Minnesota House Speaker Melissa Hortman used a gambling metaphor to describe the relationship between Gov. Tim Walz and the Legislature with regards to how money sent from the federal government for responding to COVID-19 should be shared with counties, cities and towns around Minnesota.
“Essentially, in terms of negotiating right now, the governor holds a full house,” Hortman said.
Walz’s extraordinary power over the money comes from the combination of current state law and a divided state Legislature. Any federal funds that flow to the state after the Legislature passes a two-year state budget — something that happened in 2019 — can be spent by the governor. The only restriction is that the governor must run the spending decisions past a Legislative Advisory Commission for advice, but not consent.
That process is what has guided how the state will spend its nearly $2 billion share of the federal CARES Act, the $2.2 trillion federal spending package aimed at helping fight the virus and soften the economic impact of the pandemic.
The act provided that counties and cities with populations of more than 500,000 would get direct payments from the U.S. Treasury. But in Minnesota, that designation only applies to Hennepin County, which received $221 million, and Ramsey County, which got $96 million. All other local governments need to get any of the money from the state’s share, something recommended but not required under the act.
And though the Walz Administration has yet to make a specific proposal of how to share that money among local governments, both the state Senate and House have proposed bills to send $667 million of the state’s CARES Act money to Minnesota counties, cities and towns.
What the bills would do
The difference between the measures is in how the money is distributed — and how the metro cities and counties are treated in each bill.
In the Senate on Monday, Sen. Julie Rosen’s bill to share the money, Senate File 4564, cleared the Senate Finance Committee, which Rosen chairs, on a party-line vote. Under a formula included in the bill, the state would send $174.50 per capita to each county, with the requirement that a portion of the money go to cities and towns governments in those counties. In all cases, counties would retain half of the distribution from the state.
Rosen called it the fairest way to share the state’s CARES Act money. “It’s all the same amount of money per head,” she said. Her bill is related to another measure, Senate File 4486, that would require the Legislature to approve expenditures of all CARES Act money as well as any federal funds that could come in subsequent congressional appropriations. Walz opposes that bill, preferring the current Legislative Advisory Commission process.
DFLers in the Senate have complained that the Rosen formula doesn’t take into account that the impact from COVID-19 isn’t equally distributed, with various hotspots in larger cities — but also places like Nobles County and Worthington. And they objected to a requirement that Hennepin and Ramsey counties, both of which have already been spending the money they’ve received from the feds on programs such as small business and rental assistance, would have to give some of their money to the cities within their jurisdictions.
Hennepin County Commissioner Jan Callison told the Senate Finance Committee that her county has one-third of the COVID-19 cases in the state and two-thirds of the deaths from the disease. And yet the formula in Rosen’s bill would mean that “a county with zero cases would receive substantially more per capita than counties that are in the front lines in this struggle.”
Callison called any attempt to make the county share its direct appropriation from the U.S. Treasury with its cities “an unprecedented overreach by the Legislature.”
Minnesota Department of Revenue Commissioner Cynthia Bauerly said the Walz Administration has its own concerns with the Rosen formula, saying it “creates unlikely winners and losers.”
She said the administration prefers to send out some of the money right away on a per capita basis but withholding the rest to see how the pandemic unfolds. “We know time is of the essence,” Bauerly told the Finance Committee. “We know many local governments have already spent significant funds in response to the pandemic. We look forward to working with you quickly to move a proposal along.”
In the House, meanwhile, Taxes Committee Chair Paul Marquart, DFL-Dilworth, introduced his own bill for distributing the CARES Act money, which also distributes some money per capita: $255 million to cities and towns and $312 million to counties.
And though the total cost of Marquart’s proposal is the same as the Senate bill, Marquart’s bill would hold back a batch of cash, $100 million, for grants to local governments experiencing high outbreaks of virus, and for unanticipated costs for a “recovery project or recovery coordination related to the effects of COVID-19.”
The House version will be heard in the Ways and Means Committee Thursday morning.
Where the administration stands
In an interview Tuesday, Bauerly said the administration wants to keep working with the Legislature on a proposal that all can agree on. “We do think that across the state those local governments are delivering essential services, whether that means buying more PPE for their first responders or if they have a health department,” she said.
But the administration doesn’t favor a requirement that Hennepin and Ramsey take the money they’ve already received and redistribute it to the cities in the two largest counties.
Bauerly also acknowledged that the governor can act without legislative authority, even if the administration prefers to work with the Legislature, she said, keeping in mind that some spending decisions need to be made in “hours or days.”
“The conversations are going well,” she said. “There is a common understanding that local governments need these funds. I’m optimistic.”
House Majority Leader Ryan Winkler, DFL-Golden Valley, said this week that legislators, especially GOP legislators, have to realize their relatively weak bargaining position with Walz on a number of issues.
“The default position is if the Legislature doesn’t make itself relevant by coming to an agreement on a range of issues, the governor will be the one deciding how the CARES Act will be funded; the governor will decide whether the reserve will be employed to balance the budget; the governor will decide whether allotment is necessary down the road,” said Winkler.
House Speaker Hortman said there are reasons, however, for Walz to work with lawmakers: “To some extent, the legislative process is a good way to come up with solutions. It also, though, has the detriment of being slow. So it’s very inclusive, it takes into account a lot of viewpoints.”