On Monday, the 2022 Legislative Session officially ended, but what did policymakers actually pass into law? With a historic projected surplus of $9.3 billion in FY 2022-23 and $6.3 billion in FY 2024-25, policymakers had an opportunity to address the real challenges that Minnesotans are facing and build a stronger, more equitable recovery. But much of that work remains unfinished.
Governor Tim Walz and legislative leaders agreed to a framework
to allocate $4 billion over three years to increased spending, $4 billion for a tax bill, and to leave $4.2 billion unspent, or “on the bottom line”, which would hedge against the slowing economy cutting into the projected surplus. This represented a compromise between the Senate’s prioritization of tax cuts and the House’s mix
of a smaller, more targeted tax-cutting package and greater investment in education, human services, and other budget areas.
However, the House and Senate failed to reach agreement in many major budget areas, including education, health and human services, transportation, and infrastructure (often called “bonding”). They reached agreement in other budget areas and on a tax bill, but those bills were not advanced for final votes once it became clear that all of the pieces needed to enact the framework agreement were not going to be completed.
Looking over the session as a whole, as of Monday, policymakers had only allocated about one-quarter of the general fund surpluses projected in the February forecast.
General fund impact of bills passed in the 2022 Legislative Session
|| FY 2022-23
|| FY 2024-25
|Unemployment Insurance/frontline workers/COVID response
|| $1.7 billion
|| $550 million
|| $313 million
|| $403 million
|Veterans, military affairs
|| $65 million
|| $10 million
|Agriculture, rural development, housing
|| $51 million
|| $33 million
|| $25 million
|| $16 million
|| $77 million
|| $3.0 million
|| $5.0 million
|| $3.8 million
|| $1.9 million
|| -$14 million
|| -$108 million
|| $2.2 billion
|| $972 million
|Remaining on bottom line
|| $7.0 billion
|| $5.3 billion
Tax policy is the largest area where policymakers reached agreement but did not pass a bill, given that its passage was dependent on the budget parts of the framework being completed. The nearly $4 billion tax agreement included several important policies targeted to everyday Minnesotans and the financial challenges they face, including the House’s transformational proposal to expand the Renters’ Credit, a substantial expansion of tax credits for educational and child care expenses, provisions to lower property taxes, funding to local governments for emergency rental assistance, and other resources to support essential services in our communities. Unfortunately, it also included badly targeted permanent tax cuts. The largest tax-cutting measure, with a cost of more than $1.6 billion over three years, would expand Minnesota’s income tax exemption for Social Security benefits beyond the current targeted approach, providing the biggest tax cuts to high-income seniors
. It also included $667 million over three years to reduce income taxes by cutting the first bracket tax rate – a measure that provides little or smaller tax cuts to many lower-income Minnesotans while also cutting taxes for those with the most resources.
By far the bill with the greatest fiscal impact that passed this session
was the Unemployment Insurance (UI) Trust Fund/frontline workers bill. This bill drew on both general and federal funds to allocate $2.7 billion to the state’s UI Trust Fund, rather that have that fund refill gradually over time through additional UI taxes and assessments. This provides an untargeted benefit to employers regardless of whether they are small and struggling or large and highly profitable. It also allocates $500 million for one-time “hero pay” benefits to approximately 667,000 frontline workers who stayed on the job during the pandemic. This legislation also sets aside $190 million for future COVID response and makes some changes in how the current budget is financed. In total, the bill uses $1.7 billion in general fund resources for FY 2022-23, almost 20 percent of the projected surplus for that biennium.
The second largest use of the general fund surplus that policymakers passed this session was $313 million in FY 2022-23 and $403 million in FY 2024-25 for reinsurance, which provides payments to health insurance companies with the goal of holding down premiums in the individual insurance market.
In the final days of the session, the Legislature passed a few supplemental budget bills into law, including the agriculture and commerce bills. They also enacted other smaller bills that direct funding to particular issues, including mental health and ALS research.
That leaves a lot of important unfinished business.
Minnesotans need bold policy action now, particularly to support lower-income and Black, Indigenous, and other Minnesotans of Color who have struggled disproportionately during the pandemic and under the unequal status quo that predated it.
We still need policymakers to put surplus dollars to work so that all Minnesotans can be healthy, safe, and financially secure. That would include enacting the House’s game-changing Renters’ Credit expansion
, proposals to keep more Minnesotans connected to their health care
, to make child care more affordable
, invest in the state’s E-12 and higher education systems
, and promote clean air and water and respond to climate change.