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Minnesota Update
Budget Continues to Take Shape
With less than a month left in the legislative session, omnibus budget bills continue to move through the legislative process in advance of the May 22, 2023 deadline to adjourn. Conference committees, mainly composed of five members from each chamber, have been appointed and begun the process of resolving the difference between the budget proposals of the House of Representatives and the Senate.
House of Representatives Passes Omnibus Tax Bill; Senate to Follow Suit
Authored by Rep. Aisha Gomez (DFL-Minneapolis), the House of Representatives passed its omnibus tax bill (H.F. 1938) on a 69-57 vote late last week. The bill includes $3 billion in tax cuts, but also tax increases such as a new fifth-tier income tax rate for the state’s highest earners and a new tax rate of 10.85 percent. Married filers earning more than $1 million, singles earning $600,000, and head-of-household filers making more than $800,000 would be subject to the new tax rate. The bill also introduces a new childcare tax credit, a tax credit for married and single filers who meet income requirements, as well as other state and local provisions.
Senate Tax Bill Vote Coming this Week
Introduced as a delete-all amendment in the Senate Tax Committee, S.F. 1811 authored by Sen. Ann Rest (DFL-New Hope) has passed the committee stage and is now available for debate in the full Senate. A vote is expected early this week, enabling work to begin in conference committee to reconcile any differences between the Senate and House of Representatives versions of the bill.
House Budget Bills on the Move
The House of Representatives passed the following bills last week:
- Omnibus Jobs, Economic Development, Labor, and Industry (S.F. 3035/H.F. 3028). Authored by Rep. Hodan Hassan (DFL-Minneapolis), S.F. 3035 was passed by the House of Representatives on a 69-60 vote early last week. The House Ways and Means Committee combined H.F. 3028 (economic development) and H.F. 2233 (workforce development), and H.F. 2755 (labor and industry) into one omnibus bill, allocating a total of $1.4 billion for FY 24-25. In the combined proposal, $948.4 million is appropriated for economic development programs, the largest being $362 million for FY 24-25 to address the state’s workforce shortage by funding worker-training grants, loans to entrepreneurs and businesses, and subsidized car loans to help low-income individuals get to work. The bill also appropriates $300 million to match federal funds for microelectronic manufacturing facilities and workforce development.
- Omnibus Human Services Finance (S.F. 2934/H.F. 2847). Authored by Rep. Mohamud Noor (DFL-Minneapolis), S.F. 2934 was passed by the House of Representatives on a 70-60 vote last week. The bill establishes an overall human services budget of $14 billion for FY 24-25, with $1.3 billion in new spending. The bill includes Medical Assistance rate increases intended to support increased wages for a variety of workers providing long term care and home and community-based services. The bill also allocates $100 million for chemical dependency support grants, $83.7 million worth of long-term care grants, such as $24 million for capacity grants targeting rural and underserved communities and a yet-to-be-determined amount for supporting new Americans in the long-term care workforce grants, and $33.3 million for home- and community-based workforce inventive fund grants to assist with recruiting and retaining direct support and frontline workers.
- Omnibus Judiciary and Public Safety (S.F. 2909/H.F. 2890). Authored by Rep. Kelly Moller (DFL-Shoreview), S.F. 2934 was passed by the House of Representatives on a 69-60 vote last week. This bill contains gun control measures that would require background checks for handgun sales and a “red-flag” provision that would allow for temporary confiscation of guns from those judged to be an immediate threat to themselves and others. The bill also allocates funding to the Department of Public Safety, Department of Corrections, and the state’s Judicial Branch. Included is an increase in pay for legal aid attorneys and district court judges, as well as funding to hire more public defenders.
- Omnibus Health and Human Services Finance (S.F. 2995/H.F. 2930). Authored by Rep. Tina Liebling (DFL-Rochester), S.F. 2995 was passed by the House of Representatives on a 69-58 vote last week. This bill appropriates $7 billion to the Department of Humans Services (DHS) and the Minnesota Department of Health (MDH), with an increase of $880 million in funding. The bill creates the Health Care Affordability Commission to establish health care spending growth targets and begins the process removing the income cap on MinnesotaCare as the state looks to convert it into a public option sometime in 2027, pending federal approval. The bill would also create the Office of American Indian Health to address health needs of tribal communities. A few additional provisions include the codification of Medical Assistance (MA) coverage for abortions and an administrative carve out of prescription drugs in MA and MinnesotaCare managed care system.
- Omnibus Commerce Finance (S.F. 2744/H.F. 2680). Authored by Rep. Zack Stephenson (DFL-Coon Rapids), H.F. 2680 was passed by the House of Representatives on a 70-58 vote and appropriates $293 million from the General Fund for FY 24-25. Included in the bill is a provision that would allow the state to penalize drug manufacturers from imposing an excessive price increase on prescription drugs. It also establishes the Prescription Drug Affordability Board and Advisory Council with the authority to impose an upper payment limit on prescription drugs.
Senate Budget Bills on the Move
The following bills passed the Senate last week:
- Omnibus Housing Finance (H.F. 2335/S.F. 2566). Authored by Sen. Lindsey Port (DFL-Burnsville), H.F. 2335 was passed by the Senate on a 39-28 vote last week. The bill includes $1 billion in new spending, including funding for cities to help with construction and preservation of affordable housing. A few of the larger funding initiatives include: $100 million for community stabilization programs, which are aimed toward the preservation of affordable housing and assisting eligible buyers to preserve rental properties that are at risk of increased rent in order to protect low-income tenants, $100 million for local housing needs through the Challenge Program which is a fund used in statewide to create or rehab ownership or rental housing to provide stable, affordable housing to support a productive workforce, $131 million for rental assistance with the Bring it Home program for rent support through rental vouchers to help people with lower incomes to fund and stay in their homes, and $100 million for assisting first generation home buyers.
- Omnibus Education Finance (H.F. 2497/S.F. 2684). Authored by Sen. Mary Kunesh (DFL-New Brighton), H.F. 2497 was passed by the Senate on a 35-32 vote last week. The bill allocates $2.5 billion in new funding for FY 25-26 with an overall budget of roughly $23 billion. A few funding initiatives include: $925 million for a four percent increase to the per-pupil formula, $88 million toward the English learner's program to provide language instruction, and $12.9 million for American Indian Education Aid to support tribal schools and school districts based on the number of American Indian students enrolled as an overall increase to their yearly funding. There is also significant funding to ensure literacy in Minnesota’s schools.
- Omnibus Transportation (H.F. 2887/S.F. 3157). Authored by Sen. Scott Dibble (DFL-Minneapolis), H.F. 2887 was passed by the Senate on a 36-31 vote late last week. Included in the bill is $1 billion in new spending, $658 million if which is expected to be dedicated to the state’s roads and bridges. Also included are several tax and fee increases on things like motor vehicle registration tax, license tab fees, motor vehicle sales tax, and an increase on the metro sales and use tax. The Senate included $50 million for the Northern Lights Express train that would run from the Twin Cities to Duluth.
Additional Notable Bills
- Recreational Cannabis Legalization (H.F. 100/S.F. 73). Authored by Rep. Zack Stephenson (DFL-Coon Rapids), H.F. 100 passed the House of Representatives on a 71-59 vote last week. S.F. 73, the Senate version of the recreational cannabis legislation authored by Sen. Lindsey Port (DFL-Burnsville), passed the Senate on Friday on a party-line 34-33 vote. The bills have numerous differences and are expected to go to conference committee.
A substantial difference between the House and Senate bills is the amount of local control allowed when regulating the products. Other differences between the two bills include how they deal with currently legal hemp-derived THC products, varying tax rates on cannabis products, and the speed of expungements of past marijuana offenses.
If ultimately re-passed by the legislature, Gov. Walz has publicly stated that he will sign the bill. This would legalize marijuana possession, use, and purchase by those 21 and older starting this summer. However, it might take many months for dispensaries to have enough supply to meet demand. Some have said it could take up to 18 months.
- High-Profile Legislation Signed into Law. Gov. Walz signed three bills high-profile policy initiatives into law last week. The legislation will ban the practice of conversion therapy for minors and vulnerable adults, provide legal protections to those traveling to Minnesota for an abortion, and increase access to gender-affirming health care.
Dates of Note:
- The Minnesota Legislature is constitutionally required to adjourn the regular session no later than May 22, 2023
Federal Update
Good afternoon. Senate Judiciary digs into Supreme Court ethics. A drug package is set to be marked up. And grab your calendar, because dates are out for House Appropriations markups. Here’s your federal CapWatch for Monday, May 1.
Full Steam Ahead: Senate Judiciary moves ahead with a hearing on the Supreme Court after the chief justice declined to testify.
Drug Package: A trio of bills likely to fold into a larger package that Schumer wants to send to the floor are set for markup.
Appropriations Timing: House Appropriations subcommittee and full committee markups are set to start in May.
Budget: What may come next in the search for a compromise on raising the debt ceiling?
On the Radar: There are three Senate bills to watch for floor action on.
Here are the Key Events and Activities Happening in Congress and the White House this Week:
White House: Biden and Harris deliver remarks for National Small Business Week. In the afternoon, Biden meets with President Ferdinand Marcos Jr. of the Philippines. In the evening, Biden hosts a reception celebrating Eid al-Fitr.
House of Representatives: Not in legislative session this week but there will be a pro forma session Tuesday at 11 a.m.
Senate: Convenes at 3 p.m. and will vote at 5:30 p.m. on the nomination of Anthony Devos Johnstone to be a U.S. Circuit judge for the 9th Circuit.
Committees: Director of National Intelligence Avril Haines testifies Thursday to Senate Armed Services on worldwide threats.
Senate Health, Education, Labor and Pensions holds a hearing Thursday on reauthorizing a pandemic preparedness law.
Budget Hearings This Week
Include Interior Secretary Deb Haaland testifying to Senate Energy and Natural Resources, Air Force Secretary Frank Kendall III testifying to Senate Armed Services, and Army Secretary Christine Wormuth testifying to the Senate Defense Appropriations Subcommittee, all on Tuesday.
Judiciary Panel to Hear Testimony on SCOTUS Ethics
Senate Democrats dive into Supreme Court ethics at a Judiciary Committee hearing Tuesday where Chief Justice John G. Roberts Jr. has declined to appear. Senate Judiciary Chair Richard J. Durbin, D-IL, had invited Roberts amid concerns from Democrats about reports that Justice Clarence Thomas did not disclose luxury trips and a real estate transaction with a billionaire GOP donor. Roberts declined the invitation, citing separation-of-powers concerns. Durbin in response has signaled that Congress could act to tighten policies around Supreme Court ethics.
A bipartisan Senate duo unveiled a bill last week that would require the high court to adopt an ethics code within a year. That bill, from Alaska Republican Lisa Murkowski and Angus King, a Maine independent who caucuses with Democrats, is likely to come up at Tuesday's hearing, though neither of its sponsors sits on the Judiciary Committee.
Senate Panel to Mark Up a Trio of Drug Bills
Senate Majority Leader Charles E. Schumer, D-NY, wants to put a drug package on the floor this year, and that goal will take one step forward with a markup on Tuesday. The Health, Education, Labor and Pensions Committee plans to vote on three drug bills. They are three long-standing bipartisan measures: strengthen oversight of the Food and Drug Administration's citizen petition process, improve incentives for generic manufacturers, and to boost competition for rare disease drugs. The Senate Judiciary and Commerce committees also recently approved bipartisan legislation to increase PBM business practices' transparency. Last week, Senate Finance Committee leaders unveiled a framework for their own bill. A timeline for bringing the package to the floor remains unclear.
House Appropriations Markups to Start in Mid-May
House Appropriations subcommittee markups are set to start up in May.
Full committee Chairwoman Kay Granger, R-TX, wrote to panel members that subcommittee and full committee markups will go from May 17 to June 15. Subcommittee markups are planned for May 17-18 and June 7-8, while the full committee will hold markups May 23-25 and June 13-15. Granger's message was to brace for long days; she warned that the markups will "likely go well into the afternoon and evening." Subcommittee leaders expect to receive their fiscal 2024 allocations, or so-called 302(b)s, in the next two weeks as they prepare to mark up their bills.
Some appropriators are starting to get antsy for their numbers, including Financial Services Subcommittee Chairman Steve Womack, R-AR., who said "the clock is ticking away."
Womack said he expects a "deeming" resolution out of the House Budget Committee that would set the topline discretionary spending figure — which the House-passed debt limit bill (HR 2811) set at the fiscal 2022 level of $1.47 trillion. That figure would amount to a cut of $131 billion in discretionary spending from the enacted fiscal 2023 level.
Budget
The House narrowly passed a Republican-backed bill to raise the debt limit into next year and force spending cuts. However, Congress appeared no closer to a bipartisan deal needed by summer to extend the government's borrowing authority. The House-passed debt limit and spending cut bill won’t survive bipartisan negotiations in full. But there are some potentially salvageable pieces of the GOP measure that could end up in a final deal.
While most lawmakers in either party aren’t ready to start talking about compromise, the few who are point to work requirements for benefit programs, discretionary spending caps, and a fiscal commission as potential areas for bipartisan agreement.
The work requirements and spending caps in Republicans’ bill would likely need to be softened to win Democratic support. Both parties share some interest or prior voting records on such policies.
A fiscal commission to recommend deficit reduction strategies is not in the GOP bill, however, centrists in both parties keep returning to this idea as low-hanging bipartisan fruit.
To be clear, the vast majority of Democrats are not even entertaining negotiations with Republicans on debt limit conditions, as they are still insisting on a "clean" bill. Most House Republicans, meanwhile, say it’s up to Senate Democrats to pass something if they don’t want to accept the House bill.
What Republicans seem most interested in securing in any debt limit deal is caps on discretionary spending. House Speaker McCarthy frequently notes that Democrats demanded to lift previous statutory spending caps as part of debt limit deals during the Trump administration. Republicans believe Democrats let spending run wild in the cap-free years since then.
Congressman Steny H. Hoyer, D-MD, admitted spending caps have been part of past debt limit deals and could be again here. He said Republicans would need to agree to discuss “rational numbers,” which they haven’t so far. Republicans’ bill would cut $131 billion from current discretionary spending levels to cap next year’s spending at $1.47 trillion, the fiscal 2022 topline. Caps for the remainder of the decade would allow for one percent annual growth.
On the Radar: Here are Senate Bills to Keep an Eye On
The Senate is working from Capitol Hill this week while House lawmakers head back to their districts. Votes are expected on nominees, but legislation that could call for the yeas and nays remains up in the air. Here are three measures to watch for:
S 1323 — The cannabis banking bill was introduced last week, and Sen. Schumer plans to incorporate provisions to expunge criminal records for low-level marijuana offenses. The bill aims to protect banks that service marijuana businesses in states where it is legalized.
S Res 165 — Sen. Schumer brings this resolution forward in an effort to force Republicans to either denounce former President Donald Trump’s calls to defund the FBI and Justice Department or to side with Trump and be linked to supporting scaling down money for law enforcement.
S J Res 15 — This resolution is the Senate companion to a House bill passed Friday that would retroactively reinstate a tariff on solar panels made with Chinese parts in Southeast Asia. Whether senators would vote on the House-passed bill or Florida GOP Sen. Rick Scott's version remains unclear.
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