Road to Nowhere: A 2022 Minnesota legislative session recap

The wisdom of a balanced approach is evident in many areas of life. For example, there is a passage in the centuries-old Talmud that recommends keeping one-third of your wealth in business, one-third in land, and one-third in reserves. In its modern interpretation (maintaining equal amounts of stocks, bonds, and real estate), this ancient investing advice has been a durable and effective asset allocation strategy over long periods of time. Unfortunately, in a different context, the “a third, a third, and a third” template proved far less enduring this year at the state Capitol, where a historic budget surplus was not enough to bridge significant partisan differences. 

More money, more problems

When the 2022 Minnesota legislative session began on January 31, legislators found themselves blessed with a massive budget surplus estimated at $7.7 billion, which ballooned to a whopping $9.25 billion one month later. The House and Senate typically pass budget bills in odd-numbered years, as they did in 2021. In even-numbered years they traditionally turn their attention to bonding and policy bills, but overflowing coffers diverted lawmakers’ attention in 2022 and turned the session into a quasi-budgetary showdown. 

Counting the cash was easy; allocating it was more challenging. The GOP-controlled Senate proposed permanent tax cuts while the DFL-majority House suggested one-time tax relief as well as new funding for, among other things, childcare and family medical leave. But despite these differences, it seemed that there were plenty of funds available to permit both sides to secure some victories and go home happy. That optimism was tempered, however, by a decade’s worth of vitriolic budget battles that resulted in a string of special sessions. 

After each chamber passed its respective proposals, and with one week remaining before the Legislature’s constitutional adjournment deadline, House and Senate leaders joined Gov. Tim Walz in announcing a global budget deal. The framework for the agreement set aside one-third of surplus money for tax relief and one-third for new spending, while leaving the remaining third available for the FY24-25 budget negotiations that will happen during the upcoming 2023 legislative session. 

Heralded as a bipartisan compromise, the budget deal nonetheless represented only a broad outline. Conference committees still needed to fill in the details, and there was sufficient time—barely—remaining in the session to do so. Ultimately, in virtually all major areas, the House and Senate were simply unable to reach agreements, leaving the tax bill and most of the supplemental budget bills unpassed when the 2022 session expired. Subsequent discussions regarding a special session have proven unproductive. 

There were a handful of considerations behind the stalemate. The first and most obvious was unbridgeable differences in spending priorities. The second is election-year politics. The governor’s office and every legislative seat will be on the ballot in November; in addition, a number of sitting legislators face primary challenges in August from more philosophically extreme candidates within their own parties. These dynamics naturally make elected officials more cautious. There is also the beguiling prospect of a single political party taking total control of the Capitol after the November elections and being able to dictate, rather than compromise on, surplus allocations in 2023. Finally, with an FY22-23 budget already negotiated in 2021, there was nothing that lawmakers had to accomplish in 2022. That may have been the most influential factor. 

As a result of failed negotiations, significant tax relief was not passed, and new investments in a wide spectrum of areas did not happen. Among the lost opportunities was the potential for substantial—and much-needed—supplemental budget allocations for courts, public defenders, and civil legal services. These allocations were in play with the public safety conference committee but did not happen because the committee could not finalize an overall deal. Consequently, numerous other public safety-related policy proposals from the House and Senate were lost as well. In general, the Senate public safety bill focused on enhancing criminal penalties and increasing funding for police officers, while the House version concentrated on police accountability reforms and community-based crime prevention. Other limited areas of overlap were also squandered, including an MSBA-backed proposal to eliminate fees on uncertified court documents. 

Other MSBA proposals were lost, too, after coming tantalizingly close to passage. A pair of Tax Law Section proposals to enhance tax fairness for single-member LLCs were adopted by the tax bill conference committee but vanished when the omnibus tax bill failed to pass. The collapse of the tax bill also doomed a Senate proposal to allow portability of a deceased spouse’s unused estate tax exemption. 

The failure of other major bills caused a long list of additional budget and policy casualties, some of which could receive renewed attention during a potential special session (doubtful as one is at this point) or the 2023 regular session.