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May 18, 2021

Leadership Agrees on Budget Targets and Adjourns its Regular Session

Special Session Will Follow in June

In what was an unconventional year in Minnesota politics, the Minnesota legislature adjourned the 2021 legislative session yesterday afternoon without passing a biennial state budget. However, despite being the only politically divided legislature in the nation, Governor Tim Walz, Speaker of the House Melissa Hortman (DFL-Brooklyn Park) and Senate Majority Leader Gazelka (R-East Gull Lake) reached an agreement on specific spending targets that gives the budget a framework for a special session.

The “budget agreement” includes spending targets for each major budget area as well as a series of deadlines designed to keep lawmakers on schedule to pass a balanced budget before the end of the state’s fiscal year on June 30. Speaker Hortman and Majority Leader Gazelka are requesting budget spreadsheets from all committee chairs by May 28 and the accompanying policy language by June 4.

Having extended the COVID-19 peacetime emergency declaration for 30 days last Friday, Gov. Walz will call the Legislature back for a special session no later than June 14, 2021 to extend his emergency declaration for another 30 days.

While the agreement sets a goal for meeting the constitutional requirement to pass a balanced budget before July 1, the probability of a final budget agreement, passed by both chambers and signed into law remains an uphill battle for lawmakers. The House, Senate, and Governor remain far apart on policy proposals that will complicate the process.

A breakdown of the budget agreement is below:

  • Education: $525 million in additional spending

  • Higher Education: $100 million in additional spending

  • Health & Human Services: $100 million in additional spending

  • Environment: $30 million in additional spending

  • Agriculture & Broadband: $10 million in additional spending

  • Housing: $10 million in additional spending

  • Transportation: $200 million in additional spending

  • Public Safety: $105 million in additional spending

  • Labor/Workforce: $125 million in additional spending

  • Energy/Commerce: $16 million in additional spending

  • State Government: $67 million in additional spending

The roughly $52 billion agreement includes no new tax increases and does include full conformity to the federal government’s tax exemptions for businesses and individuals receiving grants and loans from COVID-19 relief funds (PPP loans and enhanced unemployment payments).

The agreement also outlined how the state will spend $2.8 billion coming to Minnesota from the federal government through the American Recovery Plan (ARP). Gov. Walz and his administration will have discretion over $500 million in federal relief money. Of that money, $75 million will be sent to school districts to pay for summer programming. About $1.2 billion of the state’s allocation will be reserved for the state legislature to spend during the 2022 legislative session.

Monday’s announcement was technically a numbers-only agreement and committee chairs will have to spend the upcoming weeks to work out significantly different policy initiatives. A number of high-profile and contentious issues, including law enforcement accountability and reform and a Walz Administration proposal to adopt clean car emissions standards still threaten to derail the agreement. The budget agreement expressly stated that all policy and finance provisions included in the final omnibus bills must be agreed upon by the Governor, House Speaker and Senate Majority Leader. This potential hands-on involvement of leadership in committee work is similar to the finish of the 2019 session and will substantially limit the number of substantive policy initiatives included in the final budget.

Federal Update

Negotiations on a bipartisan infrastructure compromise gained new momentum after President Joe Biden met this week with Republican senators. The one thing everyone agrees on is that both sides want a bipartisan agreement. House Members on both sides of the aisle hope their earmarks will be included in the reauthorization of a five-year surface transportation law enacted in 2015. A one-year extension of that law expires Sept. 30. In the lead-up to the release of the requests, Chairman DeFazio indicated that each member will be able to designate an equal amount, between $15 million and $20 million, for specific surface transportation projects regardless of whether they vote for or against the bill. The surface transportation measure, known as the highway bill for short, typically authorizes spending on roads, bridges and public transit. Chairman DeFazio is also expected to add a title that would provide funding for passenger rail service upgrades and expansions.

Four months after the attack on the Capitol, the House plans to vote this week on a $1.9 billion emergency security spending bill and legislation to create a commission to study the Jan. 6 insurrection. Lawmakers released both bills on Friday. The bill will create a 10-person bipartisan panel like the 9/11 commission, with each party allowed to appoint five members. The commission would be tasked with examining the facts and circumstances around the insurrection by supporters of President Donald Trump and the “influencing factors” that may have incited the attack.

The White House announced that expanded child tax credits will be distributed in advance each month starting July 15, covering about 88 percent of U.S. children. Half of the maximum $3,000 per child up to age 17 — $3,600 for kids under 6 — will be distributed this year to qualifying families. Monday morning Speaker Pelosi called for making the expanded child tax credit permanent. Biden's $1.8 trillion families plan would only extend the credit through 2025.

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


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