|
Minnesota Update
Governor Walz Releases Budget Recommendations and Legislature Continues Fast Start
After releasing individual budget priorities in recent weeks, the Walz Administration released the entirety of its record $65.2 billion biennial budget proposal last Tuesday, January 24, 2023. The proposal allocates much of the $17.6 billion projected surplus to a variety of spending proposals, particularly in the areas of education and health and human services, as well as various tax reforms and individual rebates. Some high-profile elements include:
Tax Reforms & Rebates
A combination of tax reforms and individual rebates make up a large portion of the governor’s budget proposal, including:
- Individual Rebate Checks: Under the Walz budget, individuals making less than $75,000 per year would receive $1,000, families earning under $150,000 per year would be eligible for $2,000, and eligible households would qualify for an extra $200 per dependent (up to three). These rebates would be tax-exempt and would total nearly $4 billion in one-time spending;
- Working Family Credits: The proposal called for a series of tax credits tailored to benefit lower-income families, totaling approximately $1.1 billion per biennium;
- Social Security Income: The proposal would keep the existing tax in place, but reduce it by roughly $219 million, impacting approximately 90% of seniors;
- Capital Gains: Gov. Walz is proposing a 1.5% surcharge on capital gains and dividends exceeding $500,000 and a 4% surcharge on those exceeding $1 million; and
- Local Government Aid: Gov. Walz is proposing an increase in Local Government Aid (“LGA”) and County Program Aid (“CPA”).
Education
Gov. Walz’s K-12 education proposal would spend a record $24 billion over the next biennium. Significant pieces of the proposal include:
- A four percent per-pupil school funding formula increase in FY 24 and an additional two percent in FY 25;
- State funding to ensure free school meals for all students;
- An increase in special education spending;
- Expanding access to existing childcare subsidies and tax credits. Families making under $200,000 a year with one child could receive $4,000 per year for childcare, families with two children could receive $8,000 per year, and families with three children could receive up to $10,500 per year;
- Increased funding for mental health services for students; and
- Creating a new Department of Children, Youth, and Families to better align services and programming currently divided between the Minnesota Department of Human Services and the Minnesota Department of Education.
Economic Future
Gov. Walz promoted a section of the budget he called “Recommendations for Economic Future.” This part of the budget included several different departments and areas of funding. The following are some highlights:
- Funding for the startup of the paid medical and family leave program that is currently making its way through the legislature and for state agency compliance with the safe and sick time bill which is also advancing in the Legislature;
- Various initiatives intended to support small businesses, including the angel investor tax credit;
- Grants for student teachers and loan repayment opportunities for teachers working in teacher shortage areas;
- Stipends for student teaching and funding for tools to ensure more teachers of color and indigenous teachers can enter the workforce;
- New investment in various broadband and energy grant programs.
Health and Human Services
The budget includes a record $15 billion for health and human services spending over the next biennium. Below are a few of the many proposals:
- An increase to the childcare assistance program for low-income families;
- Expanding Medical Assistance (MA) coverage for children, and establishing a MinnesotaCare public option;
- Funding to help homeless adults, youth, and families as well as an increase in mental health funding;
- Funding to help address the opioid epidemic; and
- Increasing funds for a variety of long-term care, home and community-based services for individuals with disabilities and older Minnesotans.
Other notable budget recommendations include:
- $300 million in public safety aid to cities, counties, and tribal governments;
- $138 million in FY 24 and $138 million in FY 25 for a Border-to-Border Broadband Grant Program;
- Universal background checks on all firearms, raising the minimum age for purchasing military style firearms to 21, and banning high-capacity magazines;
- $1.5 billion to expand access to affordable housing, with a special emphasis on eliminating veteran homelessness;
- $29.2 million to purchase 30 battery electric city buses; and
- State funding to expand the use of body cameras by law enforcement.
Governor Releases Record-Breaking Infrastructure Package
Last week, Gov. Walz also released a $3.3 billion infrastructure package that focused on upgrading and maintaining roads, public buildings, and other amenities across the state. Approximately 38% of the funds would go toward asset preservation and 20% toward roads, bridges, and water systems. Gov. Walz is asking that the legislature approve a $1.6 billion bonding and infrastructure bill to pay for a portion of his proposal (which requires Republican votes in both the Senate and the House of Representatives), while the remainder of the package will be paid for out of the general fund or via various federal or other revenue streams.
DFL Priorities Continue to Advance
The legislature continues to move quickly as they wrap up their first month of work. Several DFL priorities, including the legalization of marijuana, restoring the right to vote to certain individuals previously convicted of felonies, providing paid family and medical leave as well as sick and safe time, are advancing through the committee process prior to the first committee deadline in early March. Legislative committees are expected to begin hearing the Governor’s proposals in the coming weeks.
Notable bills on the move this week include adult use legalization of marijuana (HF 100/S.F. 73), which has made five of its 14 expected committee stops in the House of Representatives and had its first two hearings in the Senate. The paid family leave bill (S.F. 2/HF 2) had its first hearing in the House of Representatives last week where it drew the ire of Republican legislators who saw numerous amendments rejected before it was passed out of committee on a party-line vote.
Senate Sends Reproductive Rights Bill to Governor
After the House of Representatives passed HF 1 on a 69-65 vote two weeks ago, the Senate followed suit around 3:00 am on Saturday. After approximately 15 hours of debate, the Senate voted 34-33 to pass a bill which would codify current Minnesota case law and establish a right to reproductive health care. Gov. Walz is expected to sign the bill later this week.
Important Dates to Remember:
- TBD, February 2023: Updated budget forecast from MMB
- March 10, 2023: 1st Committee Deadline - committees must act favorably on bills in the House of origin.
- March 24, 2023: 2nd Committee Deadline - committees must act favorably on bills, or companions of bills, that met the first deadline in the other House.
- April 4, 2023, at 5:00pm: 3rd Committee Deadline - committees must act favorably on major appropriation and finance bills.
- April 4, 2023, at 5:00pm - April 10, 2023: Legislative Recess
- May 22, 2023: Deadline to adjourn legislative session
Federal Update
The president and the speaker have arranged a get-together. A top House Republican wants to force teleworking federal workers back into their offices. House panels get to organizing, and House Republicans consider ‘clean’ short-term debt limit suspension.
Biden and McCarthy Expected to Meet Wednesday
President Joe Biden and Speaker Kevin McCarthy are expected to discuss the debt limit at a meeting Wednesday. Biden has vowed not to negotiate over the matter, while McCarthy (R-CA) has insisted on spending cuts as a price for increased borrowing authority. A White House spokesperson confirmed the Wednesday meeting, saying it would cover a "range of issues" and was part of a series of meetings with congressional leaders. The spokesperson said in an emailed statement that Biden would ask McCarthy whether he "intends to meet his constitutional obligation to prevent a national default" and that the president will "underscore that the economic security of all Americans cannot be held hostage to force unpopular cuts on working families."
House GOP Aims To End Covid-19 Emergencies, Rewind Telework
House Republicans plan to consider four pandemic-related measures this week, with two sending a clear message: The coronavirus is in the rearview mirror. Those bills would end the public health emergency and the national emergency declared by former President Donald Trump in 2020 related to COVID-19, and are expected on the floor as soon as Tuesday. The House Rules Committee meets Monday to consider rules for debate on the measures.
Another bill expected on the floor this week would end the requirement for COVID-19 vaccines for staff at healthcare facilities participating in Medicare and Medicaid. And a bill from Oversight and Reform Chairman James R. Comer (R-KY) would effectively require the vast majority of federal workers to return to in-office work, by requiring that all departments and agencies reinstate the telework policies in effect before the pandemic. Comer said on Twitter that under Republicans, the oversight panel would return "to its mission of rooting out waste, fraud, and abuse in the federal government." A hearing Wednesday on federal spending during the pandemic focuses on that.
Hearings To Watch This Week
Amid a slow start to this Congress, more committees get to work this week. In the House, at least seven committees are set to hold organizational meetings this week, including Rules today. Newly empowered Republicans are making changes, too, such as on House Agriculture, where they are reorganizing six subcommittees to reflect a shift in priorities to forest management and oversight of digital assets.
House hearing highlights include a Wednesday meeting of the Judiciary panel regarding the border, in which Republicans are expected to come down hard on Biden's immigration policies. House Oversight has its own hearing about the border planned for next month and has demanded a trove of records. Also on Wednesday, House Transportation and Infrastructure has a hearing on supply chain challenges, with trucking and railway trade groups set to testify.
Over in the Senate, the adoption of an organizing resolution is still awaited. The chamber and its committees are continuing bodies, meaning they can operate with holdover membership from the last Congress. As such, Senate Agriculture, Nutrition, and Forestry get started planning the 2023 farm bill with a hearing Wednesday on trade and horticulture. On Thursday, Senate Energy and Natural Resources hold a hearing on the implementation of the 2021 bipartisan infrastructure law. Electric vehicles could come up. Chairman Joe Manchin III (D-WV) introduced a bill last week aimed at forcing the Biden administration to apply strict sourcing rules to boost domestic manufacturing and energy security.
House Republicans Are Mulling A Short-term Suspension Of The Debt Limit In An Attempt To Buy Time For A Bipartisan Deal
House Republicans are attempting to buy time for further negotiations on federal spending and deficits by passing one or more short-term suspensions of the statutory debt ceiling this summer, including potentially lining up the deadline with the end of the fiscal year Sept. 30. No decisions on a cutoff date have been made, and it's not yet clear when the Treasury Department will run out of cash to meet all U.S. financial obligations. But most analysts agree Congress will need to act at some point between early June and September, and lawmakers likely won't want to leave the matter unaddressed before the August recess.
Any such short-term measure would likely be "clean" of any strings attached or specific spending cuts and be designed as a suspension of the borrowing cap, which had been done repeatedly over the past decade until 2021, rather than a dollar increase in the debt limit. That would presumably make it easier for Republicans to swallow voting for it after pledging to only back a debt limit increase if paired with spending cuts.
Sources acknowledged such figures likely won't make it through the Democrat-controlled Senate or be signed into law, at least not before the Treasury is presumed to run out of cash by late summer. But House Republicans are insisting on some form of spending cuts or "other fiscal reforms" commensurate with the growth in spending Democrats presided over during the previous two years.
Democrats, meanwhile, have repeatedly called for Republicans to present a plan for the debt limit before there's any talk of negotiating. House Majority Leader Steve Scalise (R-LA) met with members of the conservative Republican Study Committee on Wednesday to talk spending curbs, among other issues. At a press conference earlier in the day he told reporters that Republicans have already been vocal about the types of cuts they're seeking. He said Republicans want to rescind unspent COVID-19 relief dollars and go after fraud in those programs. He also made a pitch for preserving Social Security, telling reporters "we strongly believe Social Security needs to be strengthened for seniors who paid into it."
McCarthy and other Republicans have repeatedly referred to discretionary spending caps deals enacted back in 2011, including under divided government, that have accompanied debt ceiling increases. In the 2011 deal cut after a financial market-rattling summer debt limit standoff, Republicans and the Obama administration agreed to 10-year discretionary caps that the Congressional Budget Office estimated at the time would save $756 billion over a decade. Ultimately, Congress loosened those caps in subsequent legislation, but discretionary funding still wound up below the baseline CBO estimated in early 2011.
|