Opening Weeks of Session
While 2021 began rather eventfully, there was some semblance of tradition and normalcy during the start of this new legislative term. New members were sworn in (albeit virtually), committees began meeting, and bills were introduced. January has been mostly an orientation month: opportunities for legislators to hear overview presentations from various departments across the state with little official business.
COVID-19 has had a place in nearly every committee overview, with most members hearing an update directly from Minnesota Department of Health Commissioner Jan Malcolm, grappling with how the vaccine effort is rolling out, what additional relief is needed, and what the state’s economic future looks like post-pandemic.
COVID-19 Vaccine Update
Health committees in the House and the Senate have dedicated a significant amount of time to discussing the vaccine rollout in Minnesota. The Minnesota Department of Health has presented an in-depth look at how the rollout is going, what lessons are being learned, and identifying ways to improve. The biggest hurdles in the rollout are ensuring both available vaccines’ (Pfizer and Moderna) shipping and storage specifications are met and simply procuring more. Minnesota is still in phase 1a of its plan, which is focused on vaccinating healthcare professionals and long-term care residents, as well as adults ages 65 and older. That has since further expanded to include individuals who work with children (ex. childcare workers and teachers).
To effectively distribute the vaccines across the state, Minnesota created the Community Vaccine Pilot Program. The program oversees nine pilot sites across the state, which serve adults aged 65+, pre-k through grade 12 educators, staff, and childcare workers. Individuals in any of the categories can schedule vaccination appointments at these pilot sites. It should come as no surprise that the program’s launch has been bumpy, given the vast demand and short supply.
For further information on the vaccination process across Minnesota, please visit: https://mn.gov/covid19/vaccine/data/index.jsp
Governor Walz’s FY 22-23 Budget Proposal
On Tuesday, January 26, Governor Walz released his budget recommendations for the FY 2022-2023 biennium. His proposal includes several mechanisms to balance the state’s budget, such as utilizing the budget reserve, reducing spending, and raising revenue. Here are the highlights:
- The total budget proposal is $52.4 billion over the two-year biennium.
- Included in the proposal is $1.66 billion in new taxes and $1.3 billion in new spending.
- New funding includes investments in education, broadband, the angel investment tax credit, and COVID-19 support for businesses.
- New tax items include the creation of a fifth-tier income tax rate, higher corporate franchise tax rate, and vaping taxes.
- Themes the Governor mentioned throughout his proposal were supporting small businesses and driving economic recovery, ensuring students catch up on learning, and supporting working families.
- Of note in the Health and Human Services budget area:
- Funding to expand the work of the maternal mortality review committee.
- Telemedicine expansion in Minnesota health care programs.
The Governor held a press conference on the same day as the budget proposal release with a few of his commissioners to provide details on his proposal. He was quick to point out that this is just a starting point, and nothing is off the table, meaning he was open to reducing spending and raising revenue to solve our state’s budget problems. It’s important to remember that the state is still working off the budget forecast from November. The next forecast is due in February, which will provide significant guidance to the budget process. FY 2020-21 still stands with a modest $636 million budget surplus; however, there is a $1.273 billion budgetary shortfall to address for the FY 2022-2023 biennium.
Both legislative bodies will consider their own strategies to solve this problem. The Republican caucuses in the House and Senate have both committed publicly to not raising revenue and will instead look at reducing government spending to address the budget shortfall. Meanwhile, the DFL caucuses in both bodies will likely be supportive of Governor Walz’s budget proposal while also promoting their own spending priorities. Budget proposals from the legislature are expected in the coming weeks, setting the stage for end of session negotiations between the Governor, the House of Representatives, and the Senate.
House and Senate Operations
In case you missed our session preview, the House and Senate have different approaches to operating this session. There are a handful of legislators in both bodies who chose to continue working from the Capitol, though most have been sticking to virtual engagement for the time being.
The House continues their commitment to operating virtually for the duration of the 2021 legislative session, while the Senate has begun to hold hybrid hearings in response to members advocating a return to in-person operations. Any in-person aspect of hearings is reserved for legislators. Stakeholders, lobbyists, and other testifiers can only engage in proceedings remotely. We expect the Senate to continue trying to move toward a heavier in-person presence at the Capitol this session.
Action on MAA Priority Bills
S.F. 263 (Senator Bakk) – Income and corporate franchise tax federal conformity to exclusion of paycheck protection loan forgiveness from gross income; business entities option to file a C-option corporation.
This bill conforms to the CARES Act provisions that exclude forgiven Paycheck Protection Program (PPP) loans from gross income. The bill also includes an option for businesses that operate as a partnership, LLC, or S-corporation to file as a C-corporation.
There is strong bipartisan support for S.F. 263 in the Senate. Among the co-authors are both current and some previous Tax Committee chairs. The constitution requires all tax bills originate in the House, so it is unclear what the path forward is for this bill in the other chamber. There were several testifiers representing small businesses, business organizations, etc. and they all provided compelling testimony in support of S.F. 263. The Medical Alley Association provided written testimony in support of this bill; it is an important proposal that will continue to help businesses recover from the COVID-19 pandemic.
Looking Ahead
Now that orientation season is coming to a close, committee activity will continue ramping up from here. Both bodies face a significant backup at the Revisor’s Office, but once that is worked out, hearings will be jam packed with bills up for consideration. Our team is keeping a close eye on a variety of committees whose jurisdiction affect our members. Among those on our list in both the House and Senate are: Taxes, Health and Human Services, Behavioral Health, Preventive Health, Higher Education, and Jobs and Workforce.
The state is eagerly awaiting the February Budget and Economic Forecast as well. It is a critical component of the budget preparation process; outlining the financial situation Minnesota is in and determining if the state faces a budgetary shortfall. Keep an eye out for information on this forecast from our team.
ICYMI: Check out our most recent discussion focused on inequities in healthcare: Helping Close the Health Inequity Gap Through Inclusive Clinical Trials.
