2019 Budget Agreement

Last night, Governor Tim Walz (DFL-MN), House Speaker Melissa Hortman (DF_36B, Brooklyn Park) and Senate Majority Leader Paul Gazelka (R-09, Nisswa) announce a budget agreement for the 2020-21 legislative session. What we found most interesting was Gazelka’s characterization of negotiations, “It was a draw. That’s what we have here.”

The total package comes in at $48.3 billion in spending obligations, does Federal Tax conformity, but changes other collection to reflect a zero-tax increase, reduces the 2^nd tier of income tax from 7.02% to 6.8 by 2022, provides 2% increases in education funding each year of the biennium, does not include a gas tax or license tab fees and reduced the Health Care Provider tax from 2% to 1.8% eliminating the sunset provision. To get to the finish line the budget reserve is tapped leaving $491 million. One significant salient point made by Gazelka, because of the vetos the last legislative session of the “Omnibus Prime Bill” there was more money in the Budget Reserve. Also, because of the lack of Federal Conformity, the state took in more money.

Minnesota government is set to grow about a half percent greater than the rate of inflation and provides funding for a multitude of state programs. The final agreement accounts for an increase in spending 5.8% over the 2019-20 budget. All sides agreed to a $500 million bonding bill with a large amount being spent for housing. Additionally, the leadership group agreed to the formation of a Blue-Ribbon committee charged with finding $100 million in health and human services cost saving by 2023.

As we learned in the press conference and had declared last week, we knew that only agreed to policy provisions will be allowed to advance. Hortman said the only bills that will pass are, “Only bills that are okay Sen Gazelka and okay with me.”

Now, the focus will be on the Conference Committees, We found it interesting when watching the committee proceeding, specifically in Health and Human Services, where Sen Michelle Benson (R-31, Ham Lake) flipped through her version of the bill and it was clearly recognizable where the highlights of green, yellow and red could be seen. We expect green was agreed to, yellow possible agreement, either once targets became known, or some tweaking of the policy language and red full stop.

As we are tracking this and the other Conference Committees the agreed to language is continuing to move forward and we expect they will make the floor in short order.

It is clear not all of the work will be done on-time though Walz a former football coach called that “overtime,”, and when asked when a Special Session would be Hortman said, she believed by Thursday this week.