June 14, 2021

Special Session Begins

This afternoon, Minnesota lawmakers returned to the Capitol for the first special legislative session of 2021 with the goal of finalizing the state's two-year $52 billion budget. The completed slate of omnibus budget bills must be passed by both chambers and signed into law before July 1, 2021, in order to avoid a government shutdown.

Since the Legislature adjourned the 2021 regular session on May 17, 2021, the chairs of budget committees have been meeting to finalize budget and policy initiatives within the “targets” they were assigned on the last day of the regulator session. While some committees have reached an agreement and released their final budget bills (ex. Agriculture, Higher Education, and Legacy Fund), the majority of budget chairs have failed to reach the scheduled “deadlines” established in the budget agreement. As such, most capitol insiders expect Senate Majority Leader Paul Gazelka (R-East Gull Lake) and Speaker of the House Melissa Hortman (DFL-Brooklyn Park) to become more involved in individual budget bills as the week continues.

Last Friday, Gov. Tim Walz announced his intention to extend his peacetime emergency declaration an additional 30-days, and as a result, he announced today’s special session. The Minnesota Executive Council voted this morning to extend the peacetime emergency for 30 days, citing the efficiencies needed to support the ongoing vaccine program and the state’s need for an emergency declaration in order to tap into certain federal funds. However, the emergency declaration could be ended as part of the ongoing negotiations if legislative leaders are able to identify a negotiated off-ramp for eviction moratorium and a statutory process to streamline COVID-19 testing and vaccine administration.

While significant progress has been made in the last 72 hours on the budgets, it remains unknown how much policy can be agreed upon by the only politically divided legislature in the nation. Complicating matters further, while most negotiations have been conducted without either minority caucus, their votes are generally needed to suspend the rules and take up bills without waiting the required three days for final passage. House Republican Minority Leader Kurt Daudt (R-Crown) announced a series of demands for his caucus last week, including allocating “reinsurance” funds to lower health insurance premiums, ending the governor’s emergency powers, and ending the federal unemployment supplement that is seen by many as causing workforce shortages in multiple sectors of the economy.

In addition to returning to the Capitol, lawmakers will return to a new era, or in this case back to the old sense of normal, where the Capitol is now fully open to the public and media for the first time since the pandemic. Time will tell if the sense of normalcy will help or hurt lawmakers as they attempt to compromise and pass the budget by June 30.

MMB: Revenues Are Up

Despite a lack of agreement on the budget, the state’s current financial picture continues to improve. Last week, Minnesota Management and Budget (MMB) released its most recent tax collection report which showed the state’s year-to-date tax receipts being $2.170 billion more than they were projected just four months ago. A portion of this can be attributed to the delayed deadline of income tax filing and the influx of federal resources. Unfortunately, because these monthly reports come outside of the semi-annual budget forecast process, the additional tax receipts are not available as part of the ongoing budget negotiations. However, MMB’s report does indicate the likelihood of a surplus at the end of the fiscal year. MMB will release another report on July 10, 2021, which will better reflect current economic activity rather than last year’s activity.