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Summary of Meeting with Mary Liz Holberg
Civic Caucus, 8301 Creekside Circle
#920, Bloomington, MN 55437.
Friday, June 9, 2006
Guest speaker: State Rep. Mary Liz Holberg,
chair, House Transportation Finance Committee
Attendance: Verne Johnson, chair
(phone), Chuck Clay, Paul Gilje, Jim Olson (phone), Wayne Popham (phone),
and John Rollwagen (phone)
A. Welcome and introduction--Verne
welcomed Rep. Holberg and explained that the Civic Caucus is reviewing the
question of a proposed state constitutional amendment. The amendment would
dedicate the motor vehicle sales tax to transportation. Rep. Holberg, a
resident of Lakeville, is serving her fourth two-year term in the
Legislature. She was first elected in November 1998. A local business
owner, Holberg has held positions in several governmental and community
groups in Lakeville, including the City Council, planning commission,
housing and redevelopment authority, and chamber of commerce. In Holberg's
comments and in discussion with Civic Caucus participants the following
points were made:
1. History of the dedication issue--Almost
from the moment of passage of the state sales tax in 1967, transportation
advocates have been working for dedicating the sales tax on motor vehicles
to transportation. In 1971 the Legislature put the sales tax on motor
vehicles into a separate chapter of the statutes and renamed it the motor
vehicle excise tax. The tax was later renamed the motor vehicle sales tax,
or MVST. Its revenue, like all other sales tax revenue, was directed to
the state's general fund. Since 1981 a variety of laws were passed to
gradually transfer MVST funds to transit and highways. Under current law,
53.75 percent of MVST funds are dedicated to transit and highways and the
remaining is deposited in the state general fund.
A constitutional amendment to be voted on in November 2006 would require
that after a five-year phase in period all MVST funds would be dedicated
to transit and highways. The amendment provides that at least 40 percent
of the dedicated funds would be for transit and the remainder, not to
exceed 60 percent, would be deposited in a constitutionally-established
highway user tax distribution fund.
The highway user tax distribution fund already includes revenues from the
state gasoline tax and vehicle license tabs. The constitution requires
that 62 percent of the fund shall go for state highways; 29 percent,
county highways, and 9 percent, municipal highways. Should the MVST
amendment pass, amounts for highways would be distributed in the same
2. Passage of the amendment in the Legislature--At
the end of the 2005 session, late in the night, the House of
Representatives added a provision for constitutional dedication of MVST
funds to an omnibus transportation bill. The amendment was sponsored by
Rep. Ron Erhardt of Edina. The omnibus bill with the amendment passed the
House, and the Senate concurred. Therefore, no conference committee was
needed, and the omnibus bill went directly to the Governor. The bill,
which also included an increase in the state gasoline tax and a metro-wide
sales tax for transit, was vetoed by Governor Pawlenty.
However, the Governor's veto had no effect on the provision for a
constitutional amendment. Under Minnesota's constitution, constitutional
amendments are submitted to the voters directly by the Legislature without
the Governor's involvement. This meant that the MVST amendment remained
alive, even though all other parts of the bill were vetoed.
3. Controversy in the 2006 Legislature--Several
unsuccessful efforts occurred during the 2006 Legislature to change the
wording of the amendment. The amendment provides that "at least" 40
percent of MVST funds shall be dedicated to transit. Should the amendment
pass this November, the Legislature each session would decide how the
remaining 60 percent would be apportioned between transit and highways.
The Legislature could give the entire 60 percent to transit--in addition
to the 40 percent already guaranteed--or it could give the entire 60
percent or any amount up to 60 percent to highways.
Holberg said that House and Senate members were very close to an agreement
in 2006 that would guarantee 60 percent to highways, but end-of-session
deadlock produced no action. So the original language of the amendment
remains in effect. The conference committee was close to agreement on both
the constitutional language and the language on the ballot, she said.
Holberg said many outstate people who are interested in highways will
oppose the amendment this November because they fear the Legislature will
give more money to transit, which benefits the metropolitan area.
Studies of voter preferences reveal that language in the ballot question
about the amendment would attract 12-15 percent more yes votes than the
current language if other, non-adopted, language had made clear that no
new tax is involved, Holberg said.
4. Transit and highways are the only funding
options--Holberg clarified that the amendment, if adopted,
would provide two choices for the use of MVST funds, transit or highways.
It would not be possible, for example, to give a portion to the general
fund if highways were to receive less than 60 percent. If highways were
given less than 60 percent, then transit would receive the balance.
Currently some MVST funds are placed in the general fund. That would not
be possible should the amendment pass.
5. Existing constitutional distribution formula
would apply--All MVST dollars designated for highways would be
placed in the highway user tax distribution fund and be apportioned
according to a formula already in the constitution: 62 percent for state
highways; 29 percent, county highways, and 9 percent, municipal highways.
6. Transit demand is high--Holberg
said that advocates for transit will work very hard to justify a
larger-than-40-percent share of MVST for transit. She said she has seen
numbers that reveal that by 2012 transit operating expense in the
metropolitan area alone could claim a need for considerably more than one
half of all MVST funds.
7. Holberg not excited about the amendment--Personally,
Holberg has said she will not campaign for or against the amendment. She
said she is deeply concerned that highways have great needs but could
suffer under the amendment.
8. Procedural requirements for Legislature in
2007--If the amendment passes, the Legislature in 2007 would
have to pass a law providing for a specific division between transit and
highways, Holberg said.
9. Advantage in knowing what projects will
benefit--Holberg said she authored a bill that didn't pass
providing for $2.5 billion in bonding for highways over 10 years. That
bill specified a list of projects. Experience in other states indicates
that a ballot question has the best chance of being adopted when people
see a list of projects and know, therefore, where the money will be spent.
10. Question of need for constitutional
protection--A questioner wondered what the compelling reason is
to place such a revenue guarantee in the state constitution. Holberg said
the voters will decide. Advocates point out that transportation already
has a dedicated fund. Another questioner said that if the amendment is
adopted, outdoors and education will seek similar protection, and nothing
will keep the movement from snowballing. Commenting on outdoors, where
supporters are pushing for a special session, Holberg said she doubts it
will be on the ballot this year. Another questioner expressed concern that
the Governor is left out of the process when constitutional amendments are
proposed. Holberg said she has no problem with that principle, because the
collective vision of the people as expressed on amendments at the ballot
box is more important. Another questioner said that submitting such
amendments to the voters seems to be an act of desperation--matters can't
seem to be resolved at the Legislature.
11. Inflexibility in constitutional amendments--A
questioner said that the world is changing so fast that why would someone
want to place a provision in the constitution unless you knew that
circumstances wouldn't be changing again soon. It might be better, the
person said, if the proposed transportation amendment had a sunset clause.
12. So little legislative consideration--The
group discussed briefly that something as important as a constitutional
amendment really received very little discussion before passage. The
provision wasn't voted out of a regular committee to the floor. No
conference committee took place.
13. Relative needs of county and municipal
highways--It was noted that county and municipal highways
automatically receive a share of the highway users fund whenever state
trunk highways are given a share. Needs at the state, which are given wide
prominence, drive the funding of counties and municipalities. Holberg
replied that controversy has been present for many years over the
distribution of the funds among counties. Metropolitan counties claim that
the distribution favors rural counties. For example, Hennepin County is
receiving funds covering only 35 percent of its needs, while one rural
county is receiving 195 percent of its needs.
14. Comparison with other states--Jim
Olson, a resident of Decatur, IL, said a special gasoline tax funds
transit metro transit in the Chicago area. . The original source of
funding for the Regional Transportation Authority (the 6 or 7 counties in
Illinois adjacent to and including Chicago) was the Illinois State
Lottery. Realistically, this recognized the large amount needed for
transportation in the Chicago( or any) metro area, but the lottery
revenues were re-directed to education funding after 10
years, and the RTA became a taxing district. The gasoline price difference
RTA counties and Decatur seems to Olson to be in the neighborhood of 10
gallon. In his city of Decatur the transit system has a goal that the fare
box will pay 23 percent of transit expenses, leaving a huge hole, Olson
said, to be filled with tax revenues.
15. Difficulty in serving "riders" in the Twin
Cities area--Holberg said the absence of any natural barrier,
such as a mountain or a lake, means that the Twin Cities area grows in 360
degrees. Such growth in so many directions makes it very difficult, she
said, to provide transit service.
16. Advocates and opponents of the amendment--Holberg
said a broad coalition headed by the Minnesota Chamber of Commerce is
leading the campaign for the amendment. She a coalition of outstate
interests is developing in opposition.
17. Availability of additional information--Holberg
distributed two memos from House Research with background on MVST. She
said House research is a good source for additional information.
B. Thanks to Holberg--Verne expressed
thanks to Holberg for meeting with us today.
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. Core participants
include persons of varying political persuasions, reflecting
years of leadership in politics and business.
A working group meets face-to-face to
provide leadership. They are Verne C. Johnson, chair; Lee
Canning, Charles Clay, Bill Frenzel,
Paul Gilje, Jim Hetland,
John Mooty, Jim Olson, Wayne Popham and John Rollwagen.