Terri Bonoff

Governor Pawlenty Releases Revised Budget
Governor Pawlenty sent a letter to the legislature on Tuesday, transmitting revisions to the budget proposal he outlined in January. The budget revisions take into account the February Budget Forecast, the availability of federal stimulus funding and other updates. Under the Governor’s revised budget, the total amount of state general fund expenditures in FY 2010-11 would be $32.6 billion, a reduction of approximately 4 percent from the $33.9 billion in general fund expenditures in the current FY 2008-09 budget.

The most significant changes to the Governor’s budget plan would increase K-12 education funding beyond the level first proposed by the Governor in January, restore some funding for the University of Minnesota and the Minnesota State Colleges and

Universities system, delay eligibility changes for parents on Medical Assistance or MinnesotaCare, reduce the state’s General Assistance Medical Care program, put short-term offenders in state prisons, and provide an additional $10 million for operation of state courts. Following the lead of Congress and the President, the Governor’s budget would also exempt unemployment insurance benefits from state taxes up to $2,400 per individual.

I am very concerned by reductions in the Governor’s budget to Health and Human Services. Cuts to health and Human Services must be made strategically and with great care, as federal matching funds are dependent on these decisions and reductions in coverage can often result in increased emergency health care costs.

Health Care Reforms Announced
Several lawmakers unveiled a package of health care reforms on Monday intended to save taxpayers’ money, lower health care costs, and help balance the budget. The current budget deficit highlights the need to reform health care.  If our current health care spending trend continues, Minnesota will be paying nearly $50 billion/year on health care by 2015. The health care reform proposals focus on reforming both the health care payment and health care delivery system.  Other proposals will reduce administrative costs and leverage additional federal funding.

Health care payment reform proposals presented at the press conference included eliminating payments for services and lab work that is duplicative or of no value, eliminating payments for medical errors, and requiring patients to enroll in medical homes where choices are available. In the realm of health care delivery, reforms proposed included licensing and giving preference to birthing centers for normal deliveries, paying for 24-hour emergency dental and mental health services through clinic settings, discouraging over-use of C-section deliveries and psychotropic use of drugs for children, and creating a mid-level dental practitioner position. Lastly, reforms were proposed to address administrative costs in health care. These included bulk purchasing of medical supplies and equipment for governmental and private health care providers and a return of certain services to state government that can be administered at a lower cost.

Minnesota has always been a leader in health care and these ideas allow us to continue that tradition while cutting costs and improving quality. We must encourage everyone involved with the health care system to focus on payment reforms which involve transparent prices and reportable outcomes.

Shared Services Goes to the Floor
Senate File 10, the Shared Services initiative, came up for a vote on the Senate floor on Monday. Colleagues on both sides of the aisle supported the initiative; however, it failed to pass off the Senate floor by a narrow vote of 33-31.

As part of the floor debate, I reviewed the provisions of the bill and attempted to clarify misconceptions that remained regarding what the legislation would actually require.
The bill, as it stands now, would require purchases be made through some form of a cooperative purchasing venture, be it the Department of Administration’s state contract, a service cooperative, or through an inter-governmental agreement. This only applies to goods and services that are not currently purchased in-house, and so would not require that business services performed within the school be out-sourced, as some have thought.  Exceptions have been built into the bill for lower prices, regional needs such as supporting local businesses, urgent needs, quality standards and proximity of delivery.

The second part of the bill would require that school districts contract with a consultant to help them move into the realm of Shared Services. It is my belief that there are efficiencies that can be found in our educational system, and as the saying goes "we do not know what we do not know." Schools have done a very good job of saving money and would take advantage of any opportunities of which they are aware. The consultant would assist in efforts that go beyond what is currently practiced in terms of shared services and would only be paid on a percentage of cost-savings basis, with the school district having the ultimate say as to the degree of cost savings.

Though the bill did not pass off the Senate floor this week, I will continue to work with colleagues and stakeholders to fashion the bill into a final form that will help the state move forward with efforts at efficiencies and cooperation in our schools. Because the bill was introduced on General Orders, it can be brought up again at any time.
Bills Would Help Hi-Tech Businesses Avoid “Valley of Death”

The Business, Industry and Jobs Committee, on which I sit, advanced a package of bills this week aimed at improving Minnesota’s ability to attract and grow bioscience and high-technology companies.  Specifically, the bills will help companies turn new and innovative ideas into marketable products and new jobs.

Minnesota’s strong scientific community, skilled workforce, first-class research and educational institutions, and innovative entrepreneurial spirit have made the state a world leader in the bioscience industry.  While Minnesota has the infrastructure in place to continue to grow high-paying bioscience jobs, other states have moved beyond Minnesota in offering financial assistance to start-up companies, which has led to a significant migration of new high-technology companies out of the state.

As investors cope with the expanding economic recession, they have become less willing to invest in high-risk, high-potential companies.  Experts in the bioscience field have warned lawmakers that Minnesota bioscience companies face a “valley of death” between laboratory innovation and turning a profit.  The bills advanced this week will help spur private investment to help entrepreneurs survive the “valley of death” and create successful, profitable companies.  The proposals included a tax credit to “angel investors,” who fill the void in early-stage financing and put their money into promising, but unproven, companies before they qualify for bank loans. Another proposal would raise $200 million in private investments for growing high-tech companies from the insurance industry, in exchange for a short-term fractional tax credit.  These tax credits wouldn’t begin for several years after the investments are made, guaranteeing the cost to the state’s General Fund never exceeds the economic benefits generated by these investments.  The program is modeled after successful programs in ten other states.
I have been joined by a few of my colleagues from the Business, Industry and Jobs Committee in meeting with business leaders from around the state. These meetings have taken place off-site in an attempt to stimulate candid discussion regarding how we can help create a positive economic environment. If you have ideas to share, please let me know.

Have a great weekend!