Monday, June 6th, 2022
The 2022 Legislative session is official in our rearview mirror, but talks of a special session are still floating around the capitol. When midnight struck, we had not reached deals on several big spending omnibus bills pushed by the DFL. However, this is good news; it keeps the DFL’s hands out of the state's coffers at least until after the election. Hopefully, when the legislature returns in January, it will be with some more fiscally sound members.
Typically, the second year of the legislative session focuses on borrowing, or bonding, for capital projects and infrastructure. The legislature already passed, and the Governor signed a budget last year. As a result, the state government is fully funded for the next two years. Given a $12-billion surplus, there was hope that we could get tax cuts and some tax reform to stop the overtaxing of our citizens and businesses. Instead, the DFL and some Republicans saw it as an opportunity to spend more money or trade more spending for some tax reforms.
The “deal” that was announced by House and Senate Leadership was that the Governor was supposed to spend $4 billion, give $4 billion in tax relief (most of it one-time, not permanent), and leave $4 billion on the bottom line for next session.
But even if there was a leadership agreement, there was never an agreement on major budget areas. Areas such as Health, Public Safety, and Education had conference committees at loggerheads. Senate Republicans decided no deal was better than a bad deal, and they ran out the clock waiting for the DFL house to come up with better offers or to meet their offers. The House produced offers that moved further away from an agreement until there was no time left.
Will there be a special session? House Democrats now want the Governor to call a Special Session to have the Legislature come back to pass their spending proposals. Let's hope not. From our point of view, we just dodged a multi-year, billions of dollars spending increase that would drain that surplus in just a few short years. If all of the DFL bills had passed both houses and had been signed into law, we'd be looking at a 15-17% increase in the state budget on top of a budget passed last year that increased general fund spending by 9.6%.
The DFL and Governor Walz wanted to pile on the entitlements, which would mean committing future legislatures to new programs with no surplus left to pay for them. This is not a sustainable policy to manage our state. We cannot continue to let the DFL governor by pandering to its base with our money.
The Legislature did not pass the 2022 tax bill into law. The House and Senate leadership came to an agreement twice, first in general terms and then in more specific terms. Although the Conference Committee kept saying they had an agreement, no tax bill was ever signed by the conference committee. The chairs held a press conference in which they described "the deal." And even signed, not a conference committee report but "an agreement."
The "$4 billion in tax relief" was a mirage. Most of it was one-time money, not permanent tax cuts. Furthermore, as much as half of the $4 billion was going to expand refundable credits (credits to people that were more than the taxes they owed) and direct payments (Local Government Aid) to cities and towns in hopes that they would use the money to lower property taxes. No guarantee that they would.
What about the Social Security Tax Subtraction ("Removing the tax on social security")?
This is an issue Republicans and some Democrats have long sought to resolve. Unfortunately, neither side would agree to forgo the large amount of revenue it generated. So instead, they chipped away at it, making it nontaxable for people with lower incomes (who probably don't owe much in taxes anyway). This still left many seniors with some income from retirement savings feeling the pinch.
At some level, the argument for removing the tax is simply common sense. If Social Security is supposed to be your old-age insurance, accrued during your working life paycheck by paycheck, why does the government need to stick its hand in your pocket yet again? And not just the federal government, but the state of Minnesota, where you may or may not have been during your working life. It's especially galling because Minnesota is now only one of a handful of states that still tax social security.
To summarize what happened, House Democrats held tax relief hostage. They argued that they would only support tax cuts, including eliminating the state tax on Social Security, if they got to spend $4 billion and design the rest of the "tax relief" so that much of it would go to people who don’t pay taxes.
One of the few areas of agreement this session was a Veterans bill that the House and Senate passed with overwhelming support. The bill passed the House 122-1 and the Senate unanimously. It was also good to see a bill that, if completely single subject, at least did not encompass many different unrelated subjects.
$64.9 Million in FY 22-23 and another 10.2 Million in FY '24-'25. (Download spreadsheet here)
Here are the highlights.
State Representative, 31B
If you have any questions, please don’t hesitate to contact my office or me. If you have other needs, please email my Legislative Assistant, Grayson, at Grayson.email@example.com.