Governor Walz’s Budget Proposal

Dave Renner, CAE, our legislative rep, summarizes Governor Walz’s budget recommendations for Minnesota for the upcoming two-year period and the potential impact on health care.
Governor Walz’s budget recommendations include a combination of tax increases on the wealthy and on corporations, budget cuts in some agencies and a partial use of the state’s budget reserves. His proposal raises approximately $1.6 billion in new taxes and uses $1 billion from the state budget reserve. This raises enough revenue to erase the projected $1.3 billion deficit and invest in education and economic support programs to help Minnesotans recover from the COVID-19 pandemic.

Overall, Walz’s budget recommends spending $52.4 billion over the next two years. His tax increases are focused on high income earners, couples earning more than $1 million and on corporations. 

Walz also recommends increasing the state’s tobacco tax by $1 per pack and implementing a new gross receipts tax on sales of vaping products. Combined, these two taxes will raise over $151 million each year. In addition to raising new revenue, these increases have the added public health benefit of reducing the number of smokers and vapers.

In the health and human services spending area, Walz recommends continuing the expanded coverage for telehealth services for Medical Assistance and MinnesotaCare. This is an increased cost to program spending of $6 million over the two years. 

In a major change in how we provide pharmacy and dental services, Walz recommends moving to a single administrator for pharmacy and dental benefits in our public programs. This would carve out these services from managed care contracts and move them back to the Department of Human Services to administrate. By doing so, the state would implement one, statewide preferred drug list instead of using each managed care company’s lists. This will greatly reduce the administrative costs for prescribers. These changes save $15.8 million in fiscal year 2022 but cost the state $39.4 million in 2024. 

In a disappointing move, Walz recommends a cut of $1 million to the Medical Education and Research Cost (MERC) program. MERC is used to help fund training and residency programs for physicians and other health care professionals. It has been critical to help maintain a strong health care workforce.

Walz’s budget recommendations also include placeholder language to continue coverage for low-income Minnesotans in case the Affordable Care Act is ruled to be unconstitutional by the U.S. Supreme Court. He does not include a price tag for that because that case is pending, and it is hoped that it won’t be needed.

Next Steps in the Budget Process

The release of the Governor’s budget recommendations is the first step in the process to adopt a balanced budget. This is a document that lays out the broad direction that Walz recommends, knowing that there will be changes to budget numbers before final action is taken.

At the beginning of March, the state will release an updated budget forecast that House and Senate leaders will use to develop their proposals. It is expected that that budget forecast will show Minnesota to be in better fiscal health with additional federal support.

In the end, a budget agreement must be reached between the House and Senate and the Governor before they adjourn in May. If they are unable to reach agreement, the Governor will be forced to call the Legislature back for a Special Session before the end of the fiscal year on June 30 (to avoid a government shutdown).

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