Capitol Update 7 – 2015

Truth in Lending and Enrollment:

On Tuesday of this week, the Higher Education and Workforce Development Committee heard a number of bills related to disclosures to students by educational institutions, as well as open information and regular reporting for

private lenders to borrowers. These bills come as a result of some very serious issues confronting our students.

This past summer, our Attorney General, Lori Swanson, announced that she would be looking into what appeared to be misleading activity on behalf of some of the private, for-profit post-secondary institutions. Her office had

received numerous complaints from students who reported having been misled by certain institutions regarding the ability of credits to transfer, as well as the feasibility of receiving jobs related to their field of study. One case that we heard and that was written about in the news was a situation in which a student had been told that if he enrolled in a particular program, he would be on his way to receiving the necessary accreditation for a career as a Police Officer. It turned out that the way the degree was accredited (nationally vs. regionally), the curriculum did not transfer to other Minnesota schools. This student ended up in heavy debt, with nothing to show for it. Other testifiers came to the table to announce that institutions were reporting that graduates had found jobs in their field of study, when in fact, much of this information was false. The legislation that we heard on Tuesday would

require institutions to report specific information to students with regard to the transferability of credits and the potential for job placement upon completion at critical times during the enrollment process.

The second type of legislation that was heard related to the incredible amount of debt that our students are taking

on to pay for school. As many of us know who have been through the financing process, discussion over payback mechanisms, interest rates and options for refinancing can be extremely complicated and intimidating. Now put

yourselves in the shoes of an 18 year old who is trying to find a way to pay for school. As you might imagine, many of our students do not realize what the implications are as they take on long term loans. While I absolutely believe in personal accountability, lenders have a responsibility to ensure that students have a clear understanding of what

they are signing up for. The bills that we heard in committee would require private lenders to have enhanced reporting and disclosure of terms with borrowers and would also require options be made available when

borrowers were in potential default. Most lenders are covered under the Federal guidelines but private lenders such as Sallie Mae and other lending institutions do not have to conform with these best practices.

We had meaningful conversations around these initiatives and the bills were ultimately laid over for possible

inclusion into our policy omnibus bill. There are multiple ways to address this problem and it is up to our committee to propose the most effective strategy. Given the private lenders are such a small segment of the

market and the challenge is so pervasive it is my belief that there may be more effective ways to combat this. We look forward to hearing the Office of Higher Education’s recommendation with regard to this.

“Guardian of Small Business” Award given to Senator Bonoff by the National Federation of Independent Businesses (NFIB) - Minnesota

Small Business Tax Relief:

Last biennium, Minnesota enacted a new fourth tier in the income tax structure and a corresponding higher rate. At the time we heard significant outcry from the business community. Owners of small businesses registered as

"Pass Through" entities were going to be being taxed at this higher rate. Taxing small business at a rate higher than the corporate rate was something I opposed, as well as the overall new rate as it propelled the MN income tax

rate into one of the highest in the nation. The legislation that I introduced, and was heard in the Tax committee on Wednesday, would exempt these businesses from getting taxed at the new fourth tier rate.

When we first received the revenue estimate for this change, we were dismayed to learn it was $180 million dollars. In fact, we learned in committee that the taxes on these businesses make up nearly 1/3 of all of the

revenue brought in by the new tax. I knew it was doubtful the tax committee would make such a costly change. I offered an amendment to just exclude businesses registered as “S-Corps”. The “S Corps” are entities that are mostly small businesses by definition and this change was, in my opinion, the most needed. This significantly

reduced the cost, while keeping the spirit of the legislation alive. The amendment was adopted and the bill was ultimately laid over for possible inclusion in the Tax omnibus bill.

Resolution in Sight

Last week we reviewed the conflict surrounding the Governor’s proposed salary increases. Thankfully there seems to be an agreement reached so that the much needed deficiency funds will soon be appropriated.