February 27: Minnesota Management and Budget issued the forecast which the Governor and Legislature would use as the guide to making their taxing and spending decisions for the remainder of the session. The forecast showed a small increase in the expected surplus of $181 million dollars, for a total surplus of $1.53 billion for the FY 2020-21 biennium. Link to February Forecast Documents. The forecast summary stated:

  • Minnesota’s budget and economic outlook remain stable. As in November, the economic outlook is stable but a slowdown remains in the forecast. The small budgetary improvement continues into the next biennium and the structural balance is improved, but budget challenges remain.
  • IHS expects temporary and modest impacts on the US economy from COVID-19. Therefore, they do not include adjustment to the February outlook for disruptions caused by the disease.

March 12: Three weeks later, the Legislature cancelled in-person committee hearings.
March 13: Governor Walz declared a peace time emergency.
March 15: Governor Walz closed the schools.
March 16: Governor Walz closed all bars and restaurants.
March 19: Governor Walz prohibited all elective surgeries.
March 25: Governor Walz issues “Stay at Home” order to April 14.
April 8: Governor Walz issues “Stay at Home” order to May 4.

Thus, in just under four weeks, the state government, and the population at large, went from believing that COVID-19 was something akin to the Ebola virus, to understanding that this virus was something far more threatening in every possible way.

Since mid-March, approximately 350,000 people have filed for unemployment insurance. That represents 11.4% of the labor force, and in this four-week period more people than filed all last year. The February forecast indicated that the United States GDP would grow by 2.1%; the most recent estimates indicate that it will be a negative 4.5%.

Legislative Action

The legislature relatively quickly established ground rules on what items could be brought to the floor for a vote: only legislation that has been agreed to by all four caucus leaders and the Governor. Thus, the bar is very high. Additionally, rule changes were implemented in each body to allow for remote voting on the floor and in committees.

In general, the legislature is currently only considering legislation that is COVID-related. However, legislative leaders have indicated that they will also consider non-controversial legislation that is agreeable to all. One example of that type of legislation is an insulin bill that has been a source of friction since the 2019 session, where agreement was reached today. It will likely be voted on this coming Tuesday.

March 16: First COVID Bill – $200 million. On the Monday after the Governor had declared a peacetime emergency, the legislature met and passed a bill to provide $200 million essentially for health care providers in need of support to fight COVID-19. Link to Story on Legislation; Link to Bill Summary

March 26: Second COVID Bill – $330 million. The legislature approved $330 million for a variety of items, including grants for small business loans and funding for food shelves. The largest item was an appropriation of $200 million for the Commissioner of Management and Budget to disperse “to state agencies as necessary to (1) protect Minnesotans from the COVID-19 outbreak, and (2) maintain state government operations throughout the duration of the peacetime emergency.” The legislation also included a number of policy changes to allow for increased flexibility for licensing issues that had specific timelines or licenses that were to expire. Link to Bill Summary

The Legislature has also met to address workers compensation for first responders impacted by COVID, and are expected to act on additional non-financial issues in the coming weeks.

Federal Action

On March 27, Congress passed a $2 trillion+ relief package, in what is the biggest economic rescue package in American history. For comparison, the stimulus package passed under President Obama was $831 billion. The legislation included the following:

  • $150 billion to state and local governments. Each state receives at least $1.25 billion
  • $58 billion to airlines
  • $10 billion to airports
  • $100 billion to hospitals
  • $500 billion in loan guarantees

Real ID Deadline – The deadline to obtain a Real ID was extended until September 2021.

Local Units of Government – Of the $150 billion appropriated to state and local governments, Minnesota is expected to receive $2.187 billion. Of this amount, $1.8 billion goes directly to the state and $317 million goes to Hennepin and Ramsey Counties. MMB Commissioner Myron Frans has indicated that he expects more federal guidance for these dollars by April 14, and expects the dollars to be available by April 24. The current guidance is that these dollars can only be used for: 1) expenditure incurred as a result of COVID-19; 2) expenses that were not accounted for in the current budget; and 3) expenses that were incurred between March 1, and December 30, 2020.

Airports – Of the dollars appropriated to Airports, the Minneapolis-St. Paul Airport expects to receive approximately $100 million. Currently, the Airport is operating at about 5% of normal passengers. All revenues are off a minimum of 90%. The attached link is to a TSA site that shows a comparison of air travelers by day from 2019 to 2010. It is stunning. TSA 2020-2019 Comparison

Walz Administration

Since declaring the peacetime emergency, Governor Walz and cabinet members have had daily press conferences, which generally consist of Gov. Walz announcing any new executive orders and projecting command and optimism, very much like the coach he was in the past. Additionally, Health Commissioner Malcolm provides grim statistics as to the virus’ progress, Employment and Economic Development Commissioner Grove discusses unemployment statistics, and others provide relevant information.

The Administration has created a variety of links, which include:

Dashboard link – Department of Health link describing the virus’ progress and includes PPE, medical supplies, hospital capacity, more.

Executive Orders – New EOs may take several hours to be posted following announcement.

Modified List of Critical Sectors – Evolving list of industries that are exempt from the “Stay at Home” order. These employees should stay at home, but are not required to do so. This list has been updated several times.

On Sunday, April 5, the Governor gave a very short State of the State from the Governor’s Residence that essentially was an exhortation that we would get through this. He used the analogy that we are in a winter; that we had been through hard winters, but spring would come.

On Wednesday, April 8, the Governor extended the “Stay at Home” order to May 4. Governor’s press release; full text of the executive order.

Other Legislative Issues

Bonding Bill. All legislative leaders continue to indicate that there will be a bonding bill. However, there are a variety of considerations. On one hand, some argue that interest rates are very low, and we should borrow to help people to work, and thus the bonding bill should be robust. On the other hand, others argue that our finances are a mess as a result of COVID-19, and we should be very cautious about incurring debt. Most continue to believe that some sort of bonding bill will occur. However, it will occur very close to the end of the legislative session: May 18.

Tax Bill. The session started with Governor Walz and the Democrats stating that despite projected surpluses, a tax bill was not necessary. Republicans, by contrast, were pushing for a tax bill with tax reductions. While most still believe a tax bill will occur, it will likely neither contain any tax relief, nor provide local governments with any additional local government aid. All recognize that tax revenues will be significantly decreased and could be for some time.

Legislators are talking about tax provisions that may help businesses and state governments without spending state resources. Additionally, any items that do not have any fiscal impact may be considered. In the coming weeks, changes being considered include:

  • Delaying quarterly estimated payments for 2020 income tax year
  • Extending February and March sales tax deadlines
  • Delaying May 15 statewide business property tax and local property tax

The Legislature will continue discussing other tax issues as well, including potential conformity with provisions in the federal CARES Act.

April 9, 2020