Dear Friends and Neighbors,
The Minnesota House this week concluded conducting preliminary votes on the majority’s numerous omnibus finance bills as part of the process in setting a new two-year state budget. The Senate is wrapping up its own first round of budget bills.
Each legislative body having completed this first pass at budget bills brings us to the next phases of negotiating a plan, with conference committees working to reconcile differences between House and Senate proposals on various aspects of the state budget in the hopes of having agreement and a finished product in place before our May 17 date for adjournment. At some point, we can expect the governor, rightly or wrongly, to thrust the executive office more directly into final lawmaking negotiations.
For now, the challenge will be to bridge a sizable gap between proposals offered by the Democrat majority in the House and the Republican majority in the Senate. This work will take place with the backdrop of a growing state surplus and fully stocked reserves. State revenue has continued to increase since the February forecast projected our state to have $1.6 billion in excess taxpayer revenue. Furthermore, billions more from the federal government are arriving, pushing that figure to more than $4 billion even without taking into account excesses from the last couple of months.
The House’s plan includes sizable tax increases, with separate omnibus bills related to taxes and transportation combining for more than $2.5 billion in added taxes and fees. The House tax bill itself raises taxes by more than $1 billion for the upcoming biennium. This includes:
- Creating a brand-new 5th tier income tax of 11.15%, giving Minnesota the 2nd highest income tax rate in the country.
- Expanding the corporate income tax.
- Failing to fully exempt federally issued and forgiven Paycheck Protection Program loans by capping relief at $350,000.
The PPP loans have been a source of contention in the House and it boils down to a matter of principle. The House majority is looking at this as a source of potential state revenue at a time the state has billions of surplus dollars at its disposal. The House minority is generally of the position that our state should not be seeking to profit off emergency loans struggling businesses received to keep workers on the payroll amid a pandemic. Minnesota remains the only state in the Upper Midwest that has not acted to lift PPP taxes.
As for the House majority’s transportation bill, this package raises over $1.6 billion in transportation related tax increases over the next four years with increases of $627M in FY22/23 and $1.02B in FY24/25. This includes:
- Raising the gas tax by linking it to the Highway Construction Cost Index. This proposal amounts to a 5 cent per gallon increase over four years — or a $350 million gas tax increase.
- Increasing the Metro Sales tax by half of one percent – raising a total of $916 million over four years – for a nearly $1 billion light rail tax hike.
- Raising hundreds of millions in other tax and fee hikes, including an increase to registration and tab fees, and an increase to the Motor Vehicle Sales tax.
There are several other omnibus finance bills in the works, including the omnibus health, human services and early education. While there is plenty of room to examine how this package expands government control of our health care system and imposes new mandates that raise health care Minnesotans, I would like to focus on how it should do more to address our state’s critical shortage of mental health resources.
Mental health already was an issue that needed more attention in Minnesota and the COVID-19 pandemic magnified our state’s shortcomings on this subject. For example, at last check there was not a single adolescent mental health bed available in Minnesota.
We must do better as a state to ensure people who need mental health care can receive it. Just as I hope the House’s tax increases fall by the wayside during the conference committee process, I also hope to see HHS legislation come back to the floor with more of an emphasis on mental health.
Until next time, please stay in touch and let me know if there is any way I may be of assistance.
Regards,
