Walz announces two-year budget proposal which would include rebate checks

The entire budget clocks in at over $65 billion and includes cutting taxes on Social Security and legalization of marijuana
Governor Walz
Governor Tim Walz lays out his budget plan on Tuesday, January 24, 2022. Photo credit (Audacy / Tom Hauser)

Governor Walz is out with his full “One Minnesota Budget” plan which includes rebate checks for Minnesotans, first proposed by Walz in 2022 before failing in the divided Minnesota legislature. Now that the DFL controls both houses, the governor is again trying to spend a large portion of the state’s surplus.

The $65 billion, two-year budget focuses on Minnesota children and families with tax cuts for things like child care, paid family and medical leave.

The budget is usually just a starting point for negotiating with the legislature, but with a DFL-controlled House and Senate, Walz is starting negotiations from a place of historic power when it comes to the budget.

Republicans responded to the Walz budget Tuesday afternoon calling it concerning.

"We've got a surplus of $17.6 billion currently, this budget spends all of that," says Senate Minority Leader Mark Johnson (R- East Grand Forks). "Not only that, but it grows government by 25%. Huge government growth in agencies, huge government growth in taxation. This is a very, very concerning budget."

Republicans are accusing both the governor and DFL lawmakers of breaking their campaign promises including the Social Security tax exemption which they say should be totally eliminated.

Walz had already mentioned several budget initiatives the last two weeks, including $300 million in funding for public safety and funding to lower the cost of child care.

There is currently a $17.5 billion surplus, and the governor’s plan would use portions of that for schools, housing and paid worker leave. There are also tax breaks, and the previously proposed rebate checks.

In addition, the budget proposes one of the largest tax cuts in Minnesota history, with over $8 billion in cuts, including those direct payments and tax cuts for seniors and working families.

Rebate Checks
The one part of his plan that could lead to some disagreements with Democrats are the rebate checks, something DFL lawmakers opposed last year. Walz now says since they learned that it would not be competing for other monies, he believes they will get on board.

The plan would send nearly $4 billion directly back to Minnesotans in the form of checks up to $2,600. More than 2.5 million Minnesota households would receive a check according to the governor. It is structured as an advanced income tax credit equal to $2,000 for families with income below $150,000 and $1,000 for single filers making less than $75,000. You can also qualify for an additional $200 for each dependent, up to three dependents.

In 2022, Republicans were unwilling to work with the governor on those rebates, with then House Minority Leader Kurt Daudt saying the governor's plan was "short sighted".

Social Security Taxes
Another potential negotiating issue comes in the form of their recommended $219 million in the budget to reduce taxes on Social Security benefits. That would expand the number of seniors eligible for lower Social Security taxes. Under this proposal 43% of Minnesota households receiving social security would save an average of $278 in 2023.

Eliminating the taxes on Social Security is a proposal Minnesota Republicans have long favored, but Democrats have said they are concerned about the loss of state income from those taxes. The Walz proposal falls more in the middle of that, with Minnesota Republicans saying they "wish he would have gone further" in eliminating all of those taxes.

"If we can’t cut taxes now, then when can we?”, asked Rep. Lisa Demuth (R- Cold Spring).

Legalizing Marijuana
The proposal from Walz also includes a recommendation that Minnesota legalize recreational marijuana. It has been one of the top issues already for DFL lawmakers.

“A new Office of Cannabis Management would be responsible for the implementation of the regulatory framework for adult-use cannabis and hemp-derived products, along with the medical cannabis program,” a release from the Walz Administration says. “The recommendation also includes funding for grants to assist individuals entering the legal cannabis market, additional resources for substance use disorder treatment and prevention, funding to launch statewide education campaigns on the adverse health effects associated with the use of cannabis, expungement of non-violent offenses involving cannabis, and taxes on adult-use cannabis.”

Other Proposals
- $78 million to ensure all retirees on Minnesota public pension plans receive a 2.5% cost of living adjustment in 2024.

- Keep property taxes low by increasing the Local Government Aid and County Program Aid programs by $30 million each.

- A 1.5% surcharge on capital gains and dividends of individuals, trusts, and estates over $500,000 up to $1 million, and 4% on income over $1 million for individuals, trusts, and estates

- Increasing the School Building Bond Agricultural Credit to help support schools in greater Minnesota and lower property taxes for farmers.

- Increased funding for the state’s two public higher education systems, Minnesota State and the University of Minnesota.

- Additional funding for the state’s tribal colleges by expanding the Tribal College Supplemental Grant Assistance program.

- $29.2 million to purchase up to 30 battery electric buses with charging infrastructure in place of replacement diesel buses.

- $2 million each year to leverage federal Infrastructure Investment and Jobs Act (IIJA) funds that invest in efforts to reduce carbon emissions, expand the state’s electric vehicle charging network, and build a more resilient transportation system.

- $722 million to provide the state match for IIJA-funded multimodal transportation projects across Minnesota.

- Investing in EV fast charging stations across the state.Investing in critical cybersecurity protections to secure and modernize IT services.

- Separating Direct Care and Treatment, the state-operated behavioral health care system, from the Minnesota Department of Human Services. About 12,000 people with mental illness, developmental disabilities, and substance use disorders receive services each year in DCT programs.

Featured Image Photo Credit: (Audacy / Tom Hauser)