supports preserving the tax and building Dayton’s public option. But she said she worries that neither Democrats nor Republicans are fully facing reality, as budget discussions play out with federal government upheaval looming on the health care front and elsewhere.
“There is going to be a time when we have to sort of face up to all of this stuff,” Liebling said. “I don’t know when exactly that is going to come. But I sure wouldn’t get rid of my funding stream just now.”