2023 Minnesota Legislative Session Recap
2023 Minnesota Legislative Session Recap
Late in the evening on Monday, May 22, 2023, the 93rd Minnesota Legislature adjourned for the year, after finalizing key pieces of legislation. Throughout the past five months, the Minnesota Legislature met for 77 legislative days and adjourned before the Constitutional Deadline of midnight on May 22. Since convening on January 3, the Legislature has been working to fund state government, pass a tax bill, fund capital investment projects, establish a paid family and medical leave program, legalize adult-use recreational marijuana, invest in transportation and enact dozens of bills that will significantly impact the state of Minnesota. If you recall the beginning of the session, the State of Minnesota entered the Legislative Session with a $17.5 billion surplus (after being adjusted for inflation). In the end, it is estimated that the Legislature has raised taxes by nearly $10 billion and increased the state’s budget from roughly $52 billion to $72 billion - a nearly 40% increase. Some of this spending is one-time money, so starting July 1, 2025, the state budget will be roughly $66 billion per biennium.
Prior to the legislative session, The Chamber hosted multiple meetings with members, local elected officials, and key business and community leaders to identify and develop strategies to ensure our region’s top opportunities and challenges were at the forefront of this legislative session. In January, The Chamber published the 2023 legislative priority agenda, which outlined four major priorities: Comprehensive Workforce Solutions; Quality, Accessible and Affordable Childcare; Building a Community for the Future; and Business and Community Vitality. These expansive priorities included several subpoints that specifically addressed the needs of our region.
This session, The Chamber spent considerable time at the Minnesota Capitol advocating for these priorities, building relationships, meeting with elected officials, and lobbying on behalf of the Clay County area and our business community. Now that Minnesota’s session has adjourned, it is time to look back at the major outcomes for 2023. Let it be noted that the Legislature passed a number of other major pieces of legislation, and this article serves as a high-level overview of this year’s session as it relates to Minnesota businesses.
In the final days of the Legislative Session, the Conference Committee finalized the Omnibus Tax Bill, House File 1938. This bill was negotiated between House Tax Committee Chair, Representative Aisha Gomez (Minneapolis) and the Senate Tax Committee Chair, Senator Ann Rest (New Hope). The final version that passed the legislature included:
Rebate Checks: Minnesotans earning less than $150,000 (Married Filing Jointly) or $75,000 (All Other Filers) are eligible for a $520 (Married Filing Jointly) or $260 (All Other Filers) credit plus an additional $260 credit per dependent up to a maximum of $780 dollars. A married couple with three children (family of 5) could see up to a $1,300 credit.
Partial Social Security Relief: Minnesotans with an adjusted gross income of less than $100,000 (Married Filing Jointly) or $78,000 (Single or Head of Household) will no longer be taxed on social security benefits.
Child Tax Credit: Establishes a $1,750 tax credit per child for families making less than the $35,000 threshold for Married Filing Jointly or $29,500 threshold for All Other Filers. The credit is reduced for filers making over the threshold.
GILTI Conformity: Increases taxes by over $12 million (over the next 4 years) by including Global Low-Taxed Intangible Income as dividend income. This increase places Minnesota’s multinational corporations at a disadvantage.
Standard/ Itemized Deductions: Increases taxes by nearly $740 million over the next 4 years, by reducing the allowable itemized deductions for Minnesotans making over $304,970 and further reductions for Minnesotans making over $1 million.
Overall, the Minnesota tax bill imposes over $2 billion in new taxes, increases the Renter’s Tax Credit, reinstates the Angel Tax Credit and adjusts many existing tax programs over the next four years.
One of the major priorities of the Democratic-Farmer-Labor (DFL) caucus this session included Paid Family and Medical Leave. From the onset, this proposal mandated that every employer across the state of Minnesota, large and small, would be required to offer their employees both paid family leave and paid medical leave or would require employers to opt into the state family and medical leave program. In its final version, House File 2, led by Senator Alice Mann (Edina) and Representative Ruth Richardson (Mendota Heights) included several provisions that will ultimately decrease the state’s ability to attract and retain business, such as:
Benefit Length: In the original versions, Minnesotans would be eligible for up to 24 weeks of paid leave, but after further consideration, the conference committee amended the bill and settled on 20 weeks (per year) of total leave in the passed legislation. An employee is eligible for 12 weeks (bonding, safety leave, family care or qualifying exigency) and 8 weeks (medical leave), or 8 weeks (bonding, safety leave, family care or qualifying exigency) and 12 weeks (medical leave).
Tax Increase: Similar to the State’s unemployment insurance program, employers and employees who are eligible to participate in the program and are not covered by a private plan must pay a 0.7% premium via payroll tax (0.4% for medical leave and 0.3% for family leave). Employers must pay a minimum of 50% of the premium but may elect to pay 100% of the premium. Any remaining premium not paid by the employer must be paid by the employee. The premium rate may be adjusted by the Department of Employment and Economic Development (DEED) Commissioner utilizing a formula outlined in the bill.
Private Benefit Exemptions: The bill does include an exemption for businesses offering these benefits through a private plan; however, private plans are only eligible if they offer benefits that are comparable or greater to the benefits offered by the state. The private program cannot impose additional conditions or restrictions beyond those outlined in the bill. Businesses must submit an application to the DEED to receive approval for a private plan.
Small Business Grants: The bill includes $5 million in grants to help employers that have 30 or fewer employees and make less than $3 million in gross annual revenues. Employers are eligible for up to $6,000 (per calendar year) in grant funding to hire a temporary worker or increase wages for current employees.
Minnesota employees will be eligible for these state benefits on January 1, 2026.
Workforce shortages are among the top issues facing employers across the state and are a top priority for The Chamber. The Omnibus Jobs, Economic Development, Labor, and Industry Bill (Senate File 3035), led by Senate President Senator Bobby Joe Champion (Minneapolis) and Representative Hodan Hassan (Minneapolis), included economic development, business and community development, workforce development, and labor and industry programs and initiatives, including, but not limited to:
$5 million for Launch Minnesota to accelerate the growth of startups and amplify Minnesota as a national leader in innovation.
Nearly $13 million for small business assistance partnership programs under DEED.
$250 million to match the federal funds for the federal CHIPS and Science Act.
Over $60 million to establish a PROMISE Grant and Loan Program for businesses in communities that have been adversely affected by structural racial discrimination, civil unrest, lack of access to capital, loss of population or an aging population or lack of regional economic diversification.
$25 million for targeted population workforce grants.
$18.5 million for entrepreneurial skills training grants.
$1.5 million for diversity and inclusion training for small businesses.
$5 million for capacity building grants.
$2.7 for jobs training grants.
Over $8 million for Minnesota job skills partnership program.
$20 million for the Drive for Five Initiative to support to conduct outreach and provide job skills training, career counseling, case management, and support services for careers in technology, labor, caring professions, manufacturing, and educational and professional services.
$1.5 million to establish an Office of New Americans. The office is to foster immigrant and refugee inclusion through an intentional process to improve economic mobility, enhance civic participation and improve receiving communities’ openness to immigrants and refugees.
$13 million for grants to local communities to increase the number of quality child care providers.
$1 million to establish an Office of Child Care Partnerships to coordinate with state, regional, local, and private entities to promote investment in increasing the quantity of quality child care in Minnesota.
$7 million for Minnesota Initiative Foundations for childcare initiatives.
Additionally, this bill enacted a number of policy provisions that drastically impact Minnesota Businesses, such as:
Sick and Safe Leave: Article 12 amends Minnesota statute to require that an employee must accrue one hour of earned sick and safe time for every 30 hours worked, up to a maximum of 48 hours of sick and safe time in a year, effective January 1, 2024. Under this language, employees are eligible to use this accrued time for; mental or physical illness, medical diagnosis, care or treatment, and preventative medical or health care for themselves or a family member; absence due to domestic abuse, sexual assault, or stalking for themselves or a family member; closure to due to weather or public emergency for employee’s place of business or their family’s school or place of care; and additional circumstances related to communicable diseases. This is in addition to the Paid Family and Medical Leave Program.
Warehouse Protections: Article 9 of SF 3035 outlines regulations for warehouse workers’ safety. The regulations, such as written quota requirements, further enhance protections for employee breaks and allow the state greater authority to investigate companies with a high rate of injury, apply to employers with 250 or more employees at a single warehouse distribution center or employers with more than 1,000 employees at one or more warehouse distribution centers across the state.
Ban on Noncompete: Article 6 of SF 3035 outlines that any non-compete agreement between an employer and employee in a contract or agreement is void and unenforceable, unless the agreement is agreed to during a business's sale or dissolution.
Roads, bridges, and public transportation were one of the top concerns for Minnesota Lawmakers. This session, the Minnesota Legislature passed what some DFLs called a ‘generational investment’ transportation package (HF 2887), led by Senator Scott Dibble (Minneapolis) and Representative Frank Hornstein (Minneapolis). The bill raises $3.8 billion dollars in taxes and fees to pay for the many projects and initiatives throughout the bill. Of the increased taxes included, below are some notable increases:
Gas Tax Increase: The bill connects the current gas tax to inflation. Every August beginning this year the state will determine the indexed tax rate that will go into effect January 1, the following year. Starting August 2025, the rate shall not exceed a 3% increase.
Delivery Tax: The bill established a state-wide retail delivery fee. This fee would be a 50-cent tax on retail deliveries over $100 dollars (before tax). There are exemptions from the fee for medicine, food delivery, miscellaneous non-taxable items and for retailers and marketplace providers with less than $1 million in sales in the previous calendar year. However, a retailer or marketplace provider must begin collecting and remitting the fee within 60 days of exceeding $1 million dollars in sales.
Motor Vehicle Sales Tax: The legislature raised the motor vehicle sales tax rate from 6.5% to 6.875% which is expected to raise $104 million over the next biennium.
The bill funded major projects such as $194.7 million for the Northern Lights Express, connecting the Twin Cities and Duluth via passenger rail, $50 million to extend the Blue Line, $18 million for local road improvements, $18 million for bridges and much more. A notable project for our region that was funded in the omnibus transportation package was a $10 million dollar request for Moorhead’s 11th Street Rail Grade Separation (Underpass) project. This funding finalizes the project and is combined with additional Federal, State, local and private funds. After completion, this underpass will connect the community and reinvigorate communal vibrancy through a safe and equitable transportation system in Downtown Moorhead.
Under the leadership of Senator Sandra Pappas (St. Paul), Senator Karin Housley (Stillwater), Representative Fue Lee (Minneapolis) and Representative Dean Urdahl (Grove City), the Minnesota Legislature finally came to an agreement on two capital investment bills (HF 669 and HF 670). The passage of House File 669 marked the first time since 2020 that the Minnesota Legislature passed a bonding bill. In Minnesota, bonding bills require a supermajority of members in both the Senate and House (60%) to pass. With the DFL holding a slim 1-seat majority in the Senate and a 6-seat majority in the House, a bonding bill would require bi-partisan support. Additionally, with a $17.5 billion dollar surplus, the DFL caucus made the determination to advance another capital investments bill funded by general fund dollars. Together, these bills would fund hundreds of projects across the state of Minnesota. Our region was fortunate to receive funding for several projects, like:
Dilworth Fire Station: HF 670 appropriated funds to demolish the current Dilworth Fire Station and community center and construct a new Fire Station to provide emergency services to cities and townships throughout Clay County.
Weld Hall: HF 669 appropriated over $23 million to Minnesota State University Moorhead to design, renovate, expand and equip Weld Hall.
Moorhead Flood Protection: HF 669 appropriated $11 million dollars to design, construct and equip flood mitigation infrastructure in Moorhead.
Moorhead Readiness Center: HF 669 appropriated $855,000 for the renovation and expansion of the Minnesota National Guard’s Moorhead Readiness Center to improve functionality and efficiency and better accommodate the military units assigned to the facility.
Free College Tuition: Starting in the 2024-2025 academic year, Minnesota families who earn less than $80,000 per year will be eligible for the “North Start Promise” scholarship. This scholarship will cover the cost of tuition and fees for Minnesotans who attend a 2 or 4-year program at a Minnesota public college or university.
Universal School Meals: Minnesota students attending a public or charter school will now receive free school lunch. The program is expected to cost roughly $200 million annually and will become effective July 1, 2023.
Marijuana: Recreational adult-use cannabis will become legal across the state of Minnesota, marking it the 23rd state in the nation to legalize adult-use recreational cannabis. The bill establishes an Office of Cannabis Management to oversee the licensing of businesses and develop regulations. Beginning on August 1, 2023, Minnesotans will be eligible to possess and use certain amounts of cannabis products. The bill will also decriminalize marijuana and expunge prior convictions.
Energy: Very early in the 2023 legislative session, the Minnesota Legislature passed sweeping legislation, establishing new clean power mandates. The bill would require all electricity to be 100% carbon-free by 2040.
PFAS: This session, Minnesota’s Omnibus Environment, Natural Resources, Climate, and Energy Bill, included provisions banning non-essential per-fluoroalkyl and poly-fluoroalkyl chemicals (PFAS), which are referred to as “forever chemicals”. These restrictions are nation-leading and may impact the manufacturing of products like carpets, cleaning products, cookware, cosmetics, dental floss, fabrics and fabric treatments, furniture, products for children, menstruation products and ski wax.
The FMWF Chamber of Commerce is proud to work alongside our business and community leaders to advocate on behalf of our community in the Minnesota Legislative Session. For more information regarding The Chamber’s public policy and advocacy efforts, please visit https://www.fmwfchamber.com/public-policy.