Tuesday, December 01, 2020

 Budget Forecast Released.  It's really difficult to call anything that's happened during the pandemic good news (except for the recent news on progress toward a viable vaccination), but the state budget forecast released today qualifies as at least a pleasant surprise.  When the pandemic hit in March, the worst was assumed (and for many Americans, it really has been the worst thing imaginable) and that the economy was going to tank.  The stock market hit a low of 18,541.93 on March 23, but the trendline has been moving steadily upwards since albeit with a few fits-and-starts.  Remember the presentation that Peter Leatherman from Morris-Leatherman gave to SEE membership in September when he pointed out that the responses provided by participants were far more optimistic than the ones provided in April.  While the stock market is not a true measure of what is happening up and down the economy, I think in this instance it showed that the economic prospects of a large portion of the economy were not as adversely affected by the pandemic as once feared.  Please don't take this as a dismissal of the true pain felt by the small business owners and low-wage employees whose lives have been absolutely decimated by the pandemic.  As pointed out last week in the business press, large corporations have done well during the pandemic while small businesses, especially restaurants and service industries, have been crushed.

At any rate, Minnesota's budget situation is actually on the plus side of the ledger for the remainder of this fiscal year (which ends on June 30, 2021).  The February forecast had state revenues at $48.8 billion.  An interim forecast performed in May showed revenues down by $3.7 billion, but that has rebounded since to a loss of just $1.7 billion.  While revenue was down from the February forecast, so was spending to the tune of $1.1 billion.  Adding these--and several other variables together--and the state ends this fiscal year with a surplus of $641 million (see linked document for a more concise description).  It is my guess that a considerable portion of this revenue will go towards a relief package currently being negotiated by Governor Walz and the Legislature which may be taken up at the expected December special session.

The budget picture for the next biennium is less rosy, as the estimates show a looming budget shortfall of nearly $1.3 billion.  This would be reduced by any amount of the current fiscal year surplus that might be carried forward or if economic performance improves to the extent that revenues would exceed current projections.  Given the likelihood of the shortfall remaining in excess of $1.0 billion, frugality may be the order of the session as the Legislature and Governor work to hammer out agreements over the various budget areas.

Link: Budget and Economic Forecast

House Committee Chairs Named.  The House named its committee chairs for the coming biennium last evening and, like the Senate, there will be a change in the chairs of an education-related committee.  Representative Jim Davnie will remain as Chair of the Education Funding Committee and Representative Dave Pinto will remain Chair of the Early Childhood Funding and Policy Committee.  Representative Ruth Richardson will take over as Chair of the Education Policy Committee.  Representative Cheryl Youakim, Chair of the Education Policy Committee the past two sessions, will move over to chair the Property Tax Division of the House Tax Committee.  Representative Paul Marquart will remain Chair of the full Tax Committee.

Link to Story on House Committee Structure/Chairs: House committee, division chairs named for 2021-22 biennium

Membership rosters for the House and Senate committees are in the process of being developed and should be released at some point in December.

Wednesday, November 25, 2020

Senate Announces New Committee Structure and Chairs.  The Senate majority caucus announced its committee structure and chairs yesterday and there are a couple of surprises.  It wasn't entirely unexpected that there are more committees this year.  With such a large class of freshman elected in 2016, I expected that there would be a bit of restructuring to give as many of them chair responsibilities as could be sensibly managed.  Also, with Senators Tom Bakk and David Tomassoni breaking away from the DFL caucus and forming an independent caucus, the possibility existed that they would somehow be called upon to chair a committee and that did come to fruition with Bakk being named Chair of Capital Investment (Bonding) Committee and Tomassoni being named the Chair of the Higher Education Finance Committee.

While some of that may be surprising, the biggest surprise (at least to me) was the switching of Chairs between Senators Roger Chamberlain and Carla Nelson.  Senator Nelson has been the Chair of the Education Finance and Policy Committee for the past two years (Education Finance solely in 2017-2018) and Senator Chamberlain has been the Chair of the Tax Committee.  They will trade responsibilities in the coming biennium, with Nelson moving to Taxes and Chamberlain to Education Finance and Policy.  Senator Chamberlain has been a member of the education-related committees, but Senator Nelson did not serve on the Tax Committee during the last two biennia, but she did serve on the committee from 2013 to 2016.

Here is a link to the press release outlining the new committee structure and the chairs of each committee and subcommittee:  Senate Republicans Release Committee Structure and Chairs 

Tuesday, November 17, 2020

Analyzing the Election.    I thought I would let things marinate for a couple of weeks and take a close look at the election results before putting my thoughts into cyberspace.  Once I got through all the national banter, I simply came to the conclusion that this was one very odd election and really, how could it not be.  CoVID-19 has defined American life since March and the ripple effects of the virus clearly affected how Americans voted and, probably more often than not, how they voted.

I am no longer down in the gearbox of political campaigns so my observations are, for the most part, well above the fray, but I did not expect the Blue Wave--either in Minnesota or the United States--that much of the media thought was in the offing given the poll numbers spewed pretty much every day down the stretch during the election season.  Neither was I surprised that the margin between President Trump and President-elect Biden was not close to margin described in many of those polls.  I can't remember which SEE ZOOM event I was speaking at where I predicted there was going to be a lot of ticket-splitting.  While I expected President-elect Biden to prevail both in Minnesota and in the Electoral College, I didn't think he would have significant coattails.  Looking at the presidential numbers in Minnesota, Biden's spread was only one-half percentage point lower than then-President Obama's spread in 2012 (Obama-7.69%/Biden-7.10%) and the 2012 was a big swing election for the DFL in Minnesota that year with the Senate DFL picking up 9 seats and the House DFL picking up 12 to seize the majority in both House of the Legislature.

"How can that be?" one might ask (you might not, but someone might).  The 2012 wave election for the DFL followed the 2010 wave election that put the Republicans in control of both legislative bodies for the first time since the early-1970s.  In between elections, there was a government shutdown as the Legislature did not reach accord with the Governor until July.  Further, new legislative boundaries were drawn after the 2010 census, which always adds an X-factor to election season.  I think the lesson is that one has to look at every election season in the context of what may be happening across-the-board.  Clearly, the pandemic was on the minds of many Minnesotans as they voted, but with a wide variety of opinions about how it should be addressed really prevented a wave from developing on one side or the other on the issue.  I would argue--even though this article from Sunday's StarTribune argues otherwise Democrats debate how Minneapolis' 'defund the police' movement played in elections Centrists contend slogan cost the party House seats in Minnesota, nationally.--that the issues surrounding the discussions regarding public safety in the wake of George Floyd's death also didn't fuel a wave in one direction or the other.  It does appear that messaging surrounding public safety favored Republicans, but it had a greater effect outstate than in the suburbs.  Likewise, the CoVID-19-related issues appear to have had a greater effect in the suburbs than in outstate districts.  For those of you who recall Peter Leatherman's presentation to our September SEE meeting, those were the two issues that were most on the minds of Minnesotans and it appears the clash of those two issues and the partisan divide over them were counterweights that put a ceiling on the other side's gains.

I am not saying that the rhetoric around police reform didn't affect races, but here is an example as to why I don't believe it was as great as stated in the referenced article.  DFL Senator Matt Little lost to Republican Senator-elect Zach Duckworth in a Lakeville area seat, but just to the east Republican Senator Dan Hall was unseated by Senator-elect Lindsay Port.  Just south of the seat where Republican Senator Warren Limmer held off DFL challenger Bonnie Westlin, DFLer Ann Johnson Stewart easily won over Republican Greg Pulles to replace retiring Republican Senator Paul Anderson.  I am probably going to keep hitting this nail until I wreck the board, but each race has to be viewed in its own particular context and the qualities of each candidate often have as much to do with the result as any over-arching theme being promoted.

I was reluctant to make a prediction as to which party, both in Minnesota and nationally, would retain control of the respective legislative bodies.  I remember saying several times that I could envision any combination and I wasn't surprised to see the status quo maintained albeit with tighter margins both in St. Paul and Washington, D.C.  The DFL had a net gain of one seat in the Minnesota Senate, picking up the two suburban seats I mentioned above along with the seat in St. Cloud (more on that later).  The  Republicans picked up five seats in House (with a recount taking place on the Iron Range that could give them one more, although it's unlikely).  The Senate was where most of the attention was placed in media conversations, given the DFL only had to have a net gain of two seats to take control.  They did pick up three seats, but could not hold on to Senator Matt Little's seat in Lakeville or Senator Dan Sparks' seat in the Austin/Albert Lea area, leaving them one short.  The Republican gains in the House were interesting in that three came from outside the metropolitan area and two in the outer ring suburbs.  In many election cycles, close races determine who controls the Legislature and often times, the close races all fall on one side of the political divide.  That was not the case in 2020, each side won its share of close races.

A little bit more about St. Cloud.  In 2006, then-incumbent Tarryl Clark won the seat in a DFL-wave election by over 3,500 votes.  John Pederson won the seat (open after Clark's decision not to seek re-election) by 460 votes during the Republican-wave election of 2010.  Pederson held the seat comfortably by just under 2,000 votes during the 2012 DFL-wave election.  In 2016, the seat was open again after Pederson decided not to run and Republican Jerry Relph defeated DFLer Dan Wolgamott by 142 votes in a year that was kinder to Republicans at the legislative level (though arguably not a wave).  This year, DFLer Aric Putnam defeated Senator Relph by 316 votes.  As I hit the nail once again (I hope it's a sturdy board), one can see from these results that it is often difficult to predict what will happen in individual legislative districts from noise that is happening well above these frays.

My final thought is that Minnesota has seen its share of wave elections over the past twenty-plus years.  I would argue that we first saw this with former Governor Ventura's victory in 1998.  While not a definitive wave, it brought a lot of new voters into the system and that had an effect on legislative control.  Minnesota's elections in 2006, 2010, 2012, 2016 (to a lesser extent as explained above), and 2018 all saw dramatic shifts in legislative composition.  That may be in the offing again depending on how the pandemic plays out and what the new legislative boundaries look like.  With divided government, we may not see a reaction to policies pursued at the legislative level because both sides will own the results of the policy discussions.  One dynamic that I've witnessed over the past decade is that when one party controls the levers of government and moves policy forward aggressively, there is an almost inevitable reaction against those enactments come next election.  Curious to see if divided government forestalls that reaction.

And finally, I do have to say something regarding President Trump.  Everyone has an opinion and here is mine (and I hope people of all stripes find this as measured as I intend it).  I view American democracy as a house and that house is always under renovation.  If anyone has ever ripped up floorboards in a house, you know that you find all kinds of surprises; some pleasant and some otherwise.  I think we have seen both under President Trump.  He has clearly energized a segment of the voting populace that had become disenchanted with the process (Democratic pollsters/consultants Ruy Teixeira and Joel Rogers saw this coming over twenty years ago in their masterful America's Forgotten Majority: Why the White Working Class Still Matters).  While some of his policies have not been particularly helpful to the white working class, President Trump has clearly channeled their anxiety and brought them back into the system.  That isn't necessarily the bad thing some think it is if the end result is a system that works better for all Americans.  The work ahead is to make certain that we create a system that sees all people and hears all voices.  That is the responsibility of all of us as participants in our democracy.  Let's keep this house standing.

Wednesday, June 24, 2020

House Holding Hearings.  With the special session in the rear-view mirror (and perhaps another one on the horizon), the Minnesota House education-related committees are holding hearings to gain perspectives on how schools, students, and families fared during this Spring's distance-learning period.  Today's hearing featured testimony from students, parents, and community groups and centered on the challenges experienced, especially in communities of color and low-income households that characteristically face greater barriers to achievement.  It was a very impressive and impassioned set of witnesses and I urge everyone who has never had the opportunity to listen to Sondra Samuels, the director of the Northside Achievement Zone in Minneapolis, to tune in to the hearing at the link I've provided and listen in.  Samuels always does a wonderful job.

Education committees examine the report card on distance learning

The YouTube episode of the hearing is midway down in the story.  Tomorrow (Thursday), the House Education Finance Division will be hearing from a variety of school support groups (social workers, counselors, transportation providers).

Tuesday, June 23, 2020

Special Session (Number One) Comes and Goes.  It was a week that really flew by and in the end, major issues fell by the wayside.  The Special Session convened on Friday, June 12, and ran through the early morning hours of Saturday, June 20.  

This special session did not resemble recent special sessions in any way, shape, or form.  It has been the practice of gubernatorial administrations and legislative leadership over the past two decades to have all legislation pre-agreed to prior to a special session being called.  The nature of this session was bound to be different given the on-going debate over how to best address the medical and economic effects of the COVID-19 virus and that certainly turned out to be the case.

The Legislature came in with a healthy to-do list, first of which was to make a determination as to whether to extend Governor Walz' emergency powers that were first invoked with the Executive Orders in reaction to COVID-19.  There was no vote whether to restrict those powers during the regular session, but since the adjournment of the regular session, the Governor must call a special session every 30 days to provide the Legislature with an opportunity to restrict those powers.  That means there will likely be several special sessions between now and the start of the 2021 legislative session next January.  The Senate did vote to cancel the Governor's authority, but that bill did not pass in the House, meaning the Governor's authority remains in place.

StarTribune: Minnesota House blocks bid to end Walz's emergency powers

The political reaction surrounding the killing of George Floyd was unforeseen when the Legislature adjourned in May, but that has certainly taken center stage, even upstaging the bonding bill and COVID-19-related initiatives during the week-long special session.  Both the House and Senate passed comprehensive packages aimed at police reform, but the House proposal was broader and much more aggressive in its initiatives aimed at modifying police behavior.  The House proposal also addressed a number of underlying issues that many believe have contributed to disparities in law enforcement practices.  While hopes ran high that a meaningful compromise could be reached, the reluctance to remain in session by the Senate majority along with the multi-faceted nature of the issues involved, prevented an agreement from being reached.

Star Tribune: Police reform efforts collapse in divided Minnesota Legislature

The bonding bill also fell by the wayside.  There was hope late in the regular session that a compromise on the aggregate size of the bill could be reached and that there would be an accord on the last day of the session, but with a super-majority required to pass the bonding bill and neither minority caucus willing to provide votes for that to happen, the fruits of the serious negotiations being undertaken by the majority caucuses and the Governor never surfaced.

There was also legislation proposed to distribute the Federal dollars being delivered to the state that will be passed through to local units of government that also died.  Both the House and Senate passed legislation that would have accomplished that, but the bills were not identical which would have required a conference committee to work out a final compromise package and there did not seem to be the appetite for that to transpire.  Legislators in both parties are urging Governor Walz to distribute the revenue without legislative approval, which may well happen with the blessing of the Legislative Advisory Commission.  "What is the Legislative Advisory Commission?" you might ask.  Here is a descriptive link:

Minnesota Legislative Advisory Commission

Here is a StarTribune story on the issue:  City, county leaders press Gov. Tim Walz on $841M in COVID-19 aid

Given the inability to find common ground on the larger issues addressed during the special session, it was somewhat surprising that the omnibus education policy bill passed.  The bill was a scaled-down set of proposals that all were agreed upon during the regular session, but time ran out before the bill could pass both bodies.  The bill passed 67-0 in the Senate and 117-9 in the House.  Kudos to both Education Policy chairs, Representative Cheryl Youakim and Senator Carla Nelson for getting this one over the finish line during tense times on other issues.

Here is a link to the bill language:  HF 33--2020 1st Special Session Law Chapter 8

Bill Summary:  HF 33 Bill Summary.  This is the bill summary that went to the House floor.  An amendment was added (Article 1, Section 4) on the House floor last Friday providing the Ogilvie school district with a fund transfer.  That was the only change to the bill.

Stay Tuned.  I am sure many of you are wondering the state's next steps when it comes to how schools will open this fall.  Right now, the Minnesota Department of Education is preparing for three approaches:  (1) school as normal, (2) a continuation of the distance learning model adopted last spring, or (3) a hybrid model that would incorporate both distance and in-person instruction.  Many districts are trying a hybrid model for summer school and it will be interesting to see the results of those trials.  It is interesting that Wisconsin Governor Tony Evers is, at least at this point, leaving the decision on whether to open in a traditional sense up to local school districts.  Wisconsin and Minnesota have taken different approaches to dealing with a variety of issues related to COVID-19 and this may be another instance of that.

Friday, May 08, 2020

Catching Everyone Up.  It has been awhile and there hasn't been a lot to report up until the last week.  Like every other segment of society, it took the Legislature awhile to get its institutional feet underneath it and things are now moving quickly toward next week's constitutionally-mandated adjournment on Monday, May 18, at midnight.  The budget news from earlier this week (more on that later) makes it virtually impossible to see any additional financial investment coming from the state this year with the revenue situation for the next biennium also looking extremely bleak.

On the education front, it appears the House will be moving a very limited amount of revenue around from several budget areas that show a surplus to other areas that only received one-time revenue last year.  This is a miniscule amount of revenue.  The Senate has yet to unveil any spending bill and if there is any spending from that body, it will likely mirror the House in terms of amount.  Even if the economy hadn't fallen as markedly as it has, it was unlikely that there would have been a significant increase in the amount of revenue going out to school districts for next year.  There was hope that the increase in school safety revenue enacted last year could have been extended for another year, but beyond that, there wasn't a lot of buzz surrounding increased funding for K-12.  The House was looking more at early childhood education and the Senate was zeroing in on tax cuts.  While that didn't preclude additional dollars going to K-12, the final pre-pandemic legislation (at least from my vantage) was probably not going to include a significant investment in that area of the budget.

Both the House and Senate are working on policy bills right now.  The House has constructed its omnibus policy bill and the Senate has been hearing individual bills that may be incorporated into an omnibus bill.  What is more likely happening is now that the House has assembled its bill, the Senate may look at the bills it has heard and informally pre-conferee a bill with the House and fashion a final agreement to send back to the House that would include measures that both bodies have agreed upon.  It's not a perfect way of doing business, but I have found the process to be more transparent than I thought possible as the process has morphed from in-person to online.  Below is a link to the House omnibus education policy bill.  It is hoped that agreement on final policy bills can be reached by the end of this weekend and all next week can be used on the floors of the House and Senate to pass the measures.

HF 163 -- Author's Delete-All (There were amendments added to the bill at Wednesday's hearings, but there isn't a document available yet that shows those changes.)

For those of you who don't know what a delete-all is, it is an amendment that strikes the previous language from the bill and inserts an all-new version of the legislation.  Think of the bill number as a vehicle that picks up passengers along its journey through the legislative process.  Sometimes, the original language is retained and individual amendments are added as the bill moves along.  But when a wide range of new proposals are being added to the bill, the cleanest and most efficient way to incorporate these new initiatives is to start over and insert one comprehensive amendment that addresses everything the bill's author--and also that preferences of other legislators--wants to have in the bill going forward.  There may still be language added or subtracted from the bill through the amendment process (as happened in the House Committee on Wednesday), but the bill generally expresses the direction of the committee members that are in the majority. 

As is often the case, this isn't the way the process is described in most civics books, but even in years less confusing than this one has been the process usually unfolds in this manner.  It's a stay-tuned week.  Deb Griffiths has done a great job with her weekly updates describing how things are moving (or not moving) along, so if you haven't subscribed, do so.

State Economic Woes.  We are seeing an economic free fall nationally and no state or locality will be immune to the ripple effects of the slowdown caused by the pandemic and subsequent decisions to slow its spread.  Minnesota's situation mirrors the situation throughout the country. The state went from a projected surplus to end this biennium of about $1.5 billion to a projected deficit of $2.4 billion.  Almost all of the turnaround in the budget forecast comes from a steep drop in the amount of revenue collected by the state through the income and sales taxes.  The losses from are projected to be much lower collections of the income and sales taxes varies by about $300 million with the income tax loss being higher.  Given the fact that income tax plays a much heavier role in Minnesota's revenue collection system, I was somewhat surprised that the gap wasn't greater, but seeing the lines outside of Home Depot, it's obvious that while people are buying less, they are still buying things.  Here is a link to the MMB report.  I don't know if we'll get a clear picture anytime soon, but the June budget forecast should provide a more concise description of what has happened and what likely will happen revenue-wise going forward.

MMB May State Revenue Update

Sad News to Report.  I received sad news last week when I was told former Prior Lake-Savage Superintendent and SEE Executive Board Member Sue Ann Gruver passed away after a long battle with cancer.  Sue Ann was a true educational leader who was also an ardent supporter of educational equity.  Her list of accomplishments as a lifelong educator is extremely impressive and her influence will be felt in the many lives she has touched for years and years.  I know I speak for the entire SEE membership when I express my deepest condolences to the Gruver family.  I cannot say enough how much Sue Ann meant to all of us in the organization.

Monday, April 13, 2020

State Starting to Feel Economic Downturn.  The House Ways and Means Committee heard from the Commissioner of Minnesota Management and Budget Myron Frans and State Economist Dr. Laura Kalambokidis gave an update of Minnesota's fiscal situation as the state begins to experience the economic ripple effects resulting from society-wide adjustments to the COVID-19 virus.  Economic activity in Minnesota began to slow as businesses shut down and the shelter-in-place orders were issued by Executive Order.  Revenue collection from three of Minnesota's primary taxes--individual income, corporate income, and sales--were all down.  The corporate franchise tax was up and the net effect of these dynamics is a drop in $103 million off the state's bottom line.  As outlined in the Minnesota Management and Budget Revenue and Economic Update document released last Friday and linked below,  IHS Markit--the firm that provides macroeconomic projections for Minnesota's budget forecasts--predicts a 5.4% decrease in national gross domestic product for 2020 and with Minnesota's economic performance tied very closely to national measures, we can expect the $1.5 billion forecasted budget surplus (much of which has been spent on COVID-19 related interventions and supports) to dwindle dramatically with a deficit looming as the Legislature convenes in 2021.  IHS Markit projects that the national gross domestic product will increase by more than 6% in 2021, but that will not make up for the revenue lost during the downturn.  This all bears watching and the IHS Markit projection is based on a relatively optimistic "V" recovery (rapid slide followed by rapid recovery, hence the V-shape) to which they assign a 45% level of probability.  IHS-Markit assigns a 35% probability to a more pessimistic recovery that would stretch into 2021.  It is difficult to tell how consumers will react even when the shelter-at-home restrictions are lifted, which makes projecting revenue numbers extremely difficult.  In another item, the federal stimulus package (considered modest in IHS-Markit's view) is factored into their economic performance numbers.

While the committee absorbed the troubling economic news, a larger portion of the committee process was dedicated to trying to map where the Legislature and the Governor can, and perhaps will, go from this point forward.  We are closing in on the end of the regular session and there is concern about how a precipitous downturn in revenue collection will be addressed during the interim.  The Governor could call a special session, but he also has the ability to reduce state expenditures in a variety of spending areas and that power has been used in previous times of economic trouble.  While the budget reserve sits at $2.4 billion, keeping that in place until the absolute last minute will be crucial and one legislator urged the administration to use unallotment powers before exhausting the budget reserve.

There will be difficult discussions over the coming months and today offered what will be the first taste of what lies ahead.

Link:  Minnesota Management and Budget Revenue and Economic Update