April 18, 2022

The Legislature Returns to Action 

The Minnesota Legislature will re-convene tomorrow having spent the last week off for the Easter-Passover break. Legislators will return with roughly five weeks left before the constitutional deadline to adjourn the session on May 23, 2022. During this time, they will seek to negotiate several supplemental spending bills, an omnibus tax bill, and the biennial capital investment or “bonding” bill. However, House DFL and Senate Republican leadership remain divergent on several key issues that could potentially derail any attempts at negotiated compromise, including the ongoing Unemployment Insurance Trust Fund deficit, Frontline Worker bonuses, bipartisan concerns regarding public safety, the state’s historic budget surplus and what it says about Minnesota’s current tax code.  

 

Issues to Watch

Unemployment Insurance Trust Fund Deficit – The state’s UI trust fund is currently in deficit by $1.3 billion. The legislature had until March 30, 2022, to replenish the trust fund, or the state would assess a 14 percent surcharge on payroll taxes for all businesses in Minnesota to replenish the fund. The legislature missed that deadline and while it could still go back and retroactively restore funding to the UI trust fund, that would undoubtedly come with some administrative complexity for the Department of Employment & Economic Development.

Where they stand – In mid-February, the Senate passed legislation (S.F. 2677), which would appropriate $2.7 billion to pay down the UI deficit and restore the trust fund balance to $1 billion on a vote of 55-11. House DFL leadership has generally coupled a $1 billion “frontline worker” bonus proposal with any UI package after the bipartisan workgroup failed to reach an agreement on a $250 million bonus package that was agreed to as part of the 2021 budget.

In early February, the House Workforce Development Committee did pass H.F. 1035, authored by Rep. Mohamed Noor (DFL- Minneapolis), on a party-line vote of 8-5. The House proposal would appropriate $1.1 billion to pay down the UI deficit and freeze the 14% assessment for 2022, but it would not restore the fund’s previous balance. 

Public Safety – Public safety continues to be a high-profile policy issue at the legislature as elected officials work to respond to a recent increase in violent crime in the metro area, particularly carjackings, while also seeking to address ongoing concerns over police accountability and reform. 

Where they stand – The House and Senate have both advanced proposals that would appropriate new dollars for law enforcement officer recruitment and retention. That being said, the two chambers have taken very different approaches to their other public safety-related policy proposals. Democrats in the House of Representatives have focused on community policing and youth intervention programs, including community outpost houses that are operated by members of the community and focus on conflict resolution, student tutoring, and suicide awareness. Meanwhile, Senate Republicans have focused on increasing criminal penalties for crimes such as carjacking, while also establishing stricter guidelines for prosecutors that are intended to lead to longer sentences for certain criminal offenses and repeat offenders. 

Taxes – Minnesota is currently experiencing the largest surplus in state history at $9.3 billion, igniting conversations around the state’s tax code. 

Where they stand – Authored by Sen. Carla Nelson (R- Rochester), the Senate Republican tax plan (S.F. 3692) seeks to provide broad relief by eliminating Minnesota's tax on social security and reducing the first-tier tax rate from 5.3% to 2.8%. The plan's approximate cost is $3 billion the first year enacted and $5 billion the following two years. Democrats have criticized this approach as it also substantially impacts the highest income bracket taxpayers. 

Authored by Rep. Paul Marquart (DFL- Dilworth), the House DFL tax plan (H.F. 3669) attempts to target low-income families and families with children by implementing an income tax rebate which would be structured as a refundable tax credit of $325 for each child 16 years of age or younger for single parents earning up to $70,000 annually and for married parents up to $140,000 annually. The collective cost of the House’s tax proposal is $1.65 billion in tax reductions and credits in the 2022-23 biennium.