Storm relief special session may get muddied

Republicans plan to beat the tax drum once again when the Legislature convenes to pass $5M in local storm aid

If everything goes according to plan, lawmakers will have a short day back at the Capitol on Monday.

The four legislative leaders and Gov. Mark Dayton were expected to agree on  Friday to the terms of a one-day, no-fuss special legislative session to dish out disaster relief funds to 18 counties across the state that were damaged by severe storms in late June. Under the parameters of the deal, legislators will convene at 10 a.m. Monday and quickly go through the required motions to hand out $4.5 million to local governments to help repair damaged buildings and clean up debris.

The Federal Emergency Management Agency (FEMA) visited Minnesota shortly after the June storms and declared the situation a disaster. That meant local governments and the state were qualified for about $18 million in disaster relief funds, with local entities required to cover a quarter of the total cost. Handing out the required funds seems simple enough, but the terms of state law require a legislative vote to appropriate the necessary dollars.

This is the second time lawmakers have been called back to St. Paul for a disaster-related special session in two years – last year legislators convened to hand out funds to a flood-ravaged Duluth – and each time the session has been preceded by weeks of politicking over what should be discussed during legislators’ brief time back in St. Paul.

Last year, in addition to allocating flood relief for Duluth, some legislators wanted to call for the resignation of freshman DFL Rep. Kerry Gauthier, who had been questioned by police weeks earlier after having oral sex with a 17-year-old male in a Duluth-area rest stop. This year, Republicans and DFLers who control the Legislature and governor’s office bickered over whether or not to bring up a series of business-to-business tax increases passed during this year’s regular legislative session.

Republicans in the minority made repeated calls to hold a special session to repeal sales taxes on warehousing and storage, telecommunications gear, and business equipment repairs passed in the 2013 session. Dayton and DFL leaders initially agreed to repeal just the farm equipment repair portion of the tax increases, the inclusion of which they called an 11th-hour error made in haste at the end of session. But negotiations toward that end broke down, and leadership agreed to a stripped-down agenda.

Republicans will introduce tax repeals

Under the terms of the deal, no other bills or amendments will be considered during the session, but that’s not stopping a handful of Republican legislators from introducing bills to repeal those tax increases anyway.

“The special session provides a stage to amplify a bit on these bills and their negative effect on Minnesota’s economy,” Sen. Dave Senjem, R-Rochester, said this week. Senjem plans to bring up four bills for consideration during the special session, including a bill to repeal all three business-to-business taxes passed last session.

Senjem will also introduce a bill to bring back the state’s Foreign Royalty Deduction, which was repealed last session as part of an overhaul of the state’s corporate tax law, adding $189 million to the state’s general fund. The deduction allowed companies – like IBM in Rochester – to get a tax break on revenue generated at subsidiaries operating overseas.

“I just think these are four measures that individually and collectively have a fairly pronounced effect on Minnesota’s business economy,” Senjem added. “Everyone seems be opposed to these taxes, so let’s just go ahead and deal with this. I hope that during the course of dealing with the disaster relief, there is some time to have some floor discussion on these.”

On the House side, GOP Rep. Duane Quam, who serves in Senjem’s Rochester-area district, will carry the same four bills. GOP Rep. Tim Kelly has also drafted a bill that would specifically repeal the tax on warehousing and storage. Red Wing Shoes is located in Kelly’s district, and company officials have made public noise about moving some warehousing operations out of state if the new tax isn’t repealed soon. Dayton’s office called the claims a “political stunt,” pointing out that the warehousing tax doesn’t go into effect until after session starts next year.

“This is a real issue, and I think people who suggested it was a stunt have no business sense, because businesses don’t plan a month at a time, businesses need to know what’s going to happen,” Kelly said. “This is a very serious piece of legislation, and that’s what I will speak to.”

The special session may also be an amplifier for several candidates seeking to take on Dayton for the governorship next fall. State Rep. Kurt Zellers, R-Maple Grove, joined Kelly in his call for tax repeals, and Sen. Dave Thompson, R-Lakeville, will introduce a bill to repeal all the business-to-business tax increases passed last year. Both are seeking the GOP nomination to run for governor.

“I have been on the forefront of the debate about the warehousing tax and raising the issue of how much damage that is doing to employers and employees in the state, so that bill is being jacketed,” Thompson said. “My point is to draw some attention to the fact that Minnesotans are hurting. We are there already, we need do something to fix it, and I’ll do anything I can to help.”

Disaster bill reallocates unspent dollars

The draft bill for the special session, a mere two pages in length, details a series of transfers and tweaks to law to deliver the disaster relief funding.

The $4.5 million needed to match the federal disaster relief funding actually consists of leftover funding from last year’s Duluth flood. Legislators will vote to simply move those funds over to the counties and local governments hit by this year’s storm.

DFL legislators also talked over whether to add $1 million to the special session bill for Rock and Nobles counties, which were hit by severe ice storms in April. Dayton argued that the full amount should be sent to the counties, but DFL Senate Majority Leader Tom Bakk said that would go beyond the federal-state match requirement, which went out earlier this year, and would set a bad precedent for future disaster relief sessions.

Instead of allocating new dollars for the counties, lawmakers on Monday will simply vote to turn about $220,000 appropriated to the areas this session into grants. Rock and Nobles counties will get $60,000 in grants each, while the city of Worthington will get nearly $100,000 in grants, according to the disaster relief bill.

There’s a growing sentiment among legislators to fix the need to head back to St. Paul each year for a disaster-related special session. DFL Rep. Gene Pelowski plans to author a bill next year to create a disaster relief fund that can be used by the executive branch in the event of storm damage.

“This should really be our last special session,” Pelowski said. “In the future, we should have a process in place that gets the aid where it needs to go without needing to spend all the time and money it takes to schedule a special session.”