Lawmakers give final approval to $52 billion budget, averting state government shutdown

Nearly $1B in tax cuts also approved in wee hours.

By: - June 30, 2021 7:59 pm

DFL Gov. Tim Walz holds a ceremonial bill signing for a new $52 billion state budget on July 1, 2021. Photo by Ricardo Lopez/Minnesota Reformer.

Minnesota lawmakers at last completed a new $52 billion two-year budget on Wednesday with just hours to spare before parts of state government were set to temporarily shutter amid ideological differences in the divided Legislature. 

DFL Gov. Tim Walz wasted no time, quickly signing the remaining budget bills, including a nearly $21 billion education bill, passed unanimously in the Senate. 

The education budget bill was the last remaining must-pass bill to avoid a partial government shutdown that would have started at 12:01 a.m. Thursday. It had been held as leverage until the House also agreed to pass a $944 million tax bill containing business and individual tax cuts, a top Republican priority. 

“Despite divided government, we found compromise and made significant investments to help those who sacrificed the most during a challenging year,” House Speaker Melissa Hortman, DFL-Brooklyn Park, said in a statement after the special session adjourned. “While this agreement does not contain everything we would have liked, we worked together and achieved a compromise that is in the best interests of Minnesotans.”

Senate Majority Leader Paul Gazelka, R-East Gull Lake, declared victory after his caucus fended off DFL-proposed tax increases on high-earning Minnesotans and large corporations. 

“For the fifth year in a row, Senate Republicans have stopped harmful and excessive tax increases on Minnesotans,”Gazelka said in a statement. “We held strong against Gov. Walz’s demands and instead, delivered nearly a billion dollars in tax relief.”  

The final days of session included the usual end-of-session bumps, with last-minute amendments threatening to derail a previous global agreement. But the specter of a potential government shutdown appeared to motivate lawmakers to quickly work through those final hangups. 

Still, House Republicans forced lawmakers to debate well past midnight, offering amendments that stretched the special session into Thursday’s early morning hours, the second night in a row of middle-of-the-night lawmaking. The filibustering only slowed proceedings. At 1:14 a.m., the House adjourned sine die, approving a tax bill on a 69-55 vote. 

A last-minute amendment is expected to make some waves as it took aim at one sitting lawmaker: House Minority Leader Kurt Daudt, R-Crown. 

The measure bans current legislators from holding jobs with a lobbying firm regardless of whether their work or clients are based in Minnesota. Daudt currently works for a Virginia-based firm called Stateside Associates.

The amendment was proposed by state Rep. Steve Drazkowski, R-Mazeppa, a longtime critic of Daudt who splintered off from House Republicans to form his own caucus, and passed with 119 votes. 

Two late days of lawmaking

The final two days of the special session involved lengthy discussions on major budget bills, with frequent recesses as top leaders worked behind the scenes to negotiate minor hiccups and draft last-minute language changes. 

On Tuesday, the GOP-led Senate and DFL-majority House worked late into the early morning hours of Wednesday, wrangling over the final details of a contentious public safety budget bill that included modest police and criminal justice reforms that disappointed some Democrats.  

One bump included a last minute announcement by Walz that he would end his emergency powers on July 1, after reaching a deal with the federal government to extend some federal benefits like food stamps for several more weeks in the absence of a peacetime emergency declaration. 

Walz had hoped the Legislature would approve an amendment to the state government budget bill that gave the governor some continued authority to manage a public health emergency, but ultimately lawmakers stripped out that language and voted to end his emergency powers. 

The education budget bill includes a 2.45% increase to the general education funding formula in 2022 and a 2% increase in 2023, costing nearly $463 million over the next two years.

State Sen. Roger Chamberlain, R-Lino Lakes, said formula increases were the “fairest” way to give school districts money without strings attached. “Big increases in spending, few mandates,” he said. 

The tax bill lawmakers passed not only exempts unemployment benefits from state taxes, but also Paycheck Protection Program loans to businesses that struggled through the pandemic. It also provides state funding for an engineered-woods mill in Cohasset in exchange for state funding for a study of building a land bridge over Interstate-94 in St. Paul’s Rondo neighborhood.

The bill includes changes to the state’s tax credit for low-income working parents and credit increases for some taxpayers, a continuation of the historic preservation credit and an extension of a credit for startups.

It will also establish a film production tax credit at $5 million each year for fiscal years 2022 through 2025.

Lawmakers plan to return in yet another special session in September to adopt recommendations made by a working group about how to provide $250 million in bonus pay to essential workers who were left out of previous COVID-19 relief aid and were forced to use their own sick and vacation time to care for themselves or others.

This story has been updated.

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Ricardo Lopez
Ricardo Lopez

Ricardo Lopez was a senior political reporter for the Reformer. Ricardo is not new to Minnesota politics, previously reporting on the Dayton administration and statehouse for The Star Tribune from 2014 to 2017, and the Republican National Convention in 2016. Previously, he was a staff writer at The Los Angeles Times covering the California economy. He's a Las Vegas native who has adopted Minnesota as his home state. In his spare time, he likes to run, cook and volunteer with Save-a-Bull, a Minneapolis dog rescue group.