Dear Friends and Neighbors,
The 2022 legislative session is set to adjourn in less than two weeks, with progress to report on some issues and others that remain in flux as we creep closer to our May 23 closing date.
Here is a look at some of what has been accomplished recently, along with what works in progress remain:
Bill enacted to end unnecessary tax increase
Legislation to repay Minnesota’s unemployment insurance trust fund deficit and reverse tax hikes employers in the state faced despite a historic surplus has been enacted into law. S.F. 2677 was approved by both bodies and signed into law, providing $2.7 billion to fully repay the trust fund which was depleted.
It is good we stopped this tax increase from adding to the burden of employers of all sizes who, through no fault of their own, were shut down by the governor, resulting in more people being placed out of work.
Senate Republicans approved a clean bill to rectify this issue in February, with broad, bipartisan support. House Democrats delayed action until late April, when they added more than $1 billion in other funding to the bill. This change unnecessarily complicated matters and delayed final approval, costing state taxpayers $50,000 in interest for every day the legislation languished.
Final language includes $500 million in payments to frontline workers – approximately $750 per person – and $190 million is provided to Minnesota Management & Budget for continued COVID-19 expenses. Another measure allows just one legislative body to reject an expenditure instead of the current requirement for both bodies to object.
Approval of this bill replenishes the unemployment insurance trust fund, uses the state’s remaining federal American Rescue Plan funding and halts automatic payroll tax increases that kick in by default when the trust fund dips beneath required levels. The final package was widely supported, with a 124-5 House vote and near-unanimous passage in the Senate on Friday before the governor signed it into law.
Veterans bill approved
The House and Senate both recently approved with overwhelming support legislation to provide further funding for our military veterans.
Overall, S.F. 4233 appropriates an additional $2.2 million to the Department of Military Affairs and an additional $52.351 million to the Department of Veterans Affairs. The package includes more than $10 million for construction cost increases for the three new veterans homes in Bemidji, Montevideo, and Preston, and more than $16 million for enhancements and furnishings to these facilities.
Veterans and Gold Star families who served post-9/11 will receive a total of $24.8 million post-service bonus payments. The bill also includes funding to address veteran homelessness, money for the State Veterans Cemetery in Redwood Falls, and other veterans related programs.
It was good to see this bill come to the floor clean so we could take an up or down vote on veterans without unrelated measures muddling the process as was the case with UI. The bill passed the House 122-1 and cleared the Senate with no opposition. It has been presented to the governor for enactment.
Social Security and other tax relief unfinished
Surplus revenue continues to mount in Minnesota, the byproduct of higher prices driving increased sales tax collections, and increasing wages generating more income tax. I just received an email this week indicating that, for the third consecutive month since the February forecast showed a $9.25 billion surplus, revenue in Minnesota has continued to outpace projected expenditures. The state indicates it has received another $1.15 billion above prior projections, making the over-collection now $10.5 billion (UI legislation notwithstanding) to go along with an additional $3 billion of cash reserves in the rainy day fund and cash account.
We face an opportunity to deliver permanent, meaningful tax relief this session and the top priority for many is eliminating our state’s status as an outlier among only 12 states that still tax Social Security income. With the state’s persistent over-collection of taxes, it’s time to join the other 38 states that are not taxing Social Security.
That said, the omnibus tax bill House Democrats recently approved fails to fully exempt Social Security income from state taxes. In total the bill focuses more on credits instead of permanent reductions. Less than 10 percent of the funding would be dedicated to business tax relief and COVID grants, and most of those are one-time dollars.
Furthermore, property taxes are on the rise, but this bill does not include any permanent tax reductions and includes an increase in permanent spending. The bill would shift $18.7 million in rising property tax burdens back onto middle-class families. This comes as Minnesotans struggle with higher costs on most, if not all, goods and services. This will only keep Minnesota at a competitive disadvantage compared with our neighboring states in terms of tax burdens.
With all the major omnibus bills now having passed through the House and the Senate, the next couple of weeks will be spent working to find agreement on the various proposals. Expect things to remain fluid between now and May 23 and time will tell how things unfold.
Regards,
Rep. Jerry Hertaus