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May 11, 2020

Minnesota Projecting $2.42 Billion Budget Deficit

On Tuesday, May 5, Commissioner Myron Frans and staff from Minnesota Management and Budget (“MMB”) released a detailed interim budget projection. The budget update, which was requested by Governor Tim Walz in April, was intended to help legislators and others evaluate the impact of the novel coronavirus (COVID-19) outbreak in Minnesota. In February, MMB projected a $1.5 billion surplus in the current FY 20-21 biennium. However, Tuesday’s projection showed a dramatic reversal and projected an approximately $2.42 billion budget deficit.

The budget update projects an estimated $3.6 billion drop in state revenues during the current biennium. This significant decrease can be attributed to both the sudden spike in unemployment insurance claims (and resulting loss of income tax payments) for those unable to work during COVID-19 closures as well as the corresponding decrease in sales tax receipts associated with the closure of bars, restaurants, and large retail establishments. This reduction in state revenues is combined with $391 million in increased spending by the legislature to help combat the impacts of COVID-19 on the state’s healthcare systems.

Commissioner Frans and Governor Walz pointed to the state’s $2.3 billion “rainy day fund” as a tool to help ease the pandemic’s effects. Senate Majority Leader Paul Gazelka (R-Nisswa) used the report to continue his advocacy efforts to open Minnesota’s economy and outlined his vision for dealing with the new deficit, including renegotiating state employee contracts, eliminating increased spending from final session negotiations, and bonding.

Find more information on the state’s updated economic forecast here.

COVID-19 Economic Security Act Approved by House

On Thursday, May 7, the House voted along party lines (75-58) to pass a $208 million package to help the state continue to manage the effects of the COVID019 pandemic. The bill includes the following appropriations:

  • $100 million for eviction and mortgage foreclosure protection/emergency housing assistance;
  • $55 million for small-business emergency loans;
  • $27 million for grant programs to fund distance learning, broadband access and equipment for telemedicine; and
  • $26 million for a temporary 15% pay increase for personal care assistants during the pandemic.

Democrats presented the bill as much-needed relief for struggling Minnesotans. Republicans responded that allowing businesses to open and permit employees to return to work is the best way to help the state and economy.

House Passes Tobacco-21

On Saturday, May 9, the Minnesota House convened a floor session to pass a series of bills, including Tobacco-21 (T-21). In a vote of 89-41, the House approved H.F. 331 which makes numerous changes and adjustments to Minnesota’s tobacco laws, including increasing the legal age to purchase tobacco products and e-cigarettes to 21, conforming to federal law changes from 2019. The bill also adjusts the civil and criminal penalties for underage use and sales of tobacco and vaping products.

House Republicans were critical of certain details of the bill – most notably the lack of an exemption for individuals serving in the military. The bill heads to the Senate where it has broad, bi-partisan support.

Find more information on the T-21 legislation here.

    Please reach out to any of the Larkin Hoffman Government Relations team members with any questions. 


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