2023 Minnesota Legislature Adjourns – Session Update

One of the most intense Legislative Sessions in years, MSSA and other interest groups fought off a statewide flavor ban on Tobacco and in the 11th hour, able to find common ground with our Minimum Mark -Law on fuel. Want to thank all MSSA members for taking time to engage with their State Representatives and Senators this past Session. Your voices were heard and will continue to be heard! A huge “thank you” to the hard work and countless hours Todd and Jeannette Hill have invested in the members of the MSSA this year and other years.

Following a frantic pace over the last week, Monday evening just before 10 pm, the Minnesota Legislature concluded Minnesota’s 93rd Session on the 77th Day of the Legislature. The Legislature will return at noon on Monday, February 12th, to begin the 2024 Legislative Session. With the Legislature limited to meeting in session no more than 120 days over the two years of the biennium, there will be 43 days available in 2024 for the Legislature to meet in session.

Governor Walz and DFL legislative leaders are proclaiming this as the most successful session in our lifetimes. GOP members and Leadership remain critical of the sessions lack of transparency and disregard for the rules of the Legislature. Those frustrations grew louder as the DFL worked to wrap up budget negotiations and pass the remaining pieces of their legislative agenda.

The 2023 Legislative Session was unlike any previous session we have experienced in Minnesota. As of May 18th, 52 individual bills were sent to the Governor for his signature. This number will grow as the remaining budget and session ending agreements are passed and sent to the Governor for his signature. Here are a few of the early individual issues addressed by the “DFL Trifecta” in 2023.

  • In January, the Legislature passed Federal Tax Conformity providing nearly $100 million in tax relief to Minnesota businesses, mostly tied to federally forgiven COVID grants and loans. The Legislature extended unemployment benefits to Iron Miners and mining related businesses. The Legislature also established a fundamental right to reproductive healthcare.
  • In February, the Legislature set aside $315 million to match federal funding provided by the Infrastructure Investment and Jobs Act. The Legislature also modified Minnesota’s electric utility renewable energy standards, putting in place a 100% carbon-free standard for all electric utilities by 2040.
  • Other proposals adopted this spring include the restoration of voting rights for felons upon the completion of their incarceration, non-compliant driver’s licenses for individuals regardless of their immigration standards, free school lunches and breakfasts for every Minnesota student and an overhaul of many Minnesota election laws.

While the 2023 Session started as a sprint, DFL Leaders and Governor Walz included many of their remaining DFL priorities in the Omnibus Budget and Policy bills passed in the last days of the 2023 Legislative Session. Governor Walz and the DFL led legislature grew the state’s budget by nearly 40 percent, going from $52 billion to more than $72 billion for the next biennium. The budget consumes the nearly $18 billion budget surplus, and raises taxes and fees by more than $10 billion over the next four years. The budget also increases the size of the state government by adding more than 1,000 new full-time employees.

Here are a few of the omnibus budget bills and provisions of interest.

Housing – The Housing bill invests nearly $1 billion over the next two years to support housing development, rental assistant and first-time home buyer programs. The bill also includes a new .25% metro-wide sales tax to provide support for housing vouchers and aids.

Transportation – The transportation agreement provides nearly $10 billion for investments in transportation and transit projects. The legislation includes new funding sources and tax increases. The proposal will allow the gas tax to increase annually by tying the increase to the rate of inflation. The bill raises motor vehicle taxes, tab fees and creates a new $.50 fee on deliveries over $100. Transit will also have a new funding source with a new .75% metro-wide sales tax.

Public Safety – The Public Safety bill included two DFL proposals regarding the regulation of firearms. The bill establishes a new red-flag law and expands background checks for gun transfers and purchases.

Taxes – The Tax bill provides one-time rebates of $260 to some Minnesotans and creates a new credit for low-income families. However, like many of the other budget bills, the tax bill features nearly $2.6 billion in new and expanded taxes. The tax bill generated the revenue necessary to support new spending by targeting corporations and high-income individuals. Minnesota corporations will now have to include GILTI (global intangible low-taxed income) which was part of the 2017 Federal Tax Cuts and Jobs Act. However, Minnesota will exceed other states’ use of GILTI. The bill also adds a 1% tax, on top of the 9.85% top-tier rate, on net investment income above $1 million. The net investment income includes interest, dividends, royalties and other types of gains. The new tax does provide an exclusion on gains derived from a trade, business or agricultural land sale.

Jobs & Economic Development – The Jobs bill provides millions of dollars in new job training funding for non-profits and trade associations. In addition to providing funding for traditional Explore Minnesota Tourism programing, the bill sends $11 million in new money to EMT to create a business marketing program to attract employers and employees to Minnesota. The Jobs bill also contains several new business labor mandates. The bill creates a new Safe and Sick program, like the local ordinances adopted by the cities of Minneapolis, St. Paul, Bloomington and Duluth. However, the new state program does not pre-empt any of the local ordinances. Businesses operating in those cities will need to maintain records to meet both the new state law and local ordinances. The Safe and Sick program will require employers to provide 1 hour of paid leave for every 30 hours worked, with a max of 48 hours accrued in a year. An employee will be allowed to carry over unused time, however an employee can never accrue more than 80 hours. The new Safe and Sick Time proposal will go into effect on January 1, 2024. In addition to the Safe and Sick Time language, the Jobs bill also included a prohibition on the use of non-compete agreements and captive audience meetings.

Health & Human Services – The Health bill is typically one of the largest, most complicated and last bills to be wrapped up. This year’s bill was no exception. The nearly 900-page bill was posted a little before midnight Sunday. The conference committee met for a little over an hour on the last day of the session to adopt the final agreement and send the bill to the floor. The proposal spends $9.38 billion, with $1.78 billion in new spending. The bill includes language seeking an actuarial and economic analysis for the implementation of a public buy-in option for MinnesotaCare. The bill includes money for a study examining the cost and benefits of a universal healthcare financing system and an implementation plan for a direct payment system for medical assistance and MinnesotaCare. The bill authors hope the changes to the direct payment system will start the process of de-privatizing public health care programs.

The “DFL Trifecta” also passed two of their remaining legislative priorities, in the final days of the Legislative Session, as stand-alone bills. A new Paid Family Medical Leave Program along with the legalization of recreational cannabis.

House File 2 creates a new Paid Family Medical Leave program for most Minnesota workers. In the House, two members of the DFL Caucus broke ranks and joined the entire GOP Caucus in voting against the proposal. The program will be funded by a new payroll tax, which can be equally shared between employers and employees. Here are a few of the major components of the final agreement.

Length of Leave 20 weeks (12 medical, family, bonding, 8 for other reasons)
Date of implementation January 1, 2026
Payroll Tax 0.7% year one, capped at 1.2%, tax starts 1/1/26

Minnesota will join 23 other states who have legalized recreational cannabis. While the legislation has primarily been a DFL priority, the final proposal received bi-partisan support. The legislation would allow an individual 21 years of age and older to possess up to two-pounds of cannabis in their home and two-ounces in public. Public smoking or vaping of cannabis would be regulated in the same manner as tobacco is regulated under Minnesota’s Clean Indoor Air Act.

The proposal establishes numerous categories of licensing for growing, selling, transporting and testing of cannabis. An Office of Cannabis Management is created and charged with regulating cannabis and implementing the program. Cannabis will be taxed at the retail level at a rate of 10%, this is in addition to the state’s 6.875% sales tax and any other local option sales tax. The revenue generated from sales will be used to fund programs addressing cannabis abuse and for grants to assist individuals who wish to enter the cannabis market. Another major provision in the legislation is the expungement of criminal records related to certain low-level marijuana offenses. While it will take more than a year for most of the legislation to be implemented, the possession of cannabis will be allowed in Minnesota on August 1st of this year.

In the final hours of the 2023 Session some bipartisan agreements were reached between the Walz Administration, and the four legislative caucuses. Those agreements allowed for the passage of a large bonding bill, a cash only capital projects proposal, $300 million in additional funding for nursing homes and legislation sought by the Minnesota Nurses Union to address nurse and patient safety. One additional piece of legislation adopted over the weekend seeks to regulate the relationship between Uber, Lyft and their drivers. Uber and Lyft are considering leaving the Minnesota market if the legislation is signed into law. Governor Walz expressed reservations about the proposal. If the Governor were to veto the legislation, it would be the first veto he has ever issued.

The 2023 Legislative Session will be remembered for the deep partisan divides and lack of much bipartisan agreement. This session expands the size of government, creates numerous new mandates on Minnesota’s businesses and may jeopardize Minnesota’s ability to attract and retain new business investment.