Other state appropriation areas exceeding $1 billion are:

• Transportation (more than $3 billion, including nearly $777 million in federal funds);
• Aids and credits to local governmental units and individuals (more than $3 billion); and
• Higher education (nearly $2.4 billion).

K-12 Education and Taxes

The issue of K-12 education and property tax burdens for the funding of elementary and secondary education was probably the dominating issue of the 1997 legislative session.

After much debate and a Governor's veto, the Legislature passed, and the Governor signed, a program with these major initiatives:

• A new education homestead credit of 32 percent of the general education tax on a homestead, up to a maximum credit of $225. The cost of this credit is estimated at $153.3 million;
• Major expansion of income tax deductions allowed for K-12 education costs, estimated to cost about $14.5 million. The existing deduction was expanded to include tutoring and summer education camps. The maximum was increased by 150 percent, from $650 to $1,625 for students in kindergarten through grade six, and from $1,000 to $2,500 for students in grades seven through 12; and
• A refundable education credit for households with incomes less than $33,500 a year and K-12 dependents estimated to cost $38.5 million. This works in tandem with the deduction. Expenses used to get the credit cannot be used for the deduction. The credit applies only for instruction outside of the regular school day or school year. The maximum credit is $1,000 per dependent student and $2,000 per family.

The formula revenue allowance was increased by $76 the first year and an additional $79 the second year, without increasing the property tax levy because of the levy buy-down through the educational homestead credit.

More Property Taxes

The Legislature also enacted a rebate program based on property taxes paid in 1997. The rebate will be 20 percent of the property taxes paid. Property taxes for renters are stipulated to be 18 percent of the rent paid. This one-time initiative is estimated to cost about $500 million.

Human Services

The 1997 Legislature reacted to federal welfare reform legislation by making major changes in its economic support programs. The AFDC program was minimized from about $265 million in state appropriations to $7.7 million, with most of the money going to the Minnesota Family Investment Program.

State appropriations and federal block grant money totaling about $974 million went for economic support programs, with $443 million of the federal funds dedicated to Temporary Assistance for Needy Families (TANF). Most of the money was appropriated for cash grants, with other appropriations for work grants, welfare-to-work programs, pilot programs, and county and state administration. General assistance funding was increased from about $95 million to $105 million.

Other portions of the state budget that dealt with welfare reform issues included several small welfare-to-work initiatives in the economic development bill, with a $92.5 million appropriation for child care to working parents. This was a $52 million increase over the previous year's budget.

The largest appropriations in human services were for medical vendors. Vendor payments under the medical assistance, general assistance medical, regional treatment centers, mental health, and related programs totaled nearly $3.5 billion, exclusive of federal funds. About $341.8 million was appropriated for MinnesotaCare, and more than $410.6 million went for state residential treatment facilities.

Flood Relief and Bonding Bills

The 1997 Legislature dealt with help for 1997 flood damage relief during the regular session and during a one-day special session in August, when the needs and the federal government efforts became more clear.

The final package was $55.3 million from general obligation bonds and $20. 3 million in General Fund appropriations.

The package included $30 million for a 100 percent match obligation for federal funds, grants to local governments, loans to farmers for capital repairs, and forgiveness of certain housing rehabilitation loans.

A separate bonding bill of $111 million, with more than $86.6 million coming from general obligation bonds, was adopted. The $24.4 million in direct appropriations was dedicated to sewage treatment, water projects, and contaminated site (Brownfields) cleanup and development.

The major bonding expenditure was more than $73 million for a new Department of Revenue building. Debt retirement for the biennium was estimated at nearly $560.8 million.

Gulf War Veterans' Bonus

The 1997 Legislature funded a bonus for Minnesota Persian Gulf war veterans. The bonus is estimated to cost $17.6 million.

Veterans who were in active service between August 2, 1990 and July 31, 1991 are eligible. Veterans who did not serve in the war theater will be eligible for bonuses of $300; war zone veterans will be eligible for $600 bonuses; and survivors of veterans who died as a result of the war will be eligible for $1,000 payments. The program will be administered by the Department of Veterans Affairs.

Transportation

The Department of Transportation budget exceeded $3 billion. Of that amount, more than $841.6 million went for county and municipal state transportation aids, $100.7 million went for metropolitan mass transit, and $29.6 million went for outstate transit assistance. Federal aid appropriations are nearly $776.7 million, or nearly 26 percent of the total.

Governance and Miscellaneous

The 1997 Legislature created the new Office of Technology. This agency is charged with providing statewide leadership and direction for information and communications technology. The appropriation for the agency was $7.9 million. There were also numerous appropriations to agencies and school districts for technological improvements.

The Legislature also:

• Created a new Rural Policy and Development Center at Mankato State University. The appropriation included a $2 million endowment fund and $500,000 in startup operating costs;
• Appropriated more than $13 million for the Minnesota Investment Fund, an economic development effort. That was a 62 percent increase over the previous biennium;
• Increased fishing licenses by 15 percent;
• Appropriated $7.8 million to the Department of Public Safety for statewide criminal gang apprehension programs and additional agents for the Bureau of Criminal Apprehension; and
• Increased appropriations by $6.2 million for snowmobile trails and enforcement of snowmobile laws, including a $4.8 million increase for grant-in-aid trails.

The regular and first two special sessions of the 1997 Legislature debated, but did not act on, building and financing a new baseball stadium. But a third special session was being planned as this Review went to press.

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