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Minnesota Update
Budget Process Continues to Progress
With two weeks until the constitutional deadline to adjourn, legislators from both chambers continue meeting to work out the differences in each chamber’s approach to the state budget. Following the Senate’s passage of its omnibus tax bill last week, all major budget and finance bills have now been passed by both chambers and conference committees have been appointed to resolve the differences.
One large piece of the puzzle, however, remains outstanding. While the House of Representatives was able to secure enough Republican votes to pass its omnibus capital investment bill, the Senate has not brought forward a new proposal since their initial effort fell short last month. The capital investment bill is the biennial vehicle by which the state sells bonds to raise money for public infrastructure projects (roads, bridges, wastewater, government buildings, etc.). The Minnesota Constitution requires that any proposal that borrows money via the issuance of bonds receive a three-fifths majority, or 60 percent affirmative vote for passage. This heightened threshold provides members of the Republican minority in each body the opportunity to negotiate for various tax and spending provisions or specific capital investment projects in their district as part of the final budget deal.
Tax Bill Passes Senate
Last week the Senate passed its omnibus tax bill, on a party-line vote of 34-33. While the Senate and House of Representatives have generally pretty similar approaches to taxes this session, there remain a number of substantive differences. Authored by Sen. Ann Rest (DFL-New Hope), some of the more substantial provisions in the Senate bill include language:
- Issuing individual rebates of $279 for single filers earning up to $75,000; $558 for married filers earning up to $150,000; and an extra $56 per child, for up to three children;
- Eliminating the state income tax on Social Security income for couples earning $100,000 or less and singles making less than $78,000. While not a full repeal of the tax, this would impact about 75 percent of Social Security recipients;
- Creating a new Child Tax Credit of $620 per child, up to three children, for families making $80,000 or less.
Both Senate and House tax bills contain a new offshore income reporting requirement that would be an additional tax on corporate funds. Many questions surround the legality of this proposal and how much money it could bring in. Over the weekend, Sen. Rest noted that, while in her own bill, the provision no longer had the support of the Senate.
House Passes Paid Family and Medical Leave
Last week the Minnesota House of Representatives passed H.F. 2, which would establish a state-run insurance program to offer paid leave to employees for family and medical purposes. Authored by Rep. Ruth Richardson (DFL-Mendota Heights), the proposal would provide for paid leave for individuals who are unable to work due to a family member’s serious health condition, a qualifying situation, safety leave, bonding leave, or the employee’s own pregnancy, pregnancy recovery, or serious health condition. Under the proposed plan, workers would be eligible for up to 12 weeks paid leave with an annual maximum of 18 weeks. Benefits will be available beginning July 1, 2025. It is important to note that employers are allowed to institute a private plan but private plans must meet or exceed all the same rights, protections, and benefits that the state plan would offer.
An initial appropriation of $668.3 million is included to fun program implementation and start up, however a new 0.7 percent premium tax on employers will self-fund the account going forward. Part of the appropriation would go toward the establishment of a new Family and Medical Benefits Insurance Division within the Department of Employment and Economic Development (DEED) to oversee the program.
Republican legislators and representatives of the state’s business community have consistently raised concerns with H.F. 2, which was eventually passed with only DFL support. Reps. Dave Lislegard (DFL-Aurora) and Gene Pelowski (DFL-Winona) voted with the Republicans as the bill passed on a vote of 68-64, which is the minimum threshold needed to pass a bill in the House of Representatives. The Senate is expected to take up the proposal this afternoon.
Dates of Note:
- The Minnesota Legislature is constitutionally required to adjourn the regular session no later than May 22, 2023
Federal Update
Good morning. This week, Biden meets with McCarthy and other Hill leaders on the debt limit. The COVID-19 emergency is set to end and with it a contentious border policy. And House Armed Services gets going on the fiscal 2024 NDAA. Here’s your Federal CapWatch Monday, May 8.
Title 42: The contentious asylum policy is about to expire, and House Republicans intend to mark the occasion with a debate on a border security measure.
Debt Limit: Biden hosts McCarthy and others Tuesday to seek a way out of the potential crisis, but neither side seems ready to give in.
NDAA: House Armed Services subcommittees mark up their portions of the sprawling bill this week.
On the Radar: Durbin and a still-absent Feinstein push back on judges.
White House: Biden delivers remarks regarding rulemaking in relation to flight delays or cancellations. Secretary of Transportation Pete Buttigieg will also participate.
House: Not in session; convenes at 2 p.m. Tuesday.
Senate: Not in session; convenes at 3 p.m. Tuesday.
Committees: Among budget hearings this week, the Senate Defense Appropriations Subcommittee holds a hearing Thursday with Defense Secretary Lloyd J. Austin III and Gen. Mark A. Milley, chairman of the Joint Chiefs of Staff. FBI Director Christopher Wray and Drug Enforcement Administration leader Anne Milgram appear before the Senate Commerce-Justice-Science Appropriations panel.
Title 42 Set to Expire: House preps Immigration Bill
The controversial Title 42 policy allowing border agents to turn back migrants who cross the U.S.-Mexico border without considering their asylum claims, expires along with the COVID-19 public health emergency on Thursday. The Defense Department is sending 1,500 troops to the U.S. southern border to help address an expected spike in migration. The troops would assist Customs and Border Protection (CBP) officers with administrative tasks, freeing up CBP officers to handle the migration influx.
Most Republicans strongly oppose ending Title 42. Among Democrats, Rep. Ruben Gallego of Arizona expressed concern that border communities may be unable to deal with the influx. "I've heard directly from leaders in our border communities and it's abundantly clear that they, through no fault of their own, are simply unequipped to handle the surge of migrants that are expected when Title 42 ends.” In the meantime, the incumbent senator whom Gallego is challenging next year, independent Kyrsten Sinema, has announced bipartisan legislation with Sen. Thom Tillis, R-N.C., to effectively continue Title 42.
House bill on the way: House leaders plan to bring to the floor this week a border security package to coincide with the end of Title 42, with a Rules Committee meeting set for Tuesday. The measure includes bills already approved by the Homeland Security, Foreign Affairs, and Judiciary committees. Altogether, the proposal would severely restrict asylum access for migrants traveling to the border, heighten penalties for immigration violations, restart border wall construction, and modernize surveillance technology. It would also limit federal funding for nonprofits that help migrants and require the government to negotiate agreements with other nations to return asylum-seekers to Mexico, among other immigration changes.
Debt Limit Meeting Ahead as Clock Ticks
President Joe Biden on Tuesday meets with Speaker Kevin McCarthy, R-Calif., and other congressional leaders to discuss how to extend the debt limit, though so far there's little sign of anyone budging from their position. There are just 24 days until the government could potentially exhaust extraordinary measures to stay below it according to Treasury Secretary Janet L. Yellen. House Republicans in late April passed 217-215, a bill to increase the debt limit by $1.5 trillion or through March — whichever comes first — alongside about $4.8 trillion in deficit reduction. Republicans say Democrats are ignoring mounting debt and that the bill will lead the country toward fiscal order.
However, Democrats say this is effectively holding the economy hostage by mandating severe cuts that would gut critical programs. They, and Biden, want a "clean" increase to avoid a first-ever default and say Republicans only care about the debt when a Democrat is in the White House.
Biden on Friday indicated he would stick to his position this week: "As I've said all along, we can debate where to cut, how much to spend, how to finally move the tax system, where everybody has been up to pay their fair share or continue the route they're on, but not under the threat of default," he told reporters. There's less time than there may seem to reach some kind of deal; Biden will be in Asia from May 19 to 24. The Senate is supposed to be in recess the week of May 22, and the House is scheduled to be in recess the week of May 29.
A fallback option is some kind of short-term debt limit patch to buy time for a longer-term solution. On Sunday, House Minority Leader Hakeem Jeffries, D-N.Y. and Financial Services Chairman Patrick T. McHenry, R-N.C. said they wouldn't rule that out. Jeffries spoke on NBC's "Meet the Press" and McHenry spoke on CBS News’ "Face the Nation." Democrats have threatened to use a discharge petition to try and force a "clean" hike to the House floor, but that process is cumbersome.
NDAA gets Underway with Subcommittee Markups
Work on the annual defense authorization bill kicks off this week with seven House Armed Services subcommittee markups. They are the first major steps toward crafting the massive legislation and follow hearings on various aspects of the military’s budget requests. They also set the stage for the lengthy full committee markup, set to begin May 23. The Senate, which holds its own markups and writes its own bill, has yet to announce its schedule.
The National Defense Authorization Act (NDAA), enacted for the past 62 consecutive years, helps to shape the budget and priorities of the Department of Defense and other national security programs. The NDAA authorizes funds and programs, but the actual funding is provided through appropriations bills. Appropriators take the authorizers' work into consideration as they set funding levels. The Biden administration is seeking $842 billion for the Defense Department, or $26 billion more than the fiscal 2023 enacted level of $816 billion; that is a 3.2 percent increase.
On the Radar: Democrats Push Back on Judges
Senate Democrats are pushing back against criticisms that the absence of Sen. Dianne Feinstein of California and the continuation of a Judiciary Committee tradition have hampered progress on President Joe Biden’s judicial picks. Judiciary Chair Richard J. Durbin of Illinois, who faces pressure from Democratic members of Congress and liberal advocacy groups to make changes to the “blue slip” process, touted the Senate’s confirmation of seven judicial nominees last week.
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