Early morning of June 10th, the Minnesota Senate adjourned, ended the Special Session and concluded their work on the budget for the upcoming 2026-2027 biennium. The roughly $66 billion budget represents a reduction in the budget passed in 2023 and addresses nearly half of the projected $5 billion structural deficit in the 2028-2029 budget. Interestingly, it took three additional weeks to pass the comprehensive budget agreement, roughly the same amount of time members of the House DFL boycotted and failed to appear in St. Paul at the start of the legislative session.
While the budget proposal does make cuts, it also increases revenues by raising the tax on the yet to be opened cannabis market from 10% to 15% and cancels a sales tax exemption on energy purchased by data centers. The budget also increases numerous fees on businesses and individuals. While there are cuts to several programs, according to information provided by the Minnesota Senate GOP the budget also provides nearly $770 million in increased revenue to state agencies.
The original agreement between legislative leaders and the Governor to pass the outstanding 15 budget and policy related bills in less than 24-hours seemed like an impossible task. In the end the House took just over 12 hours and adjourned around 10:30 pm, the Senate took a bit longer and completed their work around 2am. The House started the day by debating the proposal to eliminate state supported healthcare coverage for undocumented adults. That debate was lengthy and suggested the time allotted for passing the collection of budget bills may fall woefully short. The bill passed the House on a vote of 68-65, with DFL Speaker-Emeritus Hortman providing the final vote necessary to pass the bill. In the Senate, the debate was also long, however unlike in the House where Rep. Hortman was the lone DFL vote for the bill, Majority Leader Murphy was joined by DFL Senators Rest, Kupec and Hauschild and the bill passed 37-30.
Both Leaders Hortman and Murphy called the vote gut wrenching but acknowledged they had agreed to the provision as part of the session ending negotiations. The Senate votes by additional members of the DFL Senate show a strong commitment by Senator Rest to support her leader and the agreements the leader had to make. The votes by Hauschild and Kupec were more likely related to their political futures and the recognition of the challenges they will be facing in the 2026 election. Most of the remaining budget bills passed both bodies with bi-partisan support.
Legislators and the Administration will now begin implementing the new budget, while also closely monitoring what happens in Washington. It seems highly likely the legislature will need to return in the fall to address any impacts federal changes have on the state budget, to bring the budget back into balance and change existing laws to match any new federal requirements.
In the end, the 2025 Session will certainly be one for the record books. It is hard to keep track of all the drama that took place in St. Paul this year. Here are just a few of the highlights.
- The Senate started with a tie following the death of Senator Kari Dziedzic
- The 2024 Elections resulted with a tie in the House, until one newly elected member of the DFL was found to not live in the district he was elected from, resulting in a short-term GOP Majority.
- The DFL Boycotting for nearly three-weeks the start of the 2025 Session.
- The House GOP winning a decision by the Supreme Court regarding the timing of Governor Walz’s call for the House Special Election, delaying that election by months.
- The House DFL winning a decision by the Minnesota Supreme Court clarifying what constitutes a quorum and nullifying the GOP’s start of the 2025 Session.
- Numerous Special Elections in both bodies
- A member of the Minnesota Senate being arrested and charged with federal crimes related to the solicitation of a minor, and resigning his seat before being removed by a full vote of the Senate.
One additional highlight from the just completed Special Session involves are very own Buck Humphrey. Legislation adopted yesterday provides money to replace one of the two Minnesota statutes in Statuary Hall in the Nation’s Capital. A replica of a statue located on the grounds of the Minnesota Capitol of Buck’s grandfather, former U.S. Senator and Vice President Hubert Humphrey, will now also be in Statuary Hall. A recognition of not only his grandfather’s legacy of leadership, but also of the entire Humphrey Family. Join us in recognizing this tremendous honor.
Transportation Omnibus
EV Regulations and Fees
- Eliminates a hold harmless requirement for the surcharge on all-electric vehicles, so that increases are not limited based on prior registration and surcharge amounts imposed for the vehicle. Effective for surcharges on or after January 1, 2026.
- Modifies the surcharge on electric vehicles, to shift to surcharge calculation based on the manufacturer’s suggested retail price with a declining rate (matching the schedule for the registration tax). Sets a minimum flat amount that begins at $150 and then adjusts to $100 on and after Juily 1, 2027. Effective for registrations on or after January 1, 2026.
- Establishes a surcharge on plug-in hybrid electric vehicles, calculated based on the manufacturer’s suggested retail price with a declining rate (matching the schedule for the registration tax). Sets a minimum flat amount that starts at $75 and then adjusts to $50 on and after Juily 1, 2027. Effective for registrations on or after January 1, 2026.
- Beginning July 1, 2027, imposes a tax on a public charging station operator for electricity sold as vehicle fuel at a public charging station. The rate is five cents per kilowatt hour of electricity sold. Sets requirements, specifies exemptions, and directs deposit of the revenue into the Highway User Tax Distribution (HUTD) Fund.
- Directs creation of an Electricity as Vehicle Fuel Working Group. Specifies membership and appointments, identifies duties, provides for working group administration and support, and requires a legislative report by February 13, 2026. Effective the day after enactment.
Modifications Related to the Retail Delivery Fees related to certain fuel deliveries
- Defines “fuel products” for the chapter of state statutes governing the retail delivery fee.
- Adds an exemption from the retail delivery fee for delivery following a sale of (1) some liquefied fuel products that are subject to the state general sales tax when sold, and (2) road construction materials.
State Government Omnibus
Modifications to Lottery Operations
- Defines “responsible lottery official” to mean an officer, director or owner of an organization, firm, partnership, or corporation that have oversight of lottery ticket sales.
- Clarifies how certain restrictions on who can be a lottery retailer apply to organizations, firms, partnerships, or corporations, by making restrictions applicable to an officer, director, or owner who has oversight of lottery ticket sales. Eliminates obsolete provisions.
- Authorizes the Bureau of Criminal Apprehension to conduct a Minnesota criminal history records check on an applicant to be a lottery retailer, at the request of the director and after receiving a consent from the applicant their fingerprints, and required fee. The director of the lottery must obtain a Minnesota and national criminal history check for a sole proprietor or responsible lottery official who has not undergone a check within the past seven years or has had a lapse in its contract to sell lottery tickets.
- Clarifies and distinguishes sole proprietors from business organizations, in setting restrictions on who can contract to be a lottery retailer.
Jobs Omnibus
Modifications to breaks
- Specifies fifteen minutes as the amount of time that an employee is entitled to take as a rest break every four hours. Currently, the rest break requirement is stated as “adequate time.”
- Specifies at least a 30-minute meal break be provided by employers for every six consecutive hours worked. Currently, the meal break requirement is stated as “sufficient time.”
Modifications to Safe & Sick Time Laws
- Allows employers to require notification of the need to use ESST by an employee that is unforeseeable as that is “reasonably required by the employer,” instead of the current “as soon as practicable” allowance for employees.
- Allows an employer to request reasonable documentation of the need for an employee to use ESST after two consecutive scheduled work days of an employee’s use of ESST. The current law allows an employee to request this documentation after three consecutive scheduled work days.
- Provides clarifying permissive language to allow an employee to voluntarily seek or trade shifts with a replacement worker to cover the hours the employee uses as earned sick and safe time.
- Adds new clarifying language regarding an employer’s ability to advance ESST based on the number of hours an employee is anticipated to work. The new language also requires an employer to make up any difference in what would have been accrued based on the actual hours worked. This section has an effective date of January 1, 2026.
Paid Family Medical Leave
- Reduces the cap on the PFML tax from 1.2% to 1.1%
What did not happen
- Proposed Increases in the Minimum Wage to $20/hour
- Governor Walz’s proposal to expand the sales tax to services – legal services, financial services and accounting
- No new regulations of tobacco – flavor bans, product bans
- No adoption of zero emissions proposals
- No new towing regulations
- No increases in corporate or individual income tax
- No business-friendly reforms to the Paid Family Medical Leave Program
Alcohol Modernization Coalition (Red, White 7 Brew Coalition)
- Continues to meet every month. Before the 2025 Session, Senator/Chair Klein told the coalition there would not be an opportunity to repeal 3.2 beer and allow C-stores and Grocery stores the opportunity to sell full strength beer. Coalition working hard this summer to get a bill introduced in the 2026 Session.
Todd A. Hill
President
HillCapitolStrategies.com