CapWatch:
March 23, 2026

Minnesota State CapWatch

Deadline Looming

The Minnesota Legislature has been operating at a rapid pace with the first committee deadline this Friday, May 27, 2026. Committees have been working tirelessly to discuss priority initiatives. However, the narrow political split in the Minnesota Legislature and the looming election both pose challenges to legislators attempting to see proposals signed into law this session.  Legislative committees have until Friday, March 27^th to take up and hear individual legislative proposals with the legislature subsequently on an Easter/Passover break the week of March 30^th. When legislators return on March 7^th, they will have only six weeks to accomplish whatever they hope to accomplish before their constitutional deadline to adjourn.

Governor Releases Supplemental Budget Proposal

On March 17, 2026, Gov. Tim Walz unveiled his supplemental budget and presented his legislative priorities. The legislature passed a two year budget last session, but it is not uncommon for supplemental appropriation packages to be considered in even-numbered years. At the highest level, with a forecasted $3.734 billion available general fund balance for the current biennium, the governor’s budget recommendations would increase state spending by $63 million in FY 2026-27 while decreasing state expenditures by $189 million in FY 2028-29.

Some of the most notable components of the budget include the following:

• Expanded & Reduced Sales Tax: The proposal would reduce Minnesota’s statewide sales tax rate (by about 0.075 percentage points, to roughly 6.425%) while broadening the tax base to include more services. Most notably, it would apply the state sales tax to professional services including legal, banking, and investment services.
• Child Care Tax Credit: The proposal would expand the Child and Dependent Care Tax Credit from the current level of $1,050 for one child and $2,100 for two to $3,000 for one and $6,000 for two. The threshold for who can receive the maximum credit would also be increased, allowing families earning up to $120,000 per year to take advantage of the program.
• Fraud Prevention: The proposal would create a statewide Office of Inspector General to oversee program integrity, appropriate additional resources to the Attorney General’s Medicaid Fraud Unit and make investments to update legacy IT systems to better track state funds.
• Housing Stability: The proposal would appropriate $33 million for permanent supportive housing and $34 million for first-time homebuyer assistance.

The governor’s proposal offsets many of the new investments by cutting $120 million in disability/mental health services, $57 million in nursing home reimbursement, and $40 million in Metro Transit funding.

Senate Democrats Release Program Integrity Proposal

On March 17, 2026, Senate DFL Caucus leaders unveiled their legislative proposal to address program integrity and combat fraud. The proposal centered on the creation of the Office of the Inspector General as an independent watchdog with the authority to investigate fraud across all state agencies and all portions of the state budget. The proposal also called for significant investments in the state’s IT infrastructure and new rules that would prevent state employees or legislators from steering grants or contracts to organizations and then going to work for those same groups.

House of Representatives Votes to End Housing Stabilization

The Minnesota House of Representatives voted to unanimously pass H.F. 3379, authored by Rep. Joe Schomacker (R-Luverne), that would remove the housing stabilization services from Minnesota Medicaid program. One of the primary programs at the heart of the ongoing Medicaid fraud discussion in Minnesota, the housing stabilization services program was administratively terminated last fall when the Minnesota Department of Human Services asked the Centers for Medicare & Medicaid Services to approve termination of the program, effective November 2025.  H.F. 3379 would remove the program from state statute.

Senate Republicans Release “Safe and Smart Kids” Package

On March 17^th, the Minnesota Senate Republican Caucus released their 2026 “Safe and Smart Kids” education plan. The proposal seeks to focus on student safety and academic performance in the classroom through both policy changes and funding priorities. In an effort to increase safety, the proposal includes funding for hard security upgrades like ballistic glass and electronic access controls. With respect to academic performance, the proposal seeks to provide greater local control over curriculum with a focus on literacy.

Party Endorsing Conventions Shake-up Election Landscape

Throughout the spring, local party units hold their district conventions where delegates elected at precinct caucuses gather to endorse potential candidates for various offices. For most incumbent legislators, this is something of a routine process, but for others, it can be the first stage of a competitive election cycle as campaign against intra-party challenges. This past weekend saw two notable results where incumbent senators did not receive their local party’s endorsement.

In Senate District 46, long time Sen. Ron Latz (DFL-St. Louis Park) was locked in a dead heat for the endorsement with progressive challenger Lynette Dumalag, a commercial real estate professional and St. Louis Park City Council Member. The convention adjourned without either candidate receiving the 60% required to receive the party’s endorsement. Both Latz and Dumalag are expected to continue their campaigns and purse the DFL nomination in the August primary election.

Meanwhile, in Senate District 5, Sen. Paul Utke (R-Park Rapids) lost the Republican endorsement to first-term Rep. Mike Wiener (R-Long Prairie) with 80 percent of the vote from the local delegation. In 2022, Sen. Utke also lost the endorsement but was able to win the primary race and ultimately the election.