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June 7, 2021

Shutdown looms: Compromise on the Horizon, Maybe?

On May 17, 2021, Gov. Tim Walz, Senate Majority Leader Paul Gazelka (R-East Gull Lake) and Speaker of the House Melissa Hortman (DFL-Brooklyn Park) marked the last day of the 2021 legislative session by announcing the framework of a “budget agreement” and a series of deadlines for committee chairs to negotiate the specifics leading up to an anticipated special session on June 14, 2021. Their agreement stipulated that committee chairs were to agree on final budget decisions no later than Friday, May 28th and that they were to have finalized bill language agreed upon no later than Friday, June 4th. However, with only a fraction of budget bills having met these deadlines, it is becoming less and less likely that the legislature will be ready to pass a biennial budget when they gavel in a special session next week.

Since the regular legislative session ended without a budget deal, the vast majority of discussions have occurred behind closed doors. While a couple of “budget work groups” have held public meetings and legislative leaders have held press conferences, very few budget committee chairs have broken the “cone of silence” to discuss budget proposals in public. The one exception to that has been in the area of health and human services, where committee chairs Sen. Michelle Benson (R-Ham Lake) and Rep. Tina Liebling (DFL-Rochester) began exchanging written offers in public late last week.

With a hot political climate in the Minnesota metropolitan area, weekday traffic rebounded to normal levels as employees returned to worksites. A sense of pre-pandemic normalcy returned as mask mandates were lifted in Minneapolis and St. Paul following the Memorial Day holiday. The vulnerability of the 'return to normal' mentality was recently tested with the removal of the George Floyd Memorial site and the shooting death of a suspect by the U.S. Marshal’s task force in Minneapolis sparked some public outcry and protest. However, the probability of a final budget agreement with significant policy reform passed by both chambers and signed into law appears to remain an uphill battle for lawmakers.

The House, Senate, and Governor remain far apart on policy proposals that will further complicate the process. 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.

Legislators must pass the budget before June 30, 2021 (the end of the state’s fiscal year) to avoid a government shutdown. Hope remains afloat as state leaders have all said they want to avoid a public shutdown and nobody is threatening to hold up the budget unless their top issues are adopted. Having extended the COVID-19 peacetime emergency declaration for 30 days in mid-May, Gov. Walz is expected to call the Legislature back for a special session on June 14, 2021, to extend his emergency declaration for another 30 days. Unlike last year’s COVID-19 related special sessions which ran only a single day, the Legislature is expected to stay in session from June 14th until a budget agreement has been passed.

Federal Update

Although President Joe Biden is expected to talk again today, June 7, 2021, with Senator Shelley Moore Capito of West Virginia, the top Republican negotiator on an infrastructure package, the real action this week might be Wednesday's House Transportation and Infrastructure Committee markup of a five-year highway bill.

The $547 billion bill includes $343 billion for roads, bridges and safety; $109 billion for transit; and $95 billion for freight and passenger rail. Committee Chair Peter A. DeFazio (D-Oregon) said it would push investing in current roads and bridges before building new ones.

The package also would make fighting climate change and emissions a priority for nearly every applicable federal program. “Federal transportation policy has been in a rut for decades, with bill after bill cobbled together based on previous versions leading back all the way to 1956.” Deron Lovaas of the Natural Resources Defense Council told reporter Jessica Wehrman, “Republican efforts to move toward a compromise were not only unreciprocated, it became apparent the Majority was more interested in moving further to the left compared with a previous bill.” House Republicans introduced their own $400 billion bill on Tuesday, May 18, though it did not include passenger rail, water, aviation or broadband.

The Senate Environment and Public Works Committee looked more bipartisan when it unanimously approved a five-year, $312.4 billion plan (S 1931) on Wednesday, May 26, though it didn't include money for rail or transit, which fall under the jurisdiction of other panels.

With Biden's full budget in the books, Cabinet and other officials are making the proverbial rounds on the Hill this week, in person and virtually. Secretary of State Antony J. Blinken kicks things off today, June 7, 2021, with two hearings in the House. The secretary will do the same tomorrow on the Senate side with two more hearings. The Biden administration is seeking $63.6 billion for Blinken's department and related programs, which would be an 11 percent increase over fiscal 2021 enacted funding. Here is a roundup of other key budget testimony this week:

Overall budget: Acting Office of Management and Budget Director Shalanda D. Young is scheduled to testify on Biden's full request before the Senate Budget on Tuesday and House Budget on Wednesday. She will also detail her own agency's budget Wednesday before the House Appropriations Financial Services Subcommittee.

Commerce: Secretary Gina M. Raimondo talks to a House Energy and Commerce subcommittee on Tuesday. Biden wants $11.4 billion for her department, including big bumps for its ocean and weather agencies.

Justice: Attorney General Merrick B. Garland, whose department would receive a 5 percent funding increase under Biden's blueprint, appears Wednesday before the Senate Commerce-Justice-Science Appropriations Subcommittee.

Housing and Urban Development: Secretary Marcia L. Fudge goes before the Senate Transportation-HUD spending subcommittee on Thursday. Biden wants $68.7 billion for her department.

Health and Human Services: Secretary Xavier Becerra talks to House Ways and Means on Tuesday and Senate Finance on Thursday. Proposed policy changes in the budget regarding abortion could cause conflict on the Hill.

Treasury: The House State-Foreign Operations Appropriations Subcommittee hears from Secretary Janet L. Yellen on Thursday regarding her department's budget for its international programs.

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


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