Governor’s Revised Budget
On Thursday, March 18, 2021, Governor Tim Walz released the details of his revised 2022-2023 budget. Following last month’s positive state revenue forecast, which flipped a projected $1.3 billion shortfall to a projected $1.6 billion surplus, Gov. Walz changes to the original budget he proposed in January. The new proposal maintains some tax increases for top income earners and economic relief for those hit hardest by COVID-19. The revised version includes two new tax cuts, already passed by the Republican-controlled Senate, that eliminates state income taxes on most of the money businesses received from PPP loans (exempting the first $350,000 from income for forgiven loan amounts) and tax relief for jobless Minnesotans who received additional federal unemployment assistance.
Additional spending of $1.61 Billion includes:
- Increased spending in public education for both general support and summer school;
- Small business assistance;
- Child care grants;
- Tuition assistance for job changers; and
- Other social and economic supports tied to the pandemic.
Some taxes in the Governor’s updated proposal remained, but the overall proposal was reduced from $1.66 billion to $670 million and include:
- A new fifth-tier income tax for couples earning more than $1 million a year and individuals earning $500,000+
- Tax increase for capital gains;
- A reduction corporate profits tax rate from 11.25 to 10.8 percent;
- An expanded vaping tax (cigarette and snuff tax increases were eliminated)
The revised proposal spends $52.269 billion over two years while the current budget is $48.3 billion.
Senate Budget Targets
On Tuesday, March 16, 2021, the Senate GOP released a list of general government spending areas (known as “budget targets”). The total package includes $51.9 billion in spending. Republican leaders include no new or additional taxes in their targets, their counterargument against the Governor’s proposal which incorporates $670 million in additional tax revenues.
The targets could likely change as they do not take into account the latest federal relief package that includes an estimated $2.5 billion in one-time money for state governments. The divided Minnesota legislature and the Walz administration will try to align on the budget before the legislature adjourns on May 17, 2021. A full budget must be signed into law before July 1, 2021 to prevent a state government shutdown.
House Democrats responded to the Senate’s budget targets, calling them “woefully inadequate,” failing to provide Minnesotans with what is needed to recover from the COVID-19 pandemic. It is expected House Democrats will release their budget targets tomorrow.
Tax Filing Deadlines Extended
On Wednesday, March 17, 2021, the IRS announced it was postponing the federal tax filing deadline to May 17, 2021 and will be providing formal guidance in the coming days. In accordance with the IRS, the Minnesota Department of Revenue announced the same grace period for taxpayers filing their annual Minnesota individual income tax return for tax year 2020. Taxpayers now have until this date to file and make their payments without any penalty or interest; this does not include first quarter estimated tax payments for people who are self-employed.
Important Dates
March 26 - April 5
Easter/Passover Break - the legislature is in recess
April 9
3rd Committee Deadline - committees must act favorably on major appropriation and finance bills
May 17
The legislature must adjourn
Please note: Committee deadlines do not apply to the committees on Capital Investment, Ways and Means/Finance, Taxes, or Rules and Legislative Administration.
Federal Update
The United States House of Representatives announced a new era for congressional influence over how the federal government spends some of the $1.4 trillion in discretionary spending approved every year. As of today, the Senate has not yet announced its plan but both chambers are in negotiations to implement this in a transparent and responsible way.
The House plan calls for resurrecting earmarks in the form of “Community Project Funding.” Earmarks are targeted spending projects that individual lawmakers can insert into large spending bills without a direct vote to deliver something to the lawmaker’s home district. The idea is that the members have first-hand knowledge of their community needs and can work to directly help organizations deliver those services.
Lawmakers can only submit earmarks to eligible nonprofit organizations. Nonprofits with qualified programs need to act now to assist their representatives in Congress to get all materials submitted for funding of their high-priority projects, specifically projects that address core infrastructure and community service needs.
Larkin Hoffman's Government Relations team has put together a Guide to Federal Funding for Nonprofits and Government Entities to keep you updated on the status of congressionally directed spending and assist nonprofits and government entities in navigating important next steps.
To view or download a copy of the guide, click here.
Our team has also put together a podcast to help clarify who is eligible and what they need to do to qualify for funding. Listen to the podcast here.
Please reach out to any of the Larkin Hoffman Government Relations team members with any questions.