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Budget, property taxes expected to be top issues at Legislature

By Janet Kubat Willette

Date Modified: 03/05/2013 10:02 AM

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ST. PAUL – Lobbyists with the state's two largest general farm organizations expect the budget to be the No. 1 issue legislators work on this session.

The Legislature convened Jan. 8, with balancing a projected $1.1 billion deficit as their priority. Legislators are also expected to pay back the school shift, when the state borrowed money from school districts in order to meet its financial obligations.

Chris Radatz, Minnesota Farm Bureau public policy director, and Thom Petersen, director of government relations for Minnesota Farmers Union, will both be keeping an eye on budget proposals. The governor will release his budget later this month and the Legislature will base their budget upon the February forecast, which comes out the first part of March.

After the governor's budget proposal comes out, legislative committees will start holding hearings as they go through the proposals, Radatz said. Farm Bureau wants to make sure that consumer protection, food safety and food inspection are adequately funded, he said. There is also money in the Agricultural Growth Research and Innovation Fund to fund agricultural programming. This money was formerly targeted to ethanol producer payments, Radatz said.

Minnesota Farmers Union wants to target the AGRI money toward value-added opportunities in agriculture and keep $10 million in the fund per year, Petersen said. Formerly, $35 million a year was passed through to ethanol plants that met state requirements. All the farm groups have different ideas what to do with the money, but all of them want to keep the money within agriculture, he said.

Both Petersen and Radatz said with a budget deficit, lawmakers will be looking at any undedicated pot of money and it will be up to the agricultural community to defend why they should keep the AGRI fund.

Petersen said he'll be watching not only the agriculture department budget, but also the Pollution Control Agency budget, the Agricultural Utilization Research Institute budget, the Department of Natural Resources budget and the Board of Animal Health budget, as all of those budgets impact agriculture. The agriculture budget itself is less than a quarter of 1 percent of the state budget. He will also keep an eye on the higher education budget and the MNSCU budget, as this is where funding for Extension and farm business management are located.

Farmers Union wants to keep tuition for farm business management programs affordable for farmers. There has been talk of moving toward a more fee-based system that might price farmers out of participation, Petersen said. Farmers Union will be talking about the value of the program for farmers and keeping it affordable.

In another education funding issue, Farmers Union will advocate for repaying the school shift. Petersen said he was surprised by the number of members who showed up at fall meetings who were concerned about the impact of the shift on their schools.

Both Petersen and Radatz expect property taxes to be discussed this session. Agricultural land is really one of the few classes of property increasing in value and the huge increases in land prices reflect how the property tax pie gets cut up, Radatz said. When one class of property increases over other classes, its share of the pie increases. Property taxes fund local governments -- counties, school districts, towns and cities. Whatever these local governments don't receive in state aid is made up by local property taxes, he said.

Farmers Union and Farm Bureau shared a joint appointment to a property tax working group that looked at making Minnesota's property tax system less complex and more understandable. Minnesota has 53 different classes of property, Radatz said.

The big debate over the past 10 years has been as state aids to local governments have been reduced, property taxes have gone up. There have also been spending reductions. It all comes back to what level of services people expect from government and what they're willing to pay for it, Radatz said.

Farmers Union is concerned about the loss of the homestead credit, Petersen said, which gave farmers a double whammy as ag land prices increased at the same time. If the land bubble bursts, property taxes could be a huge problem for farmers.

Other tax issues likely to be discussed include the state estate tax and the sales tax exemptions for agricultural inputs. Section 179 depreciation will likely be worked on.

Farmer-lender mediation expires this year and will need to be extended. Farmers Union supports the program and says it's still be used even when the agricultural economy is in good shape by all indications. There's been talk in the past of raising the threshold to be in mediation, but Farmers Union opposes that because for smaller and beginning farmers it's best to work on a problem before it grows.

There will likely be enabling legislation for the state's Agricultural Water Quality Certification program brought forward. Farmers Union anticipates supporting that, but will wait to see what the legislation looks like. There is also word that some environmental groups will push something a little different. Farmers Union favors a voluntary approach to a regulatory approach. Plus, the certification program has the potential to bring additional federal conservation dollars to the state, Petersen said.