With only three weeks until the first legislative deadline, higher profile legislative initiatives have started moving through committees and, in some cases, been voted on by the full House or Senate. Next Friday, February 26, the long-awaited February forecast will be released at 2:00 p.m. The legislature must base the budget on the February forecast.

Adult Use Cannabis

The House committee on Commerce Finance and Policy advanced H.F. 600 (Rep. Ryan Winkler, DFL-Golden Valley) on a party-line vote to the next committee. The bill seeks to legalize recreational marijuana use for adults aged 21 and older. While similar bills have been introduced in the past, this is the first time a recreational cannabis bill has cleared a committee in Minnesota. The Senate is unlikely to take up the legislation.

Competing Proposals

Since the death of George Floyd last summer, and the civil unrest that followed, Minnesota elected officials have debated how best to respond to future situations. With the upcoming trial of Derek Chauvin scheduled to start in a few weeks, such discussions have an urgency behind them. On Monday, the Senate passed a bill that would reduce Local Government Aid payments from the state to jurisdictions that have unpaid mutual aid obligations. Also on Monday, the House was expected to take up a bill that would have provided $35 million for anticipated public safety funding needs leading up to, during and after the trial. The bill was pulled from consideration at the last minute due to lack of support. The bill was considered on Thursday, and failed after several D.F.L. representatives from Minneapolis and St. Paul joined the Republicans in opposing the measure.

Court Deadline Update

Last spring, due to the pandemic, Minnesota passed a law extending certain court deadlines and statutes of limitation. That provision was set to expire on February 15. H.F. 114 (Rep. Kelly Moller, DFL-Shoreview) extends that date to April 15, 2021, and was signed into law on February 12.

Paycheck Protection Tax Conformity

House Tax Chair Paul Marquart, DFL-Dilworth, presented a bill in his committee earlier this week that would provide tax relief to businesses that participated in the federal Paycheck Protection Program by conforming Minnesota to federal law. Following adoption of a delete-all amendment, the bill, H.F. 501, was laid over for possible inclusion in the omnibus bill.

COVID-related Announcements

This week, Governor Tim Walz’s administration made news with two announcements. On Wednesday, they announced that all middle schools and high schools could resume at least part-time in-person learning within the next month. On Thursday, the administration announced the launch of the Minnesota COVID-19 Vaccine Connector, where any Minnesotan aged 18 and older can sign up for vaccine information. After submitting their data, individuals are to be notified when they are eligible to receive the vaccine, and provided with possible options for where to obtain the vaccine.

During a frigid week in Minnesota, partisan rhetoric is beginning to heat up. Committees are continuing to hear more bills, and Republicans continue to push Governor Tim Walz to further “open up” business and schools in Minnesota.

Budget Cue

This week saw a continuation of positive state budget news. With January revenues in the books, Fiscal Year 2021 revenues are now $459 million more than what was estimated in the November Forecast. Individual income, sales and corporate taxes each beat expectations. With the upcoming February forecast, which legislators use to set the next biennial budget, being released in early March, this news should be a preface to an improving budget outlook.

Turning the Dials?

Republicans and the hospitality industry have been putting pressure on Governor Tim Walz to adjust the dials on COVID-19 restrictions on businesses. Republicans would like to provide businesses, including restaurants and event centers, with a specific date that they would be allowed to fully re-open, and have proposed May 1 as that date. Governor Walz has been hesitant to make changes, citing uncertainty due to the virus variants that have begun to circulate.

COVID Liability

Introduced earlier this month, S.F. 512, Sen. Michelle Benson (R-Ham Lake) / H.F. 571, Rep. Kelly Morrison (DFL-Deephaven), would shield hospitals, nursing homes and health care professionals from liability over health care decisions made due to the pandemic. The health care industry has been advocating for these protections since last spring, but significant resistance exists from consumer advocates. To date, the legislation has not had a hearing.

Clean Energy First

Legislation referred to as Clean Energy First, H.F. 10, Rep. Zack Stephenson, (DFL-Coon Rapids), which would require new electric generation to be replaced by renewable energy, was approved in the House Climate and Energy Finance and Policy Committee. Passed on a party-line vote in committee, the bill faces an uncertain future in the Senate.

Gazelka for Governor?

Senate Majority Leader Paul Gazelka (R-Nisswa) has long been rumored to be considering a run for governor in 2022. While being interviewed on the radio this week, he made his strongest statement yet about his thoughts on the issue, saying, “Well, I’m at least considering it. I did four years ago and felt like I would best serve the state as the leader of the Senate. I know that this budget cycle is really important for Minnesota. So I told people I’ll make some sort of decision this summer.”

As it begins its second month, the Minnesota Legislature seems to have kicked into high gear. Bills are being introduced and moving through committees at a faster rate, and both the House and Senate are highlighting priorities.

Senate Transition?

The Senate, which had said prior to the start of the legislative session that they would like to return to in-person legislating as soon as it was safe, will transition to hybrid hearings next week. When the hybrid hearings begin, some committee members, some staff, and a small number of viewers will be allowed to participate in person. Some committees will continue operating in a fully virtual format. Senate offices remain closed, except for scheduled appointments.

Responding to Events

Many of the bills being heard are directly responding to events that have occurred in the past year. Both the House and Senate have spent significant time debating how best to financially help communities that see civil unrest. Additionally, many hearings continue to focus on issues raised by the pandemic, such as a Senate hearing this week on a bill from Senator Carla Nelson (R-Rochester), S.F. 2, which would prevent the Governor from closing schools through the use of peacetime emergency powers.

Earned Safe and Sick Time

On Tuesday, the House Labor, Industry, Veterans and Military Affairs Finance and Policy committee held a hearing on H.F. 7, Rep. Liz Olson (DFL-Duluth). Dubbed the Earned Sick and Safe Time bill, it would require employers to provide at least one hour of paid time off for every 30 hours an employee works. Nearly a dozen people testified at the hearing, some expressing support, and others voicing concerns that the legislation was overly prescriptive and would lead to closure of some businesses. Because the committee was still awaiting the fiscal note, the bill was laid over and will be heard again when the fiscal note is completed.

Senate Committee Backs “Seniors First” Vaccination

The Senate committee on Aging and Long-Term Care, chaired by Senator Karin Housley (R-St. Mary’s Point), this week released its recommendation that seniors be prioritized for the COVID-19 vaccine. The committee’s recommendation is based on the fact that seniors are most at risk of dying due to the virus. During the same hearing, the Minnesota Department of Health explained that approximately 80,000 of the 500,000 Minnesotans in Phase 1a (health care workers and long-term care residents) remain to be vaccinated. Minnesota is currently vaccinating those aged 65 and over and educators. That pool of people is 1.1 million, and at the current rate of vaccination, it will take about 16 weeks to finish that group.

Dr. Michael Osterholm Warning

In the same week that Minnesota saw both its professional men’s and women’s hockey teams, the Wild and Whitecaps, sidelined by COVID, Dr. Michael Osterholm testified in a House committee. Dr. Osterholm is the Director of the Center for Infectious Disease Research and Policy at the University of Minnesota, and a member of President Joe Biden’s COVID-19 Advisory Board. He was asked by House Health Finance and Policy committee Chair Tina Liebling to provide an update on the pandemic, during which he stated that he believes “the darkest days of the pandemic are yet to come” due to the variants that are beginning to spread.

Minnesota’s new assisted living licensure is set to take effect August 1, 2021. In connection with the new statute, the Minnesota Department of Health has commenced the process for adopting assisted living rules. The current version of the proposed rules can be found here.

On January 19 and 20, Administrative Law Judge Ann O’Reilly heard testimony from various individuals and will take that testimony, as well as submitted written comments, into consideration. Transcripts of the testimony can be found here for the January 19 hearing and here for the January 20 hearing.

The public comment period closes on February 9, 2021. Interested parties are encouraged to submit any written comments on the rules through the Office of Administrative Hearing’s electronic portal. Instructions on using the Rulemaking eComments Website can be found here, and FAQs here.

As expected, the biggest news this week in Minnesota politics has been the release of Governor Tim Walz’s budget proposal. We’ve rounded up several other updates to give you a sense of what is going on in Minnesota and nationwide.

The Budget

Tuesday saw the release of the Walz administration’s initial budget proposal for the next two years. The fiscal year 2022-2023 budget proposal is $52.416 billion, with additional spending of $1.3 billion. Increased revenue would come from a new fifth tier income tax rate, along with capital gains, foreign income, corporate franchise and cigarette tax increases. These would be partially offset by expanding the first tier income tax bracket and the working family credit. For most committees, the latter half of the week was spent hearing department overviews of proposed budget changes.

Deadlines

The House and Senate this week announced agreement on legislative deadlines for the 2021 legislative session, as follows:

• March 12 – Committees must act favorably on bills in the house of origin
• March 19 – Committees must act favorably on bill, or companion bills, that met the first deadline in the other body
• April 9 – Committees must act favorably on major appropriation and finance bills

The deadlines do not apply to the appropriations, tax, capital investment and rules committees.

The Census and Redistricting

Typically, the United States Census would have announced enough information by the end of 2020 to determine the apportionment of congressional districts between the states. That deadline was missed, and it was announced this week that the information won’t be available until the end of April. Another batch of data, which includes detailed demographic information that states use in redistricting, is not expected to be available until August, months after it is usually available.

While the Minnesota legislature is tasked with re-drawing district lines, this delay means the information won’t be available until after the legislature adjourns its regular session for the year. Thus, the legislature would not be able to complete its duty until the legislature re-convenes in 2022 unless a special session is called.

Is Civil Unrest a Disaster?

Legislators debated this week whether or not a state disaster fund should be used for civil unrest. Following the extensive property damage in Minneapolis and St. Paul after the death of George Floyd, Gov. Walz tapped an existing disaster fund typically used for natural disasters to partially reimburse damages. Senate Republicans are advancing a bill that would expressly prohibit this in the future, with Sen. Julie Rosen (R-Fairmont) explaining, “I’ve heard over and over again from greater Minnesota, from my constituents: ‘Please do not pay for this out of our taxpayer dollars.’”

Vaccines

The Minnesota Department of Health has said that the state is set to see vaccine doses increase by 16% for the next several weeks. While more than 200,000 Minnesotans aged 65 or older signed up this week for a vaccine lottery, fewer than 5% of them will be able to get the vaccine in the next week. Expressing concern that the state isn’t adequately prioritizing those most at risk of death, the Senate Committee on Aging and Long-Term Care held a hearing this week urging for quicker vaccination of the 65+ population. The state has yet to give any indication of when they will provide guidance on vaccination efforts for essential workers outside of the healthcare and education sectors.

As the Minnesota Legislature wraps up its third week, a new normal is settling in. While technical difficulties still pepper committee hearings and legislator meetings, everyone is getting used to operating in a new way.  Here’s what is new and coming up at the Legislature:

Picking Up the Pace

Aside from taking place online, committee hearings are moving forward almost as usual. Many committees continue to hear overviews, while some have begun hearing bills. Not surprisingly, some committee chairs have commented on the lack of bills referred to their committee at this point, resulting from the continued backlog in the Revisor’s office and limited access to the Capitol grounds.

Broadband

One issue that unifies most in the Legislature is the need for continued broadband expansion throughout the state. While the COVID-19 pandemic has highlighted the lack of access for various parts of the state, questions still exist about the appropriate funding level and use of federal funds. A House committee held a hearing on H.F. 14, which would appropriate $120 million for the 2022-2023 biennium for broadband expansion. The committee plans to re-visit the issue later in session once more is known about federal funding opportunities.

Virtual Advocacy

Many organizations typically have a “day on the hill” for their grassroots members to communicate with their elected officials. With the Capitol and legislative office buildings largely closed to the public, many groups have opted for an online forum and are finding ways to effectively advocate for their cause in new ways. Winthrop & Weinstine has been helping clients to navigate this new space.

Governor’s Budget

As expected, Governor Tim Walz has announced that he will be releasing a detailed budget proposal for the next biennium on Tuesday, January 26. Either next month or early in March, the administration will update the proposal based on the February forecast. Following the release of the budget proposal next week, legislative finance committees will begin hearings on the proposals.

All is Quiet

A week ago, many were concerned about possible violent protests at state capitols. Thankfully, the inauguration of President Joe Biden has taken place without significant protests or violence. In Minnesota, only a handful of protesters gathered, and they did so peacefully.

The CARES Act Provider Relief Fund (PRF) Portal is now open for provider registration only.  Consistent with the applicable Terms and Conditions associated with the various PRF distribution phases, providers who received more than $10,000 in aggregate distributions must register in the Provider Relief Fund Reporting Portal here: https://prfreporting.hrsa.gov/s/

Currently, there is no deadline for registering and HHS states that recipients will receive notification at a later date regarding when they should report the required information on the use of funds.  Providers should have certain information at hand in order to complete the registration, which HHS states will take at least 20 minutes and must be completed in one session.

For additional information, access the Provider Relief Fund Reporting Portal User Guide – Registration and the PRF Reporting Portal FAQs.

Business as Usual, Kind Of

The Minnesota Legislature is back in business, but it isn’t business as usual. With nearly all staff and many legislators working remotely, much of the day-to-day work looks and feels different, but both the House and Senate say they are confident that they have processes in place to complete the Legislature’s work. Here’s a sampling of what’s up in St. Paul:

Committee Hearings

With dozens of hearings last week, both the House and Senate have been making good use of the expanded webcast channel offerings. Most hearings have been focused on introductions, broad issue overviews and COVID-19 updates. Schedules are available here for the House and here for the Senate.

Bill Introductions

After a very slow start, the pace of bill introductions is starting to pick up. So far this year, the House has introduced 133 bills, and the Senate a very comparable 135 bills. At this time in the previous biennium, the House had introduced 206 bills to the Senate’s 278. While appreciated by those who think too many bills are introduced, the slow pace is primarily attributable to a backlog in the Revisor’s office and the inability for lobbyists to walk around and actively participate in getting a bill introduced.

Budget News

Minnesota Management and Budget (MMB) released a positive January economic update. Net general fund receipts again exceeded expectations, and economic indicators also show a likelihood of higher than expected GDP. Long story short, the February forecast (which is the final economic projection that the Legislature will receive and will use for purposes of budgeting) is likely to improve over the previous November forecast, meaning the Legislature is likely to have greater flexibility in its budgeting decisions.

Inauguration

President-elect Joe Biden will be sworn into office later this week. Due to possible security threats for state capitols across the country, additional security was on-hand over the weekend, and will be throughout the week in St. Paul.

No Session Today

The Capitol and legislative office buildings are closed today in observance of Martin Luther King, Jr. Day. The rest of the week is expected to be much like last week, with many committees meeting and continuing primarily with overviews.

The Minnesota Legislative Session Begins…With a Whimper

The 2021 legislative session is off and running, but the ghosts of 2020 continue to linger. We began the legislative session in a similar way to how we were all sent home from the 2020 legislative session last March. We know we are moving forward, but it is virtual and completely unlike anything we have ever experienced, and with many things still unknown. With that in mind here are FIVE new things that are true today.

New Voting Technology

During the seven special sessions that took place in 2020, the House did not have many roll call votes, as in order to do so, they had to read the names of all 134 members (many of them twice as they missed the first time) and listen for their vote. This took a substantial amount of time. The House has now installed remote access voting, which requires fingerprint confirmation that the actual member is casting their own virtual vote. While this process is still slower than having everyone in the chamber, it is light-years faster than full voice roll call voting.

New Channels

Both the House and Senate have increased the number of channels they have available for providing live webcasts of hearings and floor sessions. This should allow for all (or nearly all) committee hearings to be broadcast live. House webcast and Senate webcast schedules are both available online, including many press conferences in addition to hearings and floor sessions.

Zoom Zoom

Remember the old Mazda commercials? Committee hearings and floor sessions will take place at least partly with Zoom in both the House and Senate. Both bodies have some members participating in-person on the floor, but most activity is taking place via Zoom. The Senate has indicated they would like to move to hybrid Zoom/in-person meetings within a few weeks, but the House is expected to maintain fully remote hearings for the foreseeable future.

No Public Access

For the time being, the public, including the lobbying community, is being asked to stay away from the Capitol grounds, including legislative offices. Not surprisingly, there is discussion of allowing some public access, but it is not without significant controversy. Concerns include who will decide who has access if it is limited and the fairness of allowing public access for those who brave it, while others must stay away due to health concerns.

Budget Date

This one isn’t really all that new, but it’s important. Governor Tim Walz’s proposed budget is expected to be announced on January 26.  There is increased optimism that state and local budgets may be improved by further federal action.

Following intense negotiations in Washington, Congress approved the latest federal stimulus package as part of the Consolidated Appropriations Act, 2021, and the President has signed the bill into law.  Included in the omnibus spending bill are modifications to the Paycheck Protection Program (“PPP”) under the title the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (the “Hard-Hit Small Businesses Act”). The legislation extends some of the stimulus measures enacted by the CARES Act and the Families First Coronavirus Relief Act, along with some new relief programs.  Some highlights:

• $284.45 billion for PPP loans, including:
  • $35 billion for borrowers that missed out on the first round;
  • A “second draw” of funding for eligible borrowers under modified rules; and
  • $40 billion reserved for small businesses with up to 10 employees or that are borrowing a maximum of $250k in low-income or moderate-income areas.
• $20 billion of additional funding for the EIDL program, including funds for EIDL advance grants.
• Extension to unemployment benefits through March 14, 2021 (new applicants) or April 5, 2021 (existing recipients) with $300 of supplemental payments per week.
• $600 direct tax credit for eligible persons, reduced by 5% for amount of income exceeding $75k individually or $150k if filing jointly.
• Payroll tax credit for COVID-19 sick or family leave has been extended to March 31, 2021.
• The SBA will make payments on existing SBA guaranteed loans (other than PPP Loans) for an additional 3 months, with a further 5 months (for a total of 8) for certain industries.
• Additional grant program for venues, theaters, museums, and talent representatives, with grant amount up to 45% of 2019 gross revenue.

This alert summarizes some key changes to the PPP included in the Hard-Hit Small Businesses Act, including changes affecting current PPP borrowers and those interested in the second draw.

I have already received a PPP loan.  What changes should I know about?

• As expected, Congress has overruled the IRS and permitted PPP borrowers to deduct expenses paid with PPP funds, or, if applicable, include in basis the amount spent with PPP funds.
• PPP loan forgiveness will not be reduced on account of a $10,000 EIDL advance grant.  If your loan forgiveness has already been reduced due to an EIDL advance, the SBA has been directed to issue guidance to confirm all borrowers receive “equal treatment.”  These grants will also be excluded from gross income.
• Borrowers may obtain forgiveness for funds spent on (in addition to payroll, mortgage, lease and utility expenses already qualifying) business software or cloud computing services, property damages from vandalism or looting not covered by insurance, purchases from essential suppliers, PPE, or other expenses to improve or adapt business in accordance with federal, state, or local rules or guidance (e.g., sneeze guards, ventilation systems, health screening, outdoor space).
• If your loan was for less than $150,000, the SBA has been directed to issue a new, one-page application for forgiveness.

What does the “second draw” of PPP funding look like?

• Am I eligible?   Eligibility will be similar to the first round of PPP funding, except as follows:
  • Borrowers may not have more than 300 employees, or, for hotels, casinos, restaurants or other businesses with an NAICS code starting with 72, not more than 300 employees per any physical location (which may exceed 300 in the aggregate).
  • Borrowers must demonstrate a decrease in revenue of at least 25% for any fiscal quarter in 2020, as compared to the corresponding fiscal quarter of 2019.
  • Ineligible entities include (i) publicly traded companies, (ii) businesses receiving the “shuttered venue operator grants”, (iii) businesses more than 20% owned or controlled by a member of the United States executive branch or Congress, or by a company formed or with substantial operations in China or Hong Kong, or (iv) businesses for which a resident of China serves on the Board of Directors.
  • If you missed out on the first round of PPP, you may be eligible for the first and the second draw of PPP funding.  The first round of PPP has been extended, with $35 billion of funds reserved for borrowers that have not yet received a PPP loan.  Borrowers on the first round will have until March 31, 2021, to spend loan funds.
• How much can I borrow?  Borrowers may borrow up to 2.5x the average monthly payroll (or for hotels, casinos and restaurants, 3.5x the average monthly payroll) during either (i) 2019, or (ii) the 1-year period prior to date of application. There is a new overall cap of $2,000,000 on the total loan amount for the second draw of PPP loans. The formula varies for seasonal operators.
• How will forgiveness work?  Forgiveness for the second draw of PPP loans will be similar to the first draw, with a streamlined application for borrowers with loan amounts of not more than $150,000.  Substantially all of the same rules and limitations applicable to forgiveness for the first draw will apply to the second draw, including the reduction to forgiveness if less than 60% of the PPP loan amount is applied to employee payroll costs.