After an extremely long 2020 legislative process, with a record breaking seven Special Sessions called to address and respond to the ongoing COIVD-19 crisis, some may have expected the 2021 Legislature to set the state’s next two-year budget on time and adjourn for a well-deserved break. Things didn’t exactly work out that way as lawmakers blew through the Constitutionally mandated adjournment date and continue to flirt with a full-blown state government shutdown.
After a tightly contested election in 2020 where all 201 members of the Minnesota Legislature were on the ballot, we remained the only split Legislature in the nation. With Republicans maintaining their narrow majority in the state Senate and the DFL able to hang on to their slim majority in the state House, the odds seemed long for much common ground on new policy in 2021. Given this split control, each Chamber can essentially veto any policy they deem too extreme from the other body, a reality that made the business of legislating even more difficult than usual.
Another complicating factor for the 2021 Legislative Session was the wild swings in the state’s budget forecast. The state had a projected $1.5 billion surplus before COVID-19 changed everything. The next budget update from November of 2020 indicated Minnesota was facing a $2.4 billion deficit. But only a few months later, in February of 2021 the state’s budget forecast swung again, this time all the way back to a $1.6 billion surplus. Part of the reason for these dizzying swings is the difficulty in predicting economic activity during a once-in-a-generation global pandemic, but the federal funds provided to state and local governments in 2020 and 2021 certainly helped stabilize our economic outlook as well.
Rather than setting the biennial budget and going home, the Legislature is currently in the middle of yet another Special Session, this one to finish the work left undone at the Constitutionally mandated adjournment date of May 17th. While shockingly few bills managed to pass during the regular Session, Legislative leaders were able to finally announce a deal on joint budget targets on the final day of Session. Leaders left a host of thorny policy issues such as the Governor’s peacetime emergency powers, an eviction moratorium off-ramp, police reform provisions, and a disagreement over the Minnesota Pollution Control Agency’s clean cars rulemaking authority to be sorted out by conference committees in advance of a June special session.
One key breakthrough – leaders were able to reach agreement on the tax treatment on unemployment payments and forgiven Paycheck Protection Program (PPP) loans. The state will exempt $10,200 of unemployment benefits from state income taxes and will exempt all forgiven PPP loans, which conforms to the federal treatment of both. Potential tax liability on unemployment payments and forgiven PPP loans was a contentious issue all Session long and the announced agreement heralded a breakthrough on overall budget negotiations. Governor Walz and House DFLers had sought additional tax increases this year, but have backed away from those demands as part of the budget negotiations.
Lawmakers returned to St. Paul on June 14th for a Special Session aimed at passing the outstanding budget bills and avoiding a government shutdown. While Legislative leaders were able to strike a deal on overall budget numbers at the close of the regular Session in May, they have needed extra time to work through some of the details and actually assemble bill language, a process that has been taking place with little to no input from the general public.
Working Groups – formerly known as Conference Committees – have been meeting out of the public eye to assemble their bills with the spending targets they were given from House Speaker Hortman and Senate Majority Leader Gazelka. As Special Session began, working groups that had completed their bills started posting them for the public to review. Under a normal conference committee process, the House and Senate review the differences in their omnibus bills and debate the merits of each during public meetings. They then adopt either the House position on an issue or the Senate position, and in this way they build the omnibus bill, which is then voted on by each Chamber.
Under this year’s process, Committee Chairs from the House and Senate have been meeting privately and once they have come to an agreement, the negotiated bill is posted for review with no opportunity for amendments or input. There has been even less transparency in the process this year than most, a troubling trend for the Legislature regardless of which party is in charge.
As of the writing up this update only the public safety bill is still being negotiated with Legislative leaders able to reach agreement on all other areas of the state budget. Democrats in control of the House have been pushing for a slate of police reform measures in the wake of some high-profile police killings in Minnesota, while Republicans who control the state Senate prefer to wait and see how the changes made in 2020 impact policing and public safety. Both Speaker Hortman and Majority Leader Gazelka have reiterated their confidence that agreement will be reached in advance of June 30th, the final date for legislative action to avert a state government shutdown.
*The Legislature was in Special Session passing budget bills with both political parties vowing to avoid a government shutdown at the time this article was written.
Samuel Richie is an attorney with Fryberger, Buchanan, Smith & Frederick, P.A., practicing primarily in the government relations and legislation areas and also administrative law.
