Bailouts, Boondoggles, and Backroom Deals: The 2013 Secret Session

The dust is finally settling on the 2013 legislative session. Though session adjourned almost a month ago, Minnesotans are just now getting a clearer view of what one-party rule has wrought. And the view is not pretty.

Capitol observers will recall the chaos and disorder in the final days of session, as legislators scrambled to finalize the long-delayed and all-important budget and tax bills. Ultimately, the legislature would finish its work just a few minutes before the deadline of midnight on May 20, but only by limiting debate and forcing rushed votes on several huge conference committee reports, allowing no time for scrutiny by the public, news media, or legislative minorities. It appears that was by design.

As Nancy Pelosi would say, the legislature had to pass the bills to find out what’s in them. And what the bills have are bailouts, boondoggles, and (in keeping with the theme of the 2013 session) massive tax hikes.

In short, the final days of the 2013 session were effectively a session unto itself; call it the Secret Session, in which bad policy that could not withstand public scrutiny was quietly and surreptitiously inserted into legislation. Among the many costly provisions that legislators snuck into bills in the dead of night are several that received virtually no legislative debate all year:

Gift tax and estate tax changes – As if Minnesota wasn’t already enough of a tax outlier, Governor Dayton and the legislature made Minnesota just the second state in the nation to institute a gift tax. The gift tax will be applied at a 10 percent flat rate after a $100,000 lifetime credit against the tax. In addition, gifts made within three years of a person’s death can be taxable under the state’s revamped estate tax. Not only did Dayton and the legislature raise taxes on the dead, they made it retroactive.

Warehousing and storage tax – At the end of session, lawmakers revived portions of the Governor’s universally panned sales tax plan, applying the sales tax to a number of targeted business services, including the sale of telecommunications equipment. But the most controversy has been generated by the state’s new warehousing tax. In the words of one Star Tribune columnist, “the tax on warehouse firms and a few other industries apparently passed while their lobbyists on guard at the Capitol that day were looking the other way”. Well, the tax now has the undivided attention of logistics firms and others, and some of them are already considering leaving the state. Even many tax-happy legislators were skittish about imposing the tax too quickly, choosing to delay it’s implementation until April 2014.

New $89.5 million office building for senate offices – A new "state-of-the-art" office building for senators was one of the many surprise provisions slipped into the tax bill in the waning hours of the session. In fact, according to the Minneapolis/St. Paul Business Journal, "the only money that’s been approved is $3 million for designs, but even that escaped the notice of many…part of a 379-page tax bill and was inserted with little discussion". By utilizing a lease-purchase arrangement, legislative leaders effectively hid the cost of this project. The new senate office building will undoubtedly have some of the nicest non-smoke-filled back rooms that taxpayer money can buy.

$33 million bailout for Minneapolis library – And finally, yet another last-minute addition to this year's omnibus tax bill: a $33 million bailout for the downtown Minneapolis library. Why? According to the Star Tribune, "The addition to the tax bill was a tit-for-tat of sorts. It came after the state agreed to forgive loans on the Xcel Energy Center, located in St. Paul." In other words, Minneapolis saw St. Paul get a bailout, then went to the legislature and said "me too!"

The Secret Session would be bad enough on its own, but it comes on top of the personal income tax hike that gives Minnesota the second highest rate (for comparable income levels) in the nation; a regressive cigarette tax hike of $1.60 per pack that more than doubles the current tax; bailouts for St. Paul and Duluth teachers’ pension funds; permanent state spending increases on K-12 education and LGA (among other areas) without offering any substantive reforms in return.

It was an ugly end to a disastrous session, and what Minnesotans saw (or didn’t see) was the antithesis of open and transparent government. Worst of all, as the dust continues to settle, taxpayers may learn of even more surprises.

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