With six weeks to go in Minnesota’s legislative session, DFLers who narrowly control state government with their first “trifecta” since 2014 have a list of early accomplishments such as cementing abortion rights in state law and passing a carbon-free energy mandate.
But Democrats also have plenty of unanswered questions left to address, starting with the Big One: how, exactly, they plan to spend a Paul Bunyan-sized $17.5 billion surplus when writing the next two-year state budget.
In the last two weeks, House and Senate committees began releasing dueling budget proposals outlining potential spending on issues like public safety, child care, human services, climate change and the environment. Those plans have similarities but also major differences that will need to be ironed out.
After lawmakers return on Tuesday from a short break for Easter and Passover, they will reveal their closely-watched tax plans and start to negotiate over what can actually pass the Legislature and reach the desk of Gov. Tim Walz.
Democrats are likely to approve some form of rebate check for taxpayers, a tax credit aimed at families with young children and at least reduce a state tax on Social Security benefits. Among the thorny issues that are still in flux: tax increases for transportation and housing, a paid family leave program, legalizing recreational marijuana, sports betting, bonding for construction projects, gun regulations and more.
The regular session must adjourn by May 22. Walz and legislative leaders have all said they expect to finish their work by then.
Budget and taxes
Minnesota has a record surplus of $17.5 billion (in a state with a budget of around $26 billion a year) and could even have a $19 billion surplus if changes to how inflation is accounted for weren’t made between the December revenue forecast and the February forecast. Gov. Tim Walz and DFL lawmakers who write budget plans are deciding how to spend it with two key factors in mind — fulfilling commitments made to increase support for education and low-income families and acknowledging that much of money is available this budget period but not next budget period.
Large increases in spending have been set aside for public education, housing, social services and tax cuts. Walz continues to push for tax rebate checks and both he and DFL lawmakers are pushing for targeted tax cuts aimed at helping low and middle income families and people with children.
The record surplus does not mean DFLers are not considering tax hikes with most meant to provide ongoing money for transportation and housing. There is also a proposed new payroll tax to pay for paid family and medical leave insurance. New taxes on recreational marijuana and would only raise enough to cover the costs of regulation and enforcement.
The two tax committee chairs will not present their proposals until after the break.
House and Senate transportation chairs have produced budgets that contain the largest increase in revenue for roads, bridges and transit since a 2008 increase that needed a bipartisan override of then-Gov. Tim Pawlenty’s veto. The budgets include Increases in car tabs fees, motor vehicle sales tax rates, a new retail delivery fee and a 0.75% sales tax increase in the seven-county Metro that would raise around $1 billion a year. These are meant to respond to declines or flat growth in taxes devoted to transportation at the same time that general taxes are producing record surpluses.
- The package delivery fee of 75 cents is being altered to exempt very small businesses and allow retailers to cover the fee without charging customers. It is in the House and Senate transportation omnibus bills. Another fee on rideshare trips has been deleted from the bills, though could make a reappearance next session.
- There doesn’t appear to be majority support to change the troubled Met Council from a board appointed by governors to one elected by voters in the Twin Cities region. But a task force is likely to be created that could recommend such a change to future Legislature. Another idea still being considered is to create a charter commission to craft a home rule charter for the regional government that could include an elected council. That charter would then go to voters in the region for adoption.
- Two proposals to address crime and safety concerns on light rail transit vehicles and platforms would work together in sequence. The first would create intensive, high-profile and temporary teams of police, social workers and homelessness advocates to work to get help for those who need it and enforce a code of conduct on violators. Then, new civilian transit staff — called TRIP personnel — would take over fare enforcement from police and serve as helpers to riders and eyes and ears for transit police. Both are in the transportation omnibus bills.
- Both budgets set aside $50 million in one-time funding to help build a passenger rail line between the Twin Cities and Duluth called the Northern Lights Express.
Social Security tax
Key Senate DFLers say that eliminating a state tax on Social Security will be part of their tax budget plan passed by the chamber, but House Democrats may prefer a smaller cut to the tax to avoid giving some benefit to the wealthy. This unresolved issue will be one fierce point of debate between DFLers as they negotiate a final two-year budget. Gov. Tim Walz and top legislative leaders don’t like the idea of a full repeal, but many DFL legislators in critical swing districts do.
Local Government Aid & County Program Aid
House DFLers included $100 million in a budget plan for each of two state subsidies to help city and county governments with basic costs and help limit property tax increases. Local officials say Local Government Aid — which primarily benefits cities in Greater Minnesota — and County Program Aid have not kept up with inflation and have asked for more money. The Senate has not released its plan yet, but Walz supports a boost and so the aid programs are likely to get extra money.
Minnesota DFLers have pledged to spend cash on a nearly $2.3 billion package of construction projects. Normally, the Legislature might borrow money for capital investments on things like roads, bridges and wastewater infrastructure. But that requires a two-thirds vote in the House and Senate, and minority Republicans in the Senate already rejected a bonding bill because they first want elimination of a state tax on Social Security benefits. Cash needs only a simple majority, allowing the DFL to move ahead without Republican votes. However, it’s possible legislators will compromise on a bonding bill in the end. That would free up more money from the surplus to use on other priorities.
House and Senate DFLers are poised to spend money from an unusually large energy and climate budget on a smorgasbord of incentives for clean energy technology like electric vehicles, electric school buses, and home heat pumps. They still have significant differences to sort out on major policy questions like a requirement for electric utilities to build a certain amount of energy storage and whether to study the future of nuclear technology in Minnesota.
House and Senate bills to legalize recreational marijuana and fill regulatory gaps in last year’s hemp-derived edible legislation have moved through multiple committees and should come to votes after the break. Several changes have been made to respond to concerns that the bills did not distinguish between federally illegal marijuana and federally legal hemp products. The bills now provide local governments more authority to enforce state rules and to collect some licensing fees to cover costs.
The tax rates and license fees are designed to cover program costs — around $100 million a year — and not raise general fund revenue. “No pot for potholes,” said Rep. Zack Stephenson, the Coon Rapids DFLer and prime House sponsor. The bills are standing alone and are not in omnibus bills.
Standalone bills to legalize wagering on college and professional sports were introduced by the chairs of the House and Senate committees and while they have had a few hearings, the issue has gone quiet. While they could be waiting for work on budget bills to be completed, there is still some concern by supporters that votes in the state Senate are still short.
The bills would give all of the action to the state’s tribal nations that already have casino gambling. Only tribal casinos can offer sports betting in person. Any gambling there would not be assessed any state taxes. But tribes can also contract with national sports books like DraftKings and FanDuel for online betting via mobile devices. Those bets would be assessed a state tax. But sponsors say it will be enough to cover costs and put some money into problem gambling and youth sports but not raise money for other state functions.
The House and Senate have passed a bill to smooth the end of special Medicaid rules imposed by the federal government during the pandemic. In return for increased federal payments, the states could not remove anyone from the program as long as the public health emergency was in affect. But that emergency is ending and states must now not only start checking new applicants for eligibility but go back and make sure all 1.5 million Minnesotans on the program still meet income requirements.
Some estimates are that between 100,000 and 300,000 residents could lose coverage. The bill pays for the staffing needed to review all those clients but also to provide money for MinnesotaCare to provide a place for those who lose Medicaid to find new plans.
Walz signed the bill last week.
House and Senate housing chairs received one of the largest budget targets of any area of the state budget and far more than they have received the last several budget periods — $1 billion. The budgets, mostly one-time money, boosted funding for bonds to renovate existing public housing,bonds to partner with affordable housing providers for new units, to invest in maintenance of housing that is affordable but not part of public programs called Naturally Occurring Affordable Housing and to greatly expanded rental assistance and down-payment assistance.
The first $50 million in rental assistance was passed to Walz already, with another $50 million in the housing omnibus bills.
The committees have also approved a new quarter-cent sales tax in the seven-county Met Council region to provide ongoing money for city and county affordable housing programs and projects.
Minnesota lawmakers moved quickly to pass legislation that cemented the right to an abortion in state law, backing up a state Supreme Court ruling outlining that right in Minnesota’s Constitution. But other bills may be less likely to pass. The status of a high-profile bill that would repeal many restrictions on abortion — limits that are already defunct because of court rulings — is uncertain. The measure would also eliminate a law requiring health officials to collect and publicly report data on abortion. Another bill aimed at creating legal protections for people who come to Minnesota for an abortion has passed the House but not the Senate.
Legislators have agreed to spend an extra $100 million to help build new infrastructure for high-speed internet in rural areas. That’s a historically large amount of state money for broadband, but it was less than some developers, local officials and broadband advocates had hoped. Nearly $1 billion is on its way from the federal government, but the state cash could help keep construction moving in the meantime.
Race and health equity
The governor’s budget proposal included several health equity initiatives, some of which appear likely to pass.
Omnibus budget bills released by House and Senate leaders include a home visiting program that would increase the number of families that receive home visit services – which have been found to improve child and maternal outcomes. The Senate proposed $20 million for this, while the House plan includes $5 million.
House and Senate DFLers have also proposed, although the amount of money differs, a “Healthy Beginnings, Healthy Families” program that aims to address early childhood health outcomes through greater access to screenings, mental health services and education.
Other points of agreement include funding an HIV Prevention and Equity initiative, a program to monitor the impact of long COVID and support survivors, an establishment of an Office of African American Health and the continuation of funding for the Office of American Indian Health.
After a partisan divide in the last few legislative sessions, lawmakers on both sides of the aisle appeared to have reached a deal last month on a proposal that would increase penalties for fentanyl possession to align with heroin. The bill would add threshold numbers for pills, making it easier for law enforcement and prosecutors to put away distributors.
The bill — authored by a GOP member in the House and its companion in the Senate by a DFL member — was heard in the public safety committees of both chambers. The bills are included in both the House and Senate public safety omnibus packages, but GOP Rep. Dave Baker hopes the proposal can be peeled off into a standalone bill and make it to the House floor after lawmakers return from the Easter-Passover break.
No knock search warrants
A proposal to ban no-knock search warrants is making its way through the Legislature after years of failed attempts by DFL lawmakers to outlaw the controversial tactic. The push comes more than a year after a Minneapolis SWAT team entered a downtown apartment unannounced and fatally shot 22-year-old Amir Locke in less than 10 seconds. The use of the warrants declined sharply after Locke’s death but racial disparities persisted.
The proposal to ban no-knocks is part of a public safety omnibus bill released by DFLers in the House, but is not included in a corresponding public safety plan in the Senate.
MPCA Citizens’ Board
House DFLers are likely to pass a measure to reinstate a citizens’ board to make permitting decisions in conjunction with the Minnesota Pollution Control Agency commissioner, an idea that has drawn support from environmentalist nonprofits but opposition from Republicans and agriculture trade groups. Senate Democrats, however, did not include the citizens’ board legislation in their “omnibus” bills, signaling it may not have enough support to make it to the desk of Gov. Tim Walz.
The House and Senate both appear poised to spend a major amount of money on the child care system in Minnesota, including by using more than $370 million over the next four years to significantly increase the reimbursement rate for the Child Care Assistance Program, a subsidy for low-income families. Legislators are also likely to put hundreds of millions into payments to increase the pay of child care workers and into Early Learning Scholarships, another program aimed at helping children from low-income families access high-quality child care. The Legislature also might approve new tax credits for parents but tax plans have yet to be released by the House and Senate.
The DFL agenda on guns is now far more narrow than what Walz had hoped earlier in the year, but it’s been clear for months that lawmakers with slim Democratic majorities could not pass certain regulations such as limiting the size of gun magazines. What still might pass are bills that would extend background checks to private gun sales and create a “red flag” law that allows a judge to seize a firearm from someone deemed a threat to themselves or others.
Restore the vote
Walz has already signed a bill to restore voting rights for most people convicted of crimes but who are no longer in prison or jail. Before the bill passed, formerly incarcerated people had to wait until all probation and parole was completed. The law, which could impact around 50,000 people, does not apply to sex crimes and murder convictions.
The bills passed after the state Supreme Court rejected a lawsuit seeking to restore voting rights. The suit argued that because the impact of the previous law fell more heavily on people of color, it should be ruled unconstitutional under federal provisions requiring equal protection.
Ban the box
The Minnesota House passed a bill that would extend “ban the box” regulations to appointed positions on Minnesota’s boards and commissions, eliminating a law that asks applicants if they have a felony conviction. State law already bans this question for private employers and most public jobs as a criminal justice initiative. The Senate has advanced the bill through committees but not held a floor vote on the measure, although the legislation has support of the Senate Majority Leader.
Universal school lunch
Another early victory for DFL sponsors is legislation to spend around $200 million to provide free school breakfast and lunch for all students, not just those who qualify for federally funded meals programs. Waiving the requirement that school districts check income and submit funding requests was a pandemic-related change. But that provision ended with this school year and increased the pressure to restore universal lunch.
House lawmakers continue to work on a related problem: how to replace the free-and-reduced-price data collection with a new metric to measure poverty in schools and distribute around $700 million a year in money aimed at helping those students.
Paid Family and Medical Leave
This is one of the more-prominent issues that saw its chances change with the DFL power trifecta. DFLers introduced bills in the past to create an insurance program similar to unemployment insurance for workers who need leave when they become sick or injured or give birth. Leave would also be available for workers who need leave to care for a sick or injured loved one, including newborn children.
But those stand alone bills died in the GOP Senate but are moving this year and Walz has made it a priority. In order to get the program running more quickly – by July, 2025 — $668 million from the surplus will be used to frontload the program so benefits can be paid immediately, not after payroll taxes have collected enough to cover early benefits.
Drivers licenses for all
A bill already signed by Gov. Walz ends a 20-year ban on undocumented immigrants from receiving driver’s licenses — a ban that stemmed from the 9-11 terror attacks on New York City and Washington, D.C. Advocates for the bill said immigrants still drive for jobs or family reasons, but do so without licenses and without having to show knowledge of traffic laws and driver skills. They also drive in fear of arrest and prosecution. Law enforcement favored the change.
Immigrants without documentation can begin applying for licenses October 1.
MinnPost staff writers Mohamed Ibrahim and Ava Kian contributed to this report.