The 2021 legislative session officially ended today. To no one’s surprise, the Legislature did not complete its work by today’s deadline. As a result, a special session is needed to pass a new two-year state budget and (hopefully) avoid a state government shutdown. For more on our thoughts on the end of the regular session, please see this media statement from CGMC President Greg Zylka.

Although the Legislature did not meet its May 17 deadline, there has been some progress in the past few days. This morning, Gov. Tim Walz, House Speaker Melissa Hortman and Majority Leader Paul Gazelka announced an agreement on budget targets for the next biennium. The leaders indicated that the agreement represents a true spirit of compromise and respects the priorities of the Governor, House DFLers and Senate Republicans. It includes new funding for education (a DFL priority) and balances the budget without tax increases (a GOP priority). The agreement also includes full conformity with the federal government on taxing PPP loans and unemployment insurance benefits.

The agreement appears to spend most of the state’s current $1.6 billion surplus, as well just over $1 billion of the $2.8 billion heading to Minnesota through the federal American Rescue Plan (ARP). An additional $500 million of the state’s ARP are reserved for the Governor to allocate to pandemic response, including summer school programs. The leaders said they plan to determine how to spend the remainder of the state’s ARP funds, approximately $1.2 billion, during the 2022 session.

It is now up to the individual conference committees to hammer out the specific spending details in the various budget areas. The global agreement stipulates that committees must finalize their spending plans by May 28 and complete bill language by June 4. It is unclear when the Legislature will officially convene for a special session, but they are expected to go back into session by June 14 to vote on extending the Governor’s emergency powers. There is some speculation that the Legislature will vote on the budget bills then, but it is possible that a special session may be called earlier if the bills are ready.

Another unknown is whether there will be a bonding bill this year. The global agreement did not include bonding, and legislative leaders said today that “the conversations haven’t really started” about the size of that bill.

It also remains unclear to what extent the public will be involved in the legislative process over the coming weeks. It is possible that final spending decisions and bills could be negotiated in private by committee chairs, with little or no input from the public or even other legislators.

As the budget process continues over the next several weeks, CGMC will continue to push to ensure that our perspective and priorities are reflected in the state budget and any potential bonding bill.

Where do CGMC priorities stand?

Today’s announcement of an agreement on budget targets means that conference committees can finally get to work allocating state funding to specific programs. So what does that mean for CGMC priorities like Local Government Aid, child care, waster infrastructure and transportation? This chart outlines the CGMC’s goals and where the Governor, House and Senate currently stand on them.

However, it is important to note that the amounts listed on the chart were established before today’s budget agreement was announced, when any possibilities for spending was still speculative. Please read on for more details on how things are shaping up for CGMC priorities heading into the special session.

Local Government Aid

At the beginning of the pandemic — when the state’s fiscal situation looked potentially dire — there was significant concern about Local Government Aid. CGMC made clear that under no circumstances should LGA be cut. With the positive state budget forecast and significant funding coming from the federal government, we are pleased to report that LGA is safe this year. The only LGA provision currently being discussed at the Legislature is a Senate position under which cities that would otherwise see a reduction in LGA next year (due to the current formula) would be held harmless in 2022 only. This would help 96 cities across the state, including several CGMC members.

Water and Wastewater Infrastructure Funding

The global budget agreement did not make clear if there will be a bonding bill, and if so, what will be in it. CGMC is advocating for $100 million in funding for the Public Facilities Authority (PFA) for wastewater and drinking water infrastructure grant programs. The legislative leaders have indicated that a bonding bill could be in play this special session, but they have not had a conversation about size.

It is also possible that some of the federal funds from the American Recovery Plan could be used for the PFA infrastructure programs, but it is uncertain when or how those funds will be allocated. The global budget agreement contemplates that some decisions regarding those funds will not be made until the 2022 session, but we are still working to find out if any funds will be allocated sooner.  

Municipal PFAS Source Reduction Initiative

CGMC is seeking $500,000 for a new municipal PFAS source reduction initiative. However, progress on this and other environmental initiatives has been held up by a partisan dispute over the clean cars rules. Unlike most other conference committees, the Environment and Natural Resources Conference Committee has not discussed or adopted any policy or finance provisions. Senate Chair Bill Ingebrigtsen remains firm in his position that the House must accept a two-year delay in the implementation of the clean car rules before the Senate will discuss any other portion of the environmental bill. 

The global agreement includes $30 million for the environment budget, but the Governor and legislative leaders did not make any agreement on how that should be spent nor did they provide any guidance on how to resolve the clean car rules issue. Thus, we do not know whether the $500,000 for the municipal PFAS source reduction strategy will advance. We remain hopeful because there are versions of the proposal in both the House and Senate bills.

Child care

Child care is a complex issue at the Capitol given the number of committees that control different aspects of it. The Health & Human Services Committee oversees funding for programs like the Child Care Assistance Program and industry regulations. The K-12 Committee oversees early learning scholarships, which are tied to the state’s quality program, Parent Aware. The Jobs Committee has jurisdiction over the majority of the CGMC’s child care agenda, which includes funding for the Minnesota Initiative Foundations and child care facility grants. But the facility grants can also be funded through the Capital Investment Committee. On top of this, the state received more than $520 million in federal money to invest in our child care sector, which has to be appropriated through the Human Services Committees.

The CGMC is seeking a total of $14 million for child care grants to the six Initiative Foundations and the child care program administered through DEED, as well as funding for a new child care facilities grant program. The House Jobs Committee included $10 million for the DEED Child Care Grant program and $2 million for the MIFs in its omnibus bill, while the Senate Jobs Committee included $3 million for the MIFs. In addition, the Senate’s plan for spending the $520 million in federal child care money appropriates $20 million to the Department of Human Services for grants with similar structure to the DEED and MIF grants, with 60% of the grants dedicated to projects in Greater Minnesota.

The House included $5 million for the Greater Minnesota Child Care Facilities grant program in its bonding bill (the Senate has yet to unveil its own version of the bill). If a bonding bill comes together for the June special session, that is where we will likely see funding made available for this initiative.   
 
Housing

CGMC’s housing agenda focuses primarily on efforts to support the construction of new workforce housing that is not tied to income restrictions. The Governor’s budget included an additional $2 million for the Greater Minnesota Workforce Housing program. Unfortunately, the House’s budget focused new investment exclusively on statewide programs, and the Senate had no new housing money in its budget proposal. With Monday’s announcement of only $10 million in new housing spending, we are not likely to see any strategic investment targeted at Greater Minnesota’s workforce housing problem. Instead, the money will likely end up going to one of the existing statewide housing programs.

BDPI

The Greater Minnesota Business Development Public Infrastructure (BDPI) Grant Program receives the bulk of its funding through state bonding, but for several years CGMC has successfully advocated for injections of general fund cash into the program as well. In the budget agreement that emerged today, the BDPI program appears well-positioned to receive more than $3.5 million in general funds over the 22-23 biennium through the jobs omnibus bill. While the details of the jobs bill still need to be worked out, the funding amounts in the Senate and House versions of the bill were identical, and the Jobs Conference Committee’s budget target suggests there is more than enough money for this funding to be included in the final bill.

CGMC will also be advocating for BDPI to be included in any bonding discussions that occur heading into the June special session.

Transportation

Today’s global budget agreement included $200 million in additional funding for transportation over the 2022-23 biennium, with just $15 million of that funding carrying over into 2024-25. While we await details of the funding bills, these dollar amounts suggest is that the deal struck by legislative leaders and the Governor do not include significant, dedicated increases in transportation revenues such as the gas tax or tab fees. Instead, the large chunk of spending in the next two years suggests that the agreement includes a lot of one-time infrastructure spending.

These figures imply that key investments in small-city streets, Municipal Street Aid and Corridors of Commerce may not be as robust as they were in the individual House and Senate transportation bills. As members will recall, CGMC celebrated that both the House and Senate bills included dedicated, sustainable funding for both small and larger cities, but the money to make those investments is heavily dependent on other moving pieces in each of the budget bills. We remain hopeful that city streets will at least see a short-term boost in the final budget deal.

Stay tuned …

The CGMC will continue to advocate for our key priorities and follow all the activities and developments at the Capitol over the next few weeks and into the anticipated special session. For updates, continue to read the CGMC in Brief e-newsletter and follow us on Twitter (@greatermncities) and Facebook (@greatermncities).