Fee increases proposed at Capitol could rake in hundreds of millions

The Minnesota Capitol
The Minnesota Capitol on Thursday, Jan. 3, 2013.
MPR Photo/Hart Van Denburg

New fees and fee increases are scattered throughout the budget bills moving through the Legislature.

The Minnesota House and Senate have been working on their budget bills this week. Democrats in the Legislature and Gov. Mark Dayton are planning to raise taxes by about $2.5 billion. The fees and surcharges would raise hundreds of millions more.

The list includes $3 more for a driver's license, a $5 surcharge on homeowner's and auto insurance policies, a new fee on prepaid cell phones and a $15 surcharge on traffic violations.

The House environment budget bill raises fees on water. Lakeville City Administrator Steve Mielke said his city's water fees would go from $45,000 a year to $125,000 a year.

"The only way we pay for that is to pass the cost on to our water customers," Mielke said. "We've estimated that we would have to raise rates somewhere in the area of 2 to 3 percent depending on where this ends up."

Data privacy
Rep. Mary Liz Holberg, R-Lakeville, at a Capitol hearing Wednesday, Feb. 20, 2013 at the State Office Building. Holberg says she's frustrated that Democrats are looking to raise fees and surcharges when they are also proposing tax hikes well above what's needed to erase the state's $627 million shortfall.
MPR Photo/Jennifer Simonson

In some instances, the money raised by the fees is spent for specific purposes, such as overseeing barbers and accountants. But in other cases, the money is used to pay for programs that typically rely on general tax dollars.

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Overall, the House and Senate budget bills propose using $300 million dollars in fees, surcharges and one time money.

"It's breathtaking in its scope and amount," said Republican Rep. Mary Liz Holberg of Lakeville.

She says she's frustrated that Democrats are looking to raise fees and surcharges when they are also proposing tax hikes well above what's needed to erase the state's $627 million shortfall.

"We think they're north of $2.5 billion in tax increases. My guess is they'll approach or surpass $3 billion in total spending by the time they're done," Holberg said.

This isn't the first time policy makers have increased fees to pay for key programs. Former Republican Gov. Tim Pawlenty relied on fee hikes during his first term to honor his pledge not to raise taxes.

"We're trying to get the ship of state uprighted, and yes, that includes taxes and fees," he said.

Democrats are defending the proposed fees in their budget. Higher fees are necessary in some cases, said Rep.Lyndon Carlson, DFL-Crystal, and chair of the House Ways and Means Committee, which handles the purse strings of the state budget.

For example, Carlson says the courts have been underfunded for 10 years. He said increasing fees on attorneys is one way to ensure there are no cuts to the public defender budget.

"We're trying to get the ship of state uprighted, and yes, that includes taxes and fees," he said.

Carlson also stressed that some fees are being eliminated or reduced in the DFL budget.

The chairs of the Health and Human Services committees in the House and Senate say imposing surcharges on hospitals and HMOs will prevent cutting health care for the needy.

As for the water fees, DFL Rep. Jean Wagenius of Minneapolis defends them, saying the money will be used to monitor and protect groundwater in the state.

"We simply don't know a lot about where our water is, how much there is," Wagenius said. "We don't know anything about the recharge rates to speak of. We need to know."

But some worry that greater reliance on fees will simply mislead the public about how much it costs to run state government.

DFL Rep. Michael Paymar of St. Paul, who isn't shy about his support for tax increases, said he is concerned about the level of fees in all of the budget bills. Paymar, who chairs the House Public Safety Committee, worries higher fees could make the state's court system too costly.

"It becomes difficult for people who want to use the courts, who end up with fines for whatever violations they have committed," Paymar said. "I think we have to ask the question, is that the way we want to fund government by increasing fees and fines? And to me, the answer is no."

Dayton, who proposed about $45 million in new fees in his budget, said he is watching the Legislature closely.

"I've told the leaders that the same rule applies to them that applies to me: No games, no gimmicks and no manipulations," Dayton said. "I was able to propose an increase to nursing home providers and personal care attendants and follow that rule. I expect the same of them."

Dayton and DFL legislative leaders will start working out their differences on fees and taxes after the House and Senate pass their budget bills.

Editor's note: An earlier online version of this story said that House Democrats are seeking more than $600 million in fees. The correct number is more than $300 million.