Governor’s Budget Update

Governor Walz’s Budget Overview

The biggest problem Walz’s budget faces: a $1.28B existing funding gap, coupled with $1.3B in new investments


Minnesota’s fiscal year 2022-2023 budget has an existing $1.28 billion deficit, which is improved from MMB’s projection a few months ago. Combine that existing deficit with new investment initiatives totaling $1.3 billion – which includes $150 million in spending reductions—and existing spending initiatives, the Governor’s total budget comes in around $52.4 billion. Included in that spending is $150 million for the areas of St. Paul and Minneapolis that were damaged or destroyed during this past summer’s unrest.


Governor Walz’s solution to that $52.4 billion price tag is a mixture of using existing funds and creating new streams of revenue for the state. Included in Walz’s budget is a $217-million-dollar carry-over from the current biennium’s budget, implementing a $100 million cap on the Stadium Reserve Fund (adding roughly $130 million in funds), and taking $1.04 billion out of the state’s budget reserve – the “rainy day fund.” In addition to using those existing funds, the Walz budget contains an estimated $1.66 billion in new revenue, while giving working Minnesota families an estimated $230 million in tax cuts. In total, Governor Walz estimates this combination of revenue and existing funds would total $3.05 billion for the state—leaving the state with a surplus of $470 million.


In a press conference, Lt. Governor Flanagan praised the budget, saying: “We have often said that a budget is not only a fiscal document – it’s a moral document. This budget reflects the morals of the majority of Minnesotans.”


What does this budget mean for you?


The biggest impact on builders across the state may be the corporate franchise tax increase, contained in Governor Walz’s plan to generate new revenue. The increase in taxes coming from profitable businesses will generate an estimated $423 million in additional revenue for the state. Governor Walz’s plan also creates a 5th tier income bracket that, according to Walz, will only affect the top .7% of earners in the state. The new top bracket would include couples who make over $1,000,000 and individuals who make over $500,000. For reference, the current top bracket is set at $276,000 for couples and $166,040, respectively.

Governor’s request for Department of Labor and Industry Budget:


OSHA will add an additional 9.5 full time equivalents to handle stakeholders inquires, complaints and assistance to protect workers at public and private work sites. Complaints have increased by 500 or 37% of last year which required additional responses and/or inspection. OSHA will also raise maximum penalties for willful, repeat, serious, non-serious, failure to correct and posting violations of workplace safety standards.


The Governor continues the fee reductions for licenses. These included construction, electricians, plumbers, high pressure pipefitters and boiler operators, as well as building permit and plan review fees. This measure costs roughly $2,250,000 in 2022 and 2023.


Contractor recovery fund – The Governor recommends raising the maximum payout limit per licensed residential building contractor from $300,000 to $800,000 thus maximizing the chance that a homeowner’s claim would have to be prorated. The increased cap will result in an estimated $246,000 in additional payouts per year to impacted homeowners. Payout would be paid twice a year instead of once. (Costs to the fund per year would be $246,000 a year???)


The family medical leave act would now include employers with 1 or more employees. This benefit would expand access to maternity and parenting leave, accrued sick leave benefits for care of relatives and safety leave, and pregnancy accommodation laws. DOLI would spend an additional $34,000 a year on enforcement.


Included in the Governor’s recommendations are changes to better support lactation by ensuring employees who are lactating would receive paid break time, eliminating the ability for employers to opt-out, and make sure the legal language is gender neutral. This will also include additional money for enforcement.


Climate Subcabinet: The goal for commercial and large multifamily construction is to be net-zero by 2036. The Governor recommends instituting an adoption framework for statewide commercial building energy code that ensures net-zero by 2036.


The Governor recommends creation of a Statewide Paid Family and Medical Leave Insurance program run by Department of Employment and Economic Development. The program would provide wage replacement for family and medical leaves and will provide job protections for recipients, so they are assured of continued employment with their employer upon their return. Premiums collected from employers and employees will fund the program benefits and ongoing costs. The total cost for the State’s IT to build this system is $67.841 million for FY 2022-2026 including $5.973 m