The Minnesota Legislature adjourned the 2026 legislative session on May 18 after weeks of uncertainty surrounding the potential passage of bonding, taxes, and other budget bills. These major bills were passed in the final minutes of the session, and are now on their way to the Governor’s desk along with other legislation. Read on below for updates on how legislation in other policy areas played out.

Click here to view a list of bills passed during the 2026 legislative session.

Legislature breaks the cycle & passes a bonding bill during a bonding year

With less than ten minutes to spare, the Minnesota Legislature passed a $1.24 billion capital investment bill. Given that 2026 was considered a bonding year, the passage should not be surprising. Over the last decade, however, the Legislature failed to pass a bonding bill during the bonding sessions in 2016, 2020, 2022, and 2024. They did pass one in 2018, but much of the funding was challenged because of the way it was structured, and the bill needed to be rewritten and passed again in 2019. Thus, a huge sigh of relief was felt when the final votes were tabulated.

The voting margins were also remarkable. The Minnesota Constitution requires that bills that rely on general obligation bonds (G.O.) pass by a 60% majority, and they typically squeak by with a small margin. This year, the G.O. bill (H.F. 719), as amended, passed 122-11 in the House and 60-7 in the Senate—the widest margins any of us can remember. The cash bill (H.F. 2484), which required only a simple majority, passed by narrower margins, but still had plenty of votes: 96-39 in the House and 50-17 in the Senate.

The GO bill included funding for asset preservation at the University of Minnesota and Minnesota State, a plethora of local projects, and more than $400 million for water-related projects. The Business Development Public Infrastructure (BDPI) program was funded, but only at $2 million. The combined spreadsheet provides more details on the agencies and projects that received funding.

Mixed results for water infrastructure funding & lead line replacement

Funding for the Public Facilities Authority’s (PFA) water infrastructure programs has been a top CGMC priority for years, and we saw both success and disappointment in this year’s bills. The topline number for the PFA was $409 million, but only 1/3 of that went to PFA programs. The rest went to individual projects, including multiple CGMC member cities such as Alexandria, Ely, Eveleth, International Falls, Mountain Lake, Proctor, and Winona.

The PFA-specific program funds—including the Point Source Implementation Grant Program, which received $30 million, and the Water Infrastructure Funding Program, which received $56 million—benefit many of our members.

The biggest disappointment is the low number and the source of funds for lead line replacement. In 2023, the Legislature, on a bipartisan basis, committed to replacing all lead lines throughout Minnesota by 2033 and created a fund so that homeowners and cities would not need to pay the cost. It funded this program at $240 million, to be combined with additional funds the state received from the federal government. State funds will run out this year, and federal funds are not enough to cover the 2027 construction season. Despite a strong push from the CGMC and our partners—the 49ers, LIUNA, Conservation Minnesota, and Freshwater Alliance—the Legislature fell far short of the $150 million needed for a full construction season, with only $15 million being included. We are disappointed with these results and will continue to push for a dedicated funding source in future sessions so that Minnesota can meet its commitment to get the lead out of our state’s waters.

Session ends with city zoning powers intact

Another legislative session, another attempt to strip cities of their ability to balance residential, industrial, and commercial property uses in ways that protect health and safety, stabilize property values, and promote economic growth. Thankfully, those efforts failed.

For the third year in a row, the chairs of the Housing Committees in both the House and Senate worked with developers and other advocates on legislation that would preempt cities’ zoning authority in a ham-handed effort to promote housing construction. If the legislation had passed, all cities would have been required to eliminate residential design standards and allow Accessory Dwelling Units (ADUs) on all single-family lots. Cities over 5,000 in population would have had to allow townhomes or residential buildings with up to four units on 33% of the land zoned for single-family housing, shrink their minimum lot sizes for new development to 1/8 of an acre, and allow multifamily development in at least 33% of their commercially zoned land. Cities with populations over 10,000 would have had to adopt additional policies under a complicated formula aimed at restricting parking and promoting greater density.

The League of Minnesota Cities decided to take a “neutral stance” on the bill, while the CGMC and its members —along with Metro Cities and the Municipal Legislative Commission—continued to oppose the bill. Although changes had been made to the bill, the proposal still preempted local zoning authority without considering a city’s unique conditions. Moreover, the legislation failed to address the many challenges our cities face when trying to promote housing construction.

In the end, our efforts proved successful! The Senate never held a hearing on the “Starter Home Act,” and though it passed through one House committee, it stalled at its next stop. The proponents have vowed to bring the legislation back again next year. In the meantime, the CGMC will continue to advocate for real solutions to our housing crisis.

2026 Tax bill passes at 11th hour

A deal for the Omnibus Tax bill was reached last Sunday evening between the House and Senate tax committees just hours before the midnight deadline. The bill passed 126-8 in the House and 52-15 in the Senate before being sent to the Governor. The Senate Tax Committee had produced its tax bill a couple of weeks prior, but with a divided House, the Committee struggled to reach consensus. In the week leading up to the deadline, Chair Ann Rest of the Senate Tax Committee hosted two informal “discussion group” meetings with House legislators in the hopes that they could reconcile their differences. It’s unclear whether these meetings moved the House toward the final deal, but a deal was finally reached on Sunday.

What Made it Into the Tax Bill?

Federal Tax Conformity

The House and Senate deliberated on which components of the federal “Big Beautiful Tax Bill” that Minnesota would adopt and included in the bill:

  • Tax exclusions for capital gains in opportunity zones.
  • Expansion of the Dependent Care Credit.
  • Increase deductions for research and experimental expenditures.

Property Tax Relief

With a statewide spike in property taxes, the Legislature opted to provide homeowners with property tax relief by increasing homestead credit refunds on a one-time basis, appropriating $125 million from the general fund. Notably, this tax relief provision does not include funds for the renters’ credit, which had been a point of contention between DFL and GOP legislators in the House Tax Committee. The House DFL had previously opposed any property tax relief unless it included funding for the renters’ credit.

Other Highlights

The final tax bill also included a wide range of other tax provisions including:

  • Increasing tax credits for sustainable aviation fuel.
  • Creating a direct free tax filing system for state individual income taxes.
  • Updating TIF provisions for six municipalities.
  • Creating an ongoing school district seasonal tax base replacement aid program for districts with seasonal recreational property.
  • Appropriating $500,000 for a study concerning the future of nuclear energy generation in Minnesota.

What Didn’t Make It Into the Tax Bill?

While over 20 cities submitted bills and were considered for local sales tax authorization, none of those bills were included in the final Omnibus Tax bill. Since the local sales tax moratorium was lifted, cities have lined up to submit their local sales tax bills to the Legislature in order to fund large projects such as community centers, fire and police stations, and public works facilities. Absent any cities receiving authorization, the list of cities bidding for authorization in the next session is sure to increase.

Though the one-time property tax relief is sure to help homeowners in the coming year, it will not aid cities that have seen their costs swell in recent years. The total LGA appropriation will continue to be $644 million in 2027.

Duty disability addressed in pensions bill

Earlier this year, the Legislative Commission on Pensions and Retirement (LCPR) held a hearing on legislation that would have undone part of the reforms to the duty disability system that were passed and signed into law last year. Specifically, the bill (S.F. 4464) would have required employers to go back to paying for health insurance benefits for police and fire duty disability recipients with physical injuries until age 65, rather than the current 60 months. The proposal would not have applied to duty disability recipients whose disability was based solely on a psychological condition. The CGMC, the League of Minnesota Cities (LMC), and other local government groups voiced opposition to this in the LCPR.

Instead of backtracking on the previous reforms, the Legislature created a working group charged with making recommendations to the LCPR on a variety of duty disability-related issues by March 1, 2027. The legislation names a number of stakeholders for the work group, including a representative from the CGMC. The full legislative authorization for the work group, its charge, and its membership can be seen here.

Economic development end-of-session provisions

The House and Senate passed very different Omnibus Jobs bills this session, with the House bill creating some new programs and processes, and the Senate bill including the Department of Employment & Economic Development’s (DEED) policy fixes alongside some additional appropriations from the Workforce Development Fund. The Legislature chose to do neither.

The Chairs purportedly met to see if they could work out differences and move some shared ideas forward, but the Small Business Recovery Package was a significant stumbling block. The Small Business Recovery Package that passed in the Senate ran as a separate bill, and legislative leaders were intent on seeing it advance, but the proposal had attracted significant political headwinds. All of this worked against the passage of a Jobs Omnibus bill this session and prevented any small business recovery package from advancing. However, the bonding bill included a number of appropriations for key economic development programs, including:

  • $2 million Greater Minnesota Business Development Public Infrastructure grant program (BDPI)
  • $2 million Innovative Business Development Public Infrastructure grant program (IBDPI) 
  • $2 million Transportation Economic Development Infrastructure grant program (TEDI)  
  • $2 million DCYF early childhood facilities grants 

The Tax bill was also complicated to align for passage, and the final bill did include some federal tax conformity around Opportunity Zones and increased the dependent care credit. What it did not include was any changes to TIF or the State Housing Tax Credit that we have been advocating for to improve those programs for Greater Minnesota. 

As reported last week, the compromise Housing bill was passed in both the House and Senate and subsequently sent to the Governor, who signed it this week. The final bill makes key investments at a time when state finances are slim, but the legislators involved were united in a plan to tap two non-general-revenue sources of funding, including interest income that has accrued at Minnesota Housing and some settlement funding. Key appropriations and policy provisions in the bill include:

  • $100 million for housing infrastructure bonds (HIB)
  • $14.275 million for the Greater Minnesota Workforce Housing grant program
  • $38 million for Family Homeless Prevention and Assistance Program (FHPAP)
  • $150,000 for homebuyer education training
  • Policy language around agency reporting on fiscal balances and restrictions on interest spending

Tab fees reduction in bonding bill part of transportation wins

After some disagreement over the timing of implementation, the final agreement among leaders to end the legislative session included a one-time, temporary reduction in the registration tax on motor vehicles—commonly known as “tab fees”—for the calendar year 2027. The deal means that in 2027, when Minnesotans renew their tabs, they will pay the rates from 2022, prior to the 2023 increase. This would result in a $119 million impact on the Highway User Tax Distribution (HUTD) Fund in fiscal year 2027 and $135 million in fiscal year 2028.

However, the deal also includes a transfer of $254 million from the general fund to the HUTD Fund, so there is ultimately no net impact on the fund that pays for our roads and bridges. There’s also a transfer of $75 million from the Driver and Vehicle Services account to the general fund to partially mitigate the impact on the state’s bottom line.

According to Sen. John Jasinski, who was instrumental in striking the deal, this amounts to a $145 reduction in tab fees on a $50,000 vehicle. Vehicle owners will see a brief statement on their tab invoice informing them that, due to legislative action in 2026, their rate is temporarily reduced and that the difference between that amount and what it would have been if the reduction had not been applied.

No larger Transportation Omnibus bill was passed this session, so there were not many other items of note. None of the notable provisions or bills on things like e-bikes, autonomous vehicles, or utility relocation costs caused by trunk highway projects made it into law.

A few of the standalone transportation bills that did pass this session included changes to excavation notice reporting requirements (S.F. 4339) and legislation aimed at reducing bridge-related suicides by establishing best practices for implementing suicide reduction barriers (S.F. 2971).

Perhaps most importantly for cities in Greater Minnesota, the bonding bill contains $47 million for the Local Road Improvement Program and $25 million for the Local Bridge Replacement Program to help cities pay for local projects. When you add earmarked projects, the total for transportation projects in the bonding bill is $177 million.

Advocates did note their disappointment that there was no funding for transit projects included in the bill.