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May 8, 2020
Budget News

Minnesota Management and Budget (MMB) has announced that Minnesota is now facing an estimated $2.4 billion deficit. Each year, MMB does a budget forecast in February and November, where it provides the state’s current revenue and expenditure projections. This February, just before the COVID-19 health emergency began, MMB projected that Minnesota had a $1.5 billion surplus, however, the current shock to our economy prompted an unprecedented interim analysis of the state’s finances.

Incoming tax revenue is down $3.6 billion, the state’s spending projection is up $391 million, more than 600,000 Minnesotans have filed for unemployment so far and the course of the economy is dependent on the unknown path of the pandemic. Some positive news is that there is an incoming $2 billion in federal funds that will be used toward coronavirus response.

Both the governor and MMB cautioned against taking this projection as final word due to numerous uncertainties. One is that these projections are based on an assumption that social distancing restrictions are loosened in the fall and the economy starts recovering at that time. In reality, we can’t be certain what course the pandemic will take.

"As a nation our peak is still coming. I’m going to anticipate that this could deepen in terms of the deficit and take this a step at a time," said Gov. Walz
Governor's Statutory Authority to Repair the Budget

In a time of deficit, the governor, in consultation with the Legislative Advisory Commission, has the legal authority to dip into the state’s reserve in order to balance the budget. Minnesota’s budget reserve currently contains $2.4 billion. Due to the uncertainty of the situation, Gov. Walz has said that it would be a mistake to "just dump the budget reserves in and you’re even today. Because tomorrow if we go back in, it’s not there."

If the state is faced with a scenario in which all of the budget reserves are "dumped in" in order to balance the budget and we are still faced with a deficit, the governor can then look to a process called "unallotment." Unallotment is when the executive branch, with advice from the Legislative Advisory Council, reduces spending within existing appropriations in order to prevent a deficit. This procedure can only occur after the budget reserve is empty. Statute provides few limits on the type or amount of unallotments allowed, and no program is exempt from consideration.
End of Session Agreement

In order to end this session in an orderly manner, the leaders of the four major caucuses of the Legislature have signed an agreement that all negotiations should be completed by Saturday, May 9 at midnight. Session officially ends on May 18.

Even during a normal in-person session, it is a monumental task for staff to process the end-of-session bill rush, which they successfully do year after year. To finish on time, staffers work around the clock in marathon fashion during standard session ends. Current remote circumstances will make this task even more challenging and time-consuming. This agreement to complete negotiations on May 9 is an effort by the Legislature to allow staff extra breathing room to get to the finish line. It is noted that the Legislature has a history of missing self-imposed deadlines.
Bonding Bill in Limbo?

A bonding bill must receive a supermajority vote in each body. A supermajority is equivalent to three-fifths of the body. This means that all four major caucuses will have to be on board for a bonding bill to move forward this year.

House Minority Leader Kurt Daudt announced last week that his caucus will not provide the needed votes to pass a bonding bill unless Gov. Walz’s peacetime emergency powers end. He said that he is open to passing a bonding bill later this year during a special session if it takes that long for the peacetime emergency to end.

"The time for quick action has passed. I think it’s time for a thoughtful approach with the Legislature engaged," said Minority Leader Daudt.
COVID-19 Contact Tracing Bill

Rep. Tina Liebling, chair of the House Health and Human Services Finance committee, has authored a bill to fund a COVID-19 contact tracing and investigation program. The Minnesota Department of Health currently has over 200 employees dedicated to contact tracing, but believes it needs closer to 4,200 employees assigned to the task in order to aggressively locate cases and work to prevent further spread.

The bill currently appropriates $25 million in state funds and $200 million in federal funds to the program, but the financial need could change as the bill moves forward. The language sets the program expiration date at Feb. 1, 2021, rather than with the duration of the peacetime emergency. The bill was crafted assuming that the threat of the virus will remain present long after the peacetime emergency expires.
Executive Orders Update

The latest Executive Orders from the office of Gov. Walz:

  • 20-49 allows food trucks to operate at up to six designated highway rest areas in Minnesota. Under normal circumstances, food trucks are prohibited from selling food at highway rest areas.
  • 20-50 is for protection from consumer garnishment actions during the peacetime emergency, with the exception of domestic support obligations.
  • 20-51 lifts the ban on "non-essential or elective" medical, dental and veterinary procedures. The governor calls this move a "calculated risk", but also acknowledges in his Executive Order that "extended delays in the provision of certain care may pose substantial risks to patients."
Resources

Staying Connected with the Legislature

Minnesota Department of Health

Department of Labor and Industry

Department of Human Services

Minnesota Department of Education

Minnesota Employment and Economic Development

Minnesota Department of Corrections

Minnesota Department of Revenue
They Said It...

"We have some patients who can’t walk from their bed to the bathroom without a walker. They’re taking pain medicine; it’s changed their mental status." – Orthopedic surgeon Dr. Owen O’Neill, speaking in support of Executive Order 20-51.
Ewald Government Relations Team
David Ewald
651-290-6276

davide@ewald.com

Valerie Dosland
651-265-7857
valeried@ewald.com


Phil Griffin
651-791-0341
philg@ewald.com


Troy Olsen
651-288-3425
troyo@ewald.com

Becca Pryse
651-265-7858

beccap@ewald.com

Allie Spellman

651-285-3522
allies@ewald.com


I
vonne Hernandez
612-540-9151
ivonneh@ewald.com
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