1.1 	A bill for an act
1.2 	relating to state government; authorizing issuance of state appropriation bonds; 
1.3 	appropriating money; establishing the Minnesota pay for performance pilot 
1.4 	program;proposing coding for new law in Minnesota Statutes, chapter 16A.
1.5 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6 	Section 1. [16A.90] MINNESOTA PAY FOR PERFORMANCE ACT.
1.7 	Sections 16A.90 to 16A.96 may be cited as the "Minnesota Pay for Performance 
1.8 	Act of 2011."

1.9 	EFFECTIVE DATE. This section is effective the day following final enactment.

1.10 	Sec. 2. [16A.94] PROGRAM.
1.11 		Subdivision 1.Pilot program established. The commissioner shall implement a 
1.12 	pilot program to demonstrate the feasibility and desirability of using state appropriation 
1.13 	bonds to pay for certain services based on performance and outcomes for the people served.
1.14 		Subd. 2.Oversight committee. (a) The commissioner shall appoint an oversight 
1.15 	committee to:
1.16 	(1) identify criteria to select one or more services to be included in the pilot program;
1.17 	(2) identify the conditions of performance and desired outcomes for the people 
1.18 	served by each service selected;
1.19 	(3) identify criteria to evaluate whether a service has met the performance 
1.20 	conditions; and
1.21 	(4) provide any other advice or assistance requested by the commissioner.
1.22 	(b) The oversight committee must include the commissioners of the Departments 
1.23 	of Human Services, Employment and Economic Development, and Administration, or 
2.1 	their designees; a representative of a nonprofit organization that has participated in a 
2.2 	pay-for-performance program; and any other person or organization that the commissioner 
2.3 	determines would be of assistance in developing and implementing the pilot program.
2.4 		Subd. 3.Contracts. The commissioner and the commissioner of the agency with 
2.5 	a service to be provided through the pilot program shall enter into a contract with the 
2.6 	selected provider. The contract must specify the service to be provided, the time frame in 
2.7 	which it is to be provided, the outcome required for payment, and any other terms deemed 
2.8 	necessary or convenient for implementation of the pilot program. The commissioner 
2.9 	shall pay a provider that has met the terms and conditions of a contract with money 
2.10 	appropriated to the commissioner from the special appropriation bond proceeds account 
2.11 	established in section 16A.96. At a minimum, before the commissioner pays a provider, 
2.12 	the commissioner must determine that the state's return on investment is positive.
2.13 		Subd. 4.Return on investment calculation.  The commissioner, in consultation 
2.14 	with the oversight committee, must establish the method and data required for calculating 
2.15 	the state's return on investment. The data at a minimum must include:
2.16 	(1) state income taxes and any other revenues collected in the year after the service 
2.17 	was provided that would not have been collected without the service; and
2.18 	(2) costs avoided by the state by providing the service.
2.19 	A positive return on investment for the state will cover the state's costs in financing 
2.20 	and administering the pilot program through documented increased state tax revenue 
2.21 	or cost avoidance.
2.22 		Subd. 5.Report to governor and legislature. The commissioner must report to the 
2.23 	governor and legislative committees with jurisdiction over capital investment, finance, and 
2.24 	ways and means, and the services included in the pilot program, by January 15 of each 
2.25 	year following a year in which the pilot program is operating. The report must describe 
2.26 	and discuss the criteria for selection and evaluation of services to be provided through 
2.27 	the program, the net benefits to the state of the program, the state's return on investment, 
2.28 	the cost of the services provided by other means in the most recent past, the time frame 
2.29 	for payment for the services, and the timing and costs for sale and issuance of the bonds 
2.30 	authorized in section 16A.96.

2.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

2.32 	Sec. 3. [16A.96] MINNESOTA PAY FOR PERFORMANCE PROGRAM; 
2.33 	APPROPRIATION BONDS.
2.34 		Subdivision 1.Definitions. (a) The definitions in this subdivision apply to this 
2.35 	section.
3.1 	(b) "Appropriation bond" means a bond, note, or other evidence of obligation of the 
3.2 	state payable during a biennium from one or more of the following sources:
3.3 	(1) money appropriated by law in any biennium for debt service due with respect 
3.4 	to obligations described in subdivision 2, paragraph (b);
3.5 	(2) proceeds of the sale of obligations described in subdivision 2, paragraph (b);
3.6 	(3) payments received for that purpose under agreements and ancillary arrangements 
3.7 	described in subdivision 2, paragraph (d); and
3.8 	(4) investment earnings on amounts in clauses (1) to (3).
3.9 	(c) "Debt service" means the amount payable in any biennium of principal, premium, 
3.10 	if any, and interest on appropriation bonds.
3.11 		Subd. 2.Authority. (a) Subject to the limitations of this subdivision, the 
3.12 	commissioner of management and budget may sell and issue appropriation bonds of the 
3.13 	state under this section for the purposes of the Minnesota pay for performance program 
3.14 	established in sections 16A.90 to 16A.96. Proceeds of the bonds must be credited to 
3.15 	a special appropriation bond proceeds account in the state treasury. Net income from 
3.16 	investment of the proceeds, as estimated by the commissioner, must be credited to the 
3.17 	special appropriation bond proceeds account.
3.18 	(b) Appropriation bonds may be sold and issued in amounts that, in the opinion of 
3.19 	the commissioner, are necessary to provide sufficient funds for achieving the purposes 
3.20 	authorized as provided under paragraph (a), and pay debt service, pay costs of issuance, 
3.21 	make deposits to reserve funds, pay accrued interest, pay the costs of credit enhancement, 
3.22 	or make payments under other agreements entered into under paragraph (d); provided, 
3.23 	however, that bonds issued and unpaid shall not exceed $....... in principal amount, 
3.24 	excluding refunding bonds sold and issued under subdivision 4.
3.25 	(c) Appropriation bonds may be issued in one or more series on the terms and 
3.26 	conditions the commissioner determines to be in the best interests of the state, but the term 
3.27 	on any series of bonds may not exceed 20 years.
3.28 	(d) At the time of, or in anticipation of, issuing the appropriation bonds, and at any 
3.29 	time thereafter, so long as the appropriation bonds are outstanding, the commissioner 
3.30 	may enter into agreements and ancillary arrangements relating to the appropriation 
3.31 	bonds, including but not limited to trust indentures, liquidity facilities, remarketing or 
3.32 	dealer agreements, letter of credit agreements, insurance policies, guaranty agreements, 
3.33 	reimbursement agreements, indexing agreements, or interest exchange agreements. Any 
3.34 	payments made or received according to the agreement or ancillary arrangement shall be 
3.35 	made from or deposited as provided in the agreement or ancillary arrangement. The 
4.1 	determination of the commissioner included in an interest exchange agreement that the 
4.2 	agreement relates to an appropriation bond shall be conclusive.
4.3 		Subd. 3.Form; procedure. (a) Appropriation bonds may be issued in the form 
4.4 	of bonds, notes, or other evidences of obligation, and in the manner provided in section 
4.5 	16A.672. In the event that any provision of section 16A.672 conflicts with this section, 
4.6 	this section shall control.
4.7 	(b) Every appropriation bond shall include a conspicuous statement of the limitation 
4.8 	established in subdivision 6.
4.9 	(c) Appropriation bonds may be sold at either public or private sale and may be sold 
4.10 	at any price or percentage of par value. Any bid received at public sale may be rejected.
4.11 	(d) Appropriation bonds may bear interest at a fixed or variable rate.
4.12 		Subd. 4.Refunding bonds. The commissioner from time to time may issue 
4.13 	appropriation bonds for the purpose of refunding any appropriation bonds then 
4.14 	outstanding, including the payment of any redemption premiums on the bonds, any 
4.15 	interest accrued or to accrue to the redemption date, and costs related to the issuance 
4.16 	and sale of the refunding bonds. The proceeds of any refunding bonds may, in the 
4.17 	discretion of the commissioner, be applied to the purchase or payment at maturity of the 
4.18 	appropriation bonds to be refunded, to the redemption of the outstanding bonds on any 
4.19 	redemption date, or to pay interest on the refunding bonds and may, pending application, 
4.20 	be placed in escrow to be applied to the purchase, payment, retirement, or redemption. 
4.21 	Any escrowed proceeds, pending such use, may be invested and reinvested in obligations 
4.22 	that are authorized investments under section 11A.24. The income earned or realized on 
4.23 	the investment may also be applied to the payment of the bonds to be refunded or interest 
4.24 	or premiums on the refunded bonds, or to pay interest on the refunding bonds. After 
4.25 	the terms of the escrow have been fully satisfied, any balance of the proceeds and any 
4.26 	investment income may be returned to the general fund or, if applicable, the appropriation 
4.27 	bond proceeds account for use in any lawful manner. All refunding bonds issued under 
4.28 	this subdivision must be prepared, executed, delivered, and secured by appropriations in 
4.29 	the same manner as the bonds to be refunded.
4.30 		Subd. 5.Appropriation bonds as legal investments. Any of the following entities 
4.31 	may legally invest any sinking funds, money, or other funds belonging to them or under 
4.32 	their control in any appropriation bonds issued under this section:
4.33 	(1) the state, the investment board, public officers, municipal corporations, political 
4.34 	subdivisions, and public bodies;
5.1 	(2) banks and bankers, savings and loan associations, credit unions, trust companies, 
5.2 	savings banks and institutions, investment companies, insurance companies, insurance 
5.3 	associations, and other persons carrying on a banking or insurance business; and
5.4 	(3) personal representatives, guardians, trustees, and other fiduciaries.
5.5 		Subd. 6.No full faith and credit; state not required to make appropriations.
 5.6 	The appropriation bonds are not public debt of the state, and the full faith, credit, and 
5.7 	taxing powers of the state are not pledged to the payment of the appropriation bonds or to 
5.8 	any payment that the state agrees to make under this section. Appropriation bonds shall 
5.9 	not be obligations paid directly, in whole or in part, from a tax of statewide application 
5.10 	on any class of property, income, transaction, or privilege. Appropriation bonds shall be 
5.11 	payable in each fiscal year only from amounts that the legislature may appropriate for debt 
5.12 	service for any fiscal year, provided that nothing in this section shall be construed to 
5.13 	require the state to appropriate funds sufficient to make debt service payments with respect 
5.14 	to the bonds in any fiscal year.
5.15 		Subd. 7.Appropriation of proceeds. The proceeds of appropriation bonds and 
5.16 	interest credited to the special appropriation bond proceeds account are appropriated to the 
5.17 	commissioner for payment of contract obligations under the pay for performance program, 
5.18 	as permitted by state and federal law, and nonsalary expenses incurred in conjunction 
5.19 	with the sale of the appropriation bonds.
5.20 		Subd. 8.Appropriation for debt service. The amount needed to pay principal and 
5.21 	interest on appropriation bonds issued under this section is appropriated each year to the 
5.22 	commissioner from the general fund subject to the repeal, unallotment under section 
5.23 	16A.152, or cancellation otherwise pursuant to subdivision 6.

5.24 	EFFECTIVE DATE. This section is effective the day following final enactment.