We are already into the second half of the 2022 legislative session. Unfortunately there has not been a lot accomplished yet, despite the legislature setting a record for the number of bills introduced with more than 4,700 in the Senate and 4,300 in the House. It seems that legislators have a lot ideas, but have taken very little action. We have passed all the committee deadlines and the House and Senate have started to move on their omnibus bills: taxes, transportation, environment, etc. Not surprisingly, the House and Senate omnibus bills are vastly different on both policy and fiscal impact. Much work will have to be done to come together in conference committee or with leadership.
The Senate passed the first omnibus tax bill off the Senate floor in bipartisan fashion. Among other things, it permanently reduces the first tier individual income tax rate from 5.3% to 2.8% and eliminates income tax on social security income. The Senate Republicans touted this as the “largest tax cut ever,” totaling $3.38 billion this biennium and $5 billion in the FY 24/25 biennium.
The legislature is off and running full steam ahead! This the second year of the 2-year (biennial) legislative session. There are several themes that have been consuming the discussion early on: budget surplus, bonding, unemployment insurance trust fund, redistricting, and COVID closures. Here is a brief update on each area.
In 2021, the state passed a 2-year budget of $52 billion, a record level of spending. A key part of our budget is revenue, how much the state collects in taxes, fees, federal funds, etc. The state uses a forecasting model to try and make an educated guess of how much money will be collected (and spent) during the biennium. The state then updates their projections throughout the year with periodic “budget forecasts,” which update the revenue and expense projections. In November 2021, the state projected a budget surplus of $7.7 billion. As of Monday February 28th (the “February forecast”), that budget surplus jumped to $9.3 billion. The legislature does not technically need to do anything, they already passed a budget in 2021. However, ideas range from giving it back in the form of rebate checks, reducing taxes, or spending on new or existing programs. Governor Walz has proposed nearly tripling proposed rebate checks (“Walz Checks”) to $500 and $1,000 for qualifying individuals and couples. Senate Republicans have proposed permanently reducing the first tier individual income tax rate from 5.3% to 2.8% and eliminating income tax on social security income. House Speaker Melissa Hortman and DFL leaders have been cautious and suggested putting more in reserves while also providing unspecified support for families who continue to struggle through the pandemic.
Minnesota’s 92nd legislative session ended their 2021 regular session on May 17th without a budget. The Governor and Legislative leaders instead released a budget framework with a target of $52 billion for the next biennium. Lawmakers worked for four weeks on final details largely outside of the public eye until they convened a special session on June 14th. All spending bills were passed and signed into law by June 31st.
The need for a special session was largely due to a late infusion of funding from the American Rescue Plan Act (ARPA) that was signed into law by President Biden on March 11, 2021. Roughly $8.5 billion was allocated in the bill to the State of Minnesota for various programs.
A final budget of $52 billion was signed into law on June 31, 2021. This biennial budget is an increase of approximately $1.3 billion over the previous budget – much of that one-time funding from ARPA. Included in the bill are direct tax cuts of $644 million to people who lost jobs and employers who kept people working during the pandemic.
Paycheck Protection Program
The final tax bill included full conformity to federal tax law with regards to the Paycheck Protection Program at a cost of roughly $375 million in fiscal year 2022. Businesses and organizations that received PPP loans will not be subject to either federal or state income tax on the amount of the loan received.
In general, the order calls for the following measures:
Limits all social gatherings (indoor or outdoor) to 10 people and all social gatherings involving members of more than 3 households (regardless of the size of the gathering).
Bars, restaurants, food courts, cafes, coffeehouses, taverns, brewery taprooms, wineries, golf courses and clubs, dining clubs, tobacco shops, and other places of public accommodation offering food, beverages, tobacco products for on-premises consumption, are required to close by 10 p.m. every day, starting Friday, November 13. Delivery service, or curbside pick up options already in place for certain industries in this group is still allowed.
Venues that host celebrations, receptions, and gatherings will be capped at 50 people, effective November 27 at 10 p.m.
No bar seating service.
This figure is reduced to 25 people on December 11at 10 p.m.
The Governor also announced a proposal for $10 million in additional funding to businesses that have already applied for relief through the Small Business Relief Grant Program. This program provides $10,000 grants to impacted businesses.
Join your colleagues and our regional legislators on May 22 at 8 am as Greater Mankato Growth hosts a virtual discussion to recap the 2020 legislative session.
With COVID-19 still significantly impacting businesses, our panel of legislators will provide an update on their efforts to support our state at this time. Attendees will also have an opportunity for Q&A so you can engage directly with our legislators on the issues most important to you.
Governor Tim Walz on April 23 announced his strategy for how his administration will approach planning for the development of a comprehensive framework that will reopen Minnesota’s economy in phases.
The first step in that process is the issuance of Executive Order 20-40 which begins the process of safely returning Minnesotans to work, starting with workers in non-customer facing industrial and office-based businesses who cannot work from home. Guidance on what businesses are allowed to return to work under EO 20-40 can be found here. In addition, the state has created a comprehensive and detailed website for businesses to reference on safely returning to work, including FAQs.
The U.S. Senate today passed an additional stimulus bill that will provide $480 billion to COVID-19 related programs, including an additional $310 billion for the Paycheck Protection Program. The U.S. House is expected to consider the bill tomorrow and President Trump has indicated he will sign.
The bill also includes:
$60 billion for smaller lending facilities, including minority depository institutions, certified development companies and credit unions;
$10 billion for grants under the SBA’s Emergency Economic Injury Disaster Loan program;
$50 billion for SBA disaster recovery loans;
$2.1 billion for additional salaries and expenses for the Small Business Administration;
$75 billion for hospitals and health care providers to support for Covid-19 expenses and lost revenue from canceled elective surgeries and other procedures;
$25 billion for research to develop, validate, manufacture, purchase and administer Covid-19 tests, including $11 billion for states to expand lab capacity.
If you are an independent contractor or self-employed, you may be eligible for Paycheck Protection Program (PPP) loans/grants, SBA’s Economic Injury Disaster Loans (EIDL), and/or Unemployment Compensation for losses of income related to the coronavirus pandemic. While the PPP and EIDL programs are currently out of money, Congress is actively working to provide additional funds. This great guide to the CARES Act for Self-employed and Independent Contractors from the US Chamber of Commerce will ensure you have the information you need to take advantage of these federal programs.