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UPDATE: Minnesota Legislature passes tax bill to finish $52B budget

MINNEAPOLIS (AP) — The divided Minnesota Legislature passed a tax bill early Thursday as it completed a $52 billion, two-year budget, averting the threat of a partial state government shutdown.

Gov. Tim Walz personally delivered the signed K-12 education funding bill to Secretary of State Steve Simon on Wednesday evening to make its enactment official, and signed three other budget bills. The tax bill didn’t need to pass before the old budget ran out late Wednesday, which gave lawmakers time to extend the debate into the early hours Thursday.

The Democratic-controlled House passed the tax bill 69-55 after a long, partisan fight over the details of unwinding the governor’s emergency powers.

The Republican-led Senate approved the bill 54-11 a few hours later and sent it to Walz for his signature, completing the work of a special session that became necessary after lawmakers failed to finish the job before time ran out on their regular session last month.

“This is a strong, bipartisan tax bill that is going to make Minnesota families, communities and businesses better and stronger into the future, the House tax committee chairman, Democratic Rep. Paul Marquart, of Dilworth, said as the debate got going Wednesday.

About about 80% of the bill is COVID-19 relief, Marquart said. Businesses that received forgiveness on Paycheck Protection Program loans will be allowed to fully deduct the amount on their state income taxes, while workers who collect unemployment insurance payments will be able to deduct them up to $10,200. He said that will benefit about 500,000 people who lost their jobs with an average $500 tax cut.

The Senate passed the K-12 education bill 65-0 on Wednesday evening after the House approved it earlier in the week.

Republican Senate education committee chairman Roger Chamberlain, of Lino Lakes, hailed the bipartisan school funding bill as relying on “money not mandates.” He highlighted how it contains the largest increase in the state’s per-pupil funding formula in 15 years — 2.5% in the first year and 2% in the second, amounting to about $296 per pupil for school districts to spend as they see fit.

“Now that money is theirs to use,” he said. “It’s local control, members.”

A potential public works borrowing package known as a bonding bill, which would require bipartisan 60% supermajorities in both chambers, did not emerge before lawmakers adjourned. Republican Senate Majority Leader Paul Gazelka, of East Gull Lake, said they could pass one during the special session that Walz is expected to call in early September. The aim of that session would be to pass a plan to pay $250 million in bonuses from federal aid to frontline workers who risked their lives in the pandemic.

Both chambers voted early Wednesday to end the peacetime state of emergency that Walz declared at the start of the COVID-19 pandemic, more than 15 months ago, shortly after the Democratic governor said he was doing so himself. Walz had used emergency powers under multiple extensions of that declaration to manage the state’s response, which was a long-running sore point for Republicans who complained he had shut the Legislature out of important spending and policy decisions.

Walz said it became possible to end the peacetime emergency earlier that the Aug. 1 date he had set last week after reaching a deal with the U.S.

Department of Agriculture to protect emergency food aid payments to needy Minnesotans under the Supplemental Nutritional Assistance Program. The Legislature met another condition earlier this week when it approved an “off ramp” for the governor’s eviction moratorium, which he had imposed in the early days of the pandemic.