S.F. No. 79 - 2003 Budget Reconciliation Bill
Author:	Senator Richard J. Cohen
Prepared by:	Kenneth P. Backhus, Senate Counsel (651/296-4396) Carol Baker, Senate Counsel (651/296-4395) Tom Bottern, Senate Counsel (651/296-3810) Katie Cavanor, Senate Counsel (651/296-3801) David Giel, Legislative Analyst (651/296-7178) Greg Knopff, Legislative Analyst (651/296-9399) Patricia Lien, Senate Counsel (651/296-0558) George McCormick, Senate Counsel (651/296-6200) Amy Vennewitz, Legislative Analyst (651/296-7681) Peter S. Wattson, Senate Counsel (651/296-3812) Maja Weidmann, Legislative Analyst (651/296-4855)
Date:	January 23, 2003

S.F. No. 79, as passed by the Senate, would provide almost $375 million in relief to the general fund for the fiscal year ending June 30, 2003, from transfers from other funds into the general fund and from reductions and cancellations in general fund appropriations. Additional relief would be provided by an increase of about $8 million in revenue to the general fund from counties that operate nursing homes. Transfers from other funds total about $97 million, appropriation reductions about $148 million, and cancellation of a general fund appropriation for highway construction is $130 million.

ARTICLE 1 SUMMARY (General Fund Only, after Forecast Adjustments)
TRANSFERS FROM OTHER FUNDS	$ 97,295,000
APPROPRIATIONS
E-12 Education	$ (4,787,000)
Higher Education	(30,107,000)
Health, Human Services and Corrections Appropriations	(40,379,000)
Environment and Agriculture	(8,047,000)
Economic Development	(1,953,000)
Transportation	-0-
State Government	(10,160,589)
Sales Tax Refunds	(50,000,000)
Capital Projects	(2,018,274)
SUBTOTAL APPROPRIATIONS	$ (147,451,863)
CANCELLATIONS	(130,000,000)
TOTAL	$ (374,746,863)

Section 1 [E-12 Education Appropriations and Reductions] explains that the dollar amounts in the columns under "APPROPRIATION CHANGE" shown in parentheses are subtracted from previous appropriations for the current fiscal biennium. The total appropriation reduction is $4,787,000.

Section 2 [Commissioner of Children, Families and Learning] reduces appropriations for agency management, aids and grants, school readiness, early childhood and family education, and community education by $4,617,000.

Section 3 [Perpich Center for Arts Education] reduces the appropriation by $130,000.

Section 4 [Minnesota State Academies] reduces the appropriation by $40,000.

Section 5 [Reserve Account Limit - Early Childhood Family Education] eliminates a provision allowing the Commissioner of Children, Families and Learning to reallocate aid amounts over the 25 percent limit on a district's early childhood family education reserve account to other districts' programs. Instead, future aid payments to a district with an excess in its reserve account will be reduced.

This section also changes the calculation of a district's early childhood family education reserve account limit to include the sum of excess revenue plus any fees, grants, or other revenue received by the district for early childhood family education programs. (Current law allows only excess revenue to be counted in calculating the reserve account limit.)

Section 6 [Reserve Account Limit - School Readiness] eliminates a provision allowing the commissioner to reallocate aid amounts over the 25 percent limit in a particular school district's reserve account for school readiness programs to other districts' school readiness programs.

Section 7 [Reserve Account Limit - Community Education] limits a district's community education reserve account to not greater than 25 percent of that district's maximum total community education revenue plus additional community education levy, fees, grants, or other revenue received by the district for community education programs for the prior year. If the balance is greater than the limit, the commissioner must reduce the district's community education state aid and levy authority by the lesser of the current year revenue or the excess reserve amount.

Section 8 [Waiver] allows a district to seek approval from the commissioner to exceed the reserve account limit for community education programs due to extenuating circumstances.

Section 9 [Districts in Statutory Operating Debt] makes the community education reserve account limitation and any levy reduction not effective for any school district in statutory operating debt.

Section 10 [Effective Date] makes sections 1 to 9 effective the day following final enactment.

Section 1 delineates fund transfers and appropriation reductions.

Section 2 reduces the fiscal year 2003 appropriation to the Board of Trustees of the Minnesota State Colleges and Universities, and states that this is a one-time reduction and does not reduce the budget base for the 2004-05 biennium.

Section 3 reduces the fiscal year 2003 appropriation to the Board of Regents of the University of Minnesota, and states that this is a one-time reduction and does not reduce the budget base for the 2004-05 biennium.

Section 4, subdivision 1, specifies appropriation changes to the Higher Education Services office.

Subdivision 2 makes a one-time appropriation to the state grant program.

Subdivision 3 subtracts $107,000 from the general fund appropriation for operating purposes.

Section 5 states that notwithstanding Minnesota Statutes, section 136A.71, or any other law to the contrary, the Higher Education Services Office shall transfer $30,000,000 of uncommitted balances in the SELF loan reserve fund to the general fund.

Section 6 makes sections 1 to 5 effective the day following final enactment.

Section 1 summarizes appropriations for the Minnesota Department of Health (MDH), the Department of Human Services (DHS), and the Department of Corrections (DOC).

Section 2 authorizes appropriations/reductions for DHS and includes related budget rider language.

Section 3 authorizes appropriations/reductions for MDH and includes related budget rider language.

Section 4 authorizes appropriations/reductions for the Veterans Homes Board and includes related budget rider language.

Section 5 authorizes appropriations/reductions for DOC and includes related budget rider language.

Section 6 sunsets the uncodified language in this article on June 30, 2003, unless a different expiration date is explicit.

Section 7 makes this article effective the day following final enactment unless a different effective date is otherwise provided.

Section 1 (145A.13, subdivision 3) postpones the subsidy payment to community health boards that is due for the month of May by one month. Currently, this payment is due the first working day of June. This change would postpone the payment until the first working day of July.

Section 2 (256.9657, subdivision 1) increases the nursing home surcharge to $1,632, an annual increase of $642 from the current $990, effective April 15, 2003.

Section 3 (256.969, subdivision 3a) delays until July the last June fee-for-service payments for inpatient hospital services reimbursed by Medical Assistance (MA) and General Assistance Medical Care (GAMC). The payments must be made by on the first scheduled payment date in the following fiscal year. The prompt payment law does not apply to these delayed payments.

Section 4 (256B.0625, subdivision 13) decreases the actual acquisition cost of prescription drugs under the MA program from the average wholesale price (AWP) minus nine percent to AWP minus 14 percent. It eliminates the requirement for the commissioner to set the maximum allowable costs for certain multisource drugs. It also authorizes the commissioner to deem certain pharmacies as critical access pharmacies based on specified criteria and to increase the dispensing fee to these pharmacies.

Section 5 (256B.0625, subdivision 24) eliminates coverage for chiropractic and podiatric services from the MA program.

Section 6 (256B.19, subdivision 1d) increases intergovernmental transfer payments to the general fund from counties that operate nursing homes by $2,230 per bed per year.

Section 7 (256B.195, subdivision 3) freezes at the March 2003 level certain payments to community clinics. Any additional amounts available for these purposes in future years are allocated instead for MA payments to children's hospitals. The source of funds for these payments is intergovernmental transfer payments from Hennepin and Ramsey counties and matching federal payments.

Section 8 (256B.32, subdivision 1) delays until July the last June fee-for-service payments for outpatient hospital services reimbursed by MA and GAMC. The payments must be made on the first scheduled payment date in the following fiscal year. The prompt payment law does not apply to these delayed payments.

Section 9 (256B.431, subdivision 23) increases reimbursement rates to county-owned nursing homes by $6.11 per bed per day to offset the intergovernmental transfer payments from counties that own nursing homes.

Section 10 (256B.431, subdivision 38) increases nursing facility payment rates to offset the increase in the nursing home surcharge. The rate increase is equal to the surcharge increase divided by 365 and further divided by .88.

Section 11 (256B.75) delays until July the last June fee-for-service payments for outpatient hospital services reimbursed by MA and GAMC. The payments must be made on the first scheduled payment date in the following fiscal year. The prompt payment law does not apply to these delayed payments.

Section 12 is a repealer. It repeals coverage under the MA program for intensive early intervention behavior therapy services for children with autism spectrum disorders.

Article 6 contains policy changes related to the Department of Corrections. Current law provides that an executed felony sentence of imprisonment for more than one year results in the offender's commitment to the Commissioner of Corrections (i.e., the offender is sent to state prison). This article changes this to provide for commitments to the Commissioner of Corrections only of offenders who will serve more than one year in prison (generally inmates serve only two-third's of the executed sentence). Offenders serving less than one year will be incarcerated at the local level (i.e., county jails, workhouses, etc.). The article requires that these short-term offenders who would otherwise be imprisoned in a state prison and who are now being kept at the local level must be incarcerated for the period that they would have at the state level. The article also requires the Commissioner of Corrections to make grants to counties to assist them to incarcerate offenders and delays reimbursement payments to counties for probation officers so that they are made in the next fiscal year.

Section 1 (244.101, subdivision 5) provides that Minnesota Statutes, section 244.101, (sentencing of felony offenders who commit offenses on and after August 1, 1993) does not apply to the offenders described in section 4 or 6.

Section 2 (609.105, subdivision 1) provides that felony sentences to imprisonment for more than 18 months after adjusting for jail credit commits the offender to the custody of the Commissioner of Corrections.

Section 3 (609.105, subdivision 3) provides that a sentence to imprisonment for a period of 18 months or less after adjusting for jail credit shall be served at the local level.

Section 4 (609.112) provides that when a court executes a sentence for an offender whose term of imprisonment after adjusting for jail credit is more than eight months but not more than one year, the court must require the offender to serve the term of imprisonment incarcerated at the local level. Creates an incarceration /release structure for these offenders based on the state model for offenders sent to prison (see subdivisions 3 to 6). Under this structure, the offender will be incarcerated for the term of imprisonment (two-thirds of the executed sentence) and then be conditionally released to serve the last one-third of the sentence in the community.

Section 5 (609.135, subdivision 7) prohibits an offender from demanding execution of sentence rather than a stayed sentence if the offender will serve less than 12 months in prison.

Section 6 (609.14, subdivision 3) provides that when a court revokes an offender's probation and the duration of the offender's term of imprisonment after adjusting for jail credit is more than eight months but not more than one year, the court must require the offender to serve the term of imprisonment incarcerated at the local level. This section is substantively identical to section 4 and applies to probation revocations where section 4 applies to initial sentences.

Section 7 clarifies that sections 1 to 6 do not alter what offenses are classified as felonies or impinge on a felony offender's constitutional rights

Section 8 requires the Commissioner of Corrections to make grants to counties to assist them to incarcerate offenders. Requires counties seeking grants to report certain information to the Commissioner and provides due dates for these reports.

Section 9 requires the Commissioner of Corrections to delay fiscal year 2003 payments for county probation officer reimbursements by making them in fiscal year 2004. Requires this in the future as well.

Section 10 makes the article effective the day following final enactment. Of note, the short-term offender changes are effective prospectively to persons sentenced or whose probation is revoked on or after that date. Thus, the article does not affect individuals currently in prison.

Article 7 reduces general fund appropriations for operating budgets for state agencies responsible for environment, natural resources, and agriculture in the remainder of fiscal year 2003 by just over $5.77 million, reduces an open, general fund appropriation in fiscal year 2003 for ethanol producer payments by $2.25 million, and eliminates a $25,000 grant to Taylors Falls for fiscal year 2003. The agency operating budget reductions are one-time and to be distributed across accounts with an emphasis on cutting administration and overhead expenses. The ethanol producer payment reduction is based on a rider in Section 7. The rider provides that an ethanol plant that is located in a city of the first class, and has had violations and a lawsuit brought by the city is ineligible to receive ethanol producer payments for the final three quarters of fiscal year 2003. This article also transfers $11 million from the balance of the solid waste fund to the general fund.

Article 8 reduces general fund appropriations for operating budgets for state agencies responsible for trade and economic development in the remainder of fiscal year 2003 by just over $1.85 million. This article also reduces passthrough grant programs by $99,000. The reductions are one-time and are to be distributed across accounts with an emphasis on cutting administration and overhead expenses. Section 3 restores a $124,000 reduction from state services for the blind. This article also transfers $15 million in June 2003 from the excess surplus account in the workers' compensation special compensation fund to the general fund.

Section 1 contains the total transportation appropriation changes including a $130.0 million cancellation to the general fund and a $130.13 million appropriation from the trunk highway bond proceeds account.

Section 2 appropriates $130 million from the trunk highway bond proceeds account for interregional corridor and bottleneck construction and cancels a $130 million appropriation from the general fund made in Laws 2000, chapter 479, for the same purposes. Requires the Commissioner of Finance to transfer $15 million of the balance in the state airports fund to the general fund.

Section 3 appropriates $130,000 from the trunk highway bond proceeds account to the commissioner of finance for bond sale expenses.

Section 4 authorizes the Commissioner of Finance to sell $130.13 million in trunk highway bonds to provide the funds appropriated in sections 2 and 3.

Section 5 directs the Commissioner of Transportation to sell a state airplane and requires the proceeds to be deposited in the general fund.

Section 6 makes the article effective the day following final enactment.

Section 1 explains that amounts in the columns under "APPROPRIATION CHANGE" are added to or, if in parentheses, subtracted from previous appropriations for the current fiscal biennium. Reductions for the Legislature and constitutional officers are changes in base funding. All others are one-time reductions.

Section 2 declares the Legislature's intent, unless otherwise provided, that reductions in agency funding must be distributed across all the agency's accounts and must seek to cut overhead and administrative expenses in order to minimize impact on programs and services.

Section 3 reduces the Legislature's base funding by $2,561,000, including $1,130,000 from the House of Representatives, $845,000 from the Senate, and $586,000 from the Legislative Coordinating Commission.

Section 4 reduces the Secretary of State's base funding by $291,000.

Section 5 reduces base funding for the Governor's office by $162,000.

Section 6 reduces the State Auditor's funding base by $390,000.

Section 7 reduces the Attorney General's funding base by $1,038,000.

Section 8 reduces funding for the Office of Strategic and Long-Range Planning by $169,000.

Section 9 reduces funding for the Department of Administration by $1,410,589.

Section 10 transfers $5 million to the general fund from a Department of Administration segregated account for depreciation and repair costs of state-owned buildings.

Section 11 reduces funding for the Department of Finance by $639,000, which includes a $65,000 reduction in the operations of the State Treasurer, assumed by the department on January 6, 2003.

Section 12 reduces funding for the Department of Employee Relations by $305,000.

Section 13 transfers $11,201,000 to the general fund from the Department of Employee Relations state employee insurance trust fund. The transfer reimburses the general fund for all or part of appropriations to the trust fund made in 1998 and 1999.

Section 14 reduces funding for the Department of Revenue by $1,810,000.

Section 15 reduces funding for the Amateur Sports Commission by $25,000.

Section 16 reduces funding for the Department of Military Affairs by $301,000.

Section 17 reduces funding for the Campaign Finance and Public Disclosure Board by $25,000.

Section 18 reduces funding for the State Board of Investment by $90,000.

Section 19 reduces funding for the Capitol Area Architectural and Planning Board by $6,000.

Section 20 reduces funding for the Department of Veterans Affairs by $186,000.

Section 21 reduces funding for the Lawful Gambling Control Board by $89,000.

Section 22 reduces funding for the Racing Commission by $16,000.

Section 23 reduces funding for the Department of Human Rights by $146,000.

Section 24 reduces funding for the Uniform Laws Commission by $2,000.

Section 25 reduces funding for the Private Detective and Protective Agent Licensing Board by $6,000.

Section 26 reduces funding for the Department of Commerce by $434,000.

Section 27 reduces funding for the Office of Administrative Hearings from the workers' compensation fund to correct an earlier overappropriation.

Section 28 reduces funding for the Board of Accountancy by $24,000.

Section 29 reduces funding for the Board of Architecture, Engineering, Landscape Architecture, Geoscience, and Interior Design by $29,000.

Section 30 reduces funding for the Board of Barber Examiners by $6,000.

Section 31 appropriates $295,000 to the Commissioner of Public Safety to reimburse public employers for providing health insurance for police officers and firefighters injured in the line of duty. The Commissioner must reduce other appropriations to the Department for fiscal year 2003 by the same amount to balance the new appropriation.

Section 32 authorizes the Racing Commission to receive reimbursement for the costs of services provided by veterinarians. Current law authorizes reimbursement for the cost of services provided by assistant veterinarians.

Section 33 amends one of last year's appropriations bills to eliminate a requirement that budget reductions for the Secretary of State may not come from revenue-producing programs or elections.

Section 34 makes the article effective the day following final enactment.

Sections 1 through 4 change the payment provisions for most sales tax refunds. Current law does not specify when a claim for refund must be paid; it does require payment of interest on tax overpayments from the date the claim is filed with the Commissioner. The changes require the Commissioner of Revenue to: 1) not pay refunds until 90 days after the refund claim is received; and 2) not pay interest until 90 days after the claim is received. All changes are effective the day following final enactment.

Section 1 changes the timing of refund payments when the purchaser files a claim directly with the Commissioner rather than seeking a refund through the vendor.

Section 2 changes the timing of refund payments for taxes paid on capital equipment purchases.

Section 3. Changes to this provision make it consistent with the new payment time for capital equipment.

Section 4 changes the interest payments for sales tax refund claims on capital equipment and purchaser refunds.

Article 12 reduces a 1998 appropriation to the Commissioner of Natural Resources for local initiative grants for parks, trails, and natural and scenic areas by just over $2 million.

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