Gov. Tim Walz has told the state Legislature that he could decide on his own how to spend the billions of federal dollars heading to Minnesota from the American Rescue Plan.

In a Friday letter [PDF] to the state’s legislative leaders, Walz triggered a section of state law that requires him to give members of an advisory committee of lawmakers, the Legislative Advisory Commission, an opportunity to hold up expenditures of that money. 

But because those holds expire when the regular session of the Legislature adjourns on May 17, the governor will get to decide how to spend the money — unless the House and Senate can agree to spend some of the funds in whatever budget compromise emerges from the 2021 session, and provided Walz agrees to sign such a budget.

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A complicated law 

The Legislative Advisory Commission was created in 1943, though the law has been amended many times since then. The purpose was to allow the expenditure of federal funds when the Legislature is not in session. Prior to the COVID-19 pandemic, the funds were usually small amounts, often federal disaster relief payments or specific grants in social and human services.

That changed with the CARES Act, which last spring delivered $1.87 billion to the state, money Walz spent after giving notice to the LAC. Under the CARES Act, the administration made 96 individual “requests” for spending, even though he was simply serving notice, not seeking permission.

Under the complex — and disputed — statute,  the power to hold up the spending of federal money in Minnesota is given to members of the LAC only during session, and even then only during part of session, in that it expires 20 days prior to the third legislative committee cutoff. That deadline is April 8 this year, meaning any expenditure of the federal money submitted after Saturday, March 20, could be made by the governor alone.

An example of how the LAC law would apply to the current session is a proposal by the governor to spend $100 million of the latest federal funding for summer schools to help students catch up after a year of distance learning. Had he waited until this week to place the issue before the LAC, the members would have 10 days to advise the governor on the spending, though they couldn’t delay it. 

Because the proposal was part of a federal funds request submitted last week, however, any member of the LAC could put a hold on the money, delaying it until the Legislature agrees on how to spend the money — or the session adjourns.

And since it will take weeks if not months for the U.S. Treasury to tell states and local governments how they can spend the various pots of money they will be getting from the ARP, it will likely be after adjournment that the first actual spending of the funds is done by the state. 

Legislative Republicans not happy

Legislative Republicans have been unhappy since last spring about what they consider the governor cutting the Legislature out of the process of spending federal money. They were even more unhappy after getting Walz’s letter. 

During a meeting of the House Ways and Means Committee Monday, during which state budget director Britta Reitan described the provisions of the American Rescue Plan [PDF], Rep. Pat Garofalo, R-Farmington, asked how the administration planned to spend the ARP money.

After describing the process under the law, Reitan said that by submitting Walz’s letter on Friday, rather than waiting until this week, the administration made an effort to give the Legislature more authority under the LAC law.  

“We did make sure we submitted it through the 20-day process,” Reitan said, referring to the window that gives the LAC the ability to review federal spending requests made by the administration and to place temporary holds on the money.

“This creates a window of time between now and the end of session where there is the ability to allocate those funds in cooperation with the Legislature,” she said. “If the funds are not put on hold, after 20 days there is authority to spend.”

Garofalo offered his own summary: “At the end of the legislative session this administration is planning on spending the money without legislative authorization.” 

Reitan said the LAC process provides the opportunity to weigh in.

Ways and Means Chair Rena Moran, DFL-St. Paul, said the law gives governors that power once the Legislature adjourns, adding: “We don’t want that to happen. We want to be involved in this process.”

But Garofalo disagreed with that interpretation of the statute, saying Walz “does not have the power to do that.”

“That is an opinion of this administration that he can do that,” Garofalo said. “That’s not how I interpret it. We need to know the administration’s position on this issue, that …  in the absence of legislative agreement during the regular session, they do believe they have the authority only constrained by the guidance of the federal law.”

Garofalo asked DFL members of the committee if they “have any problems with one dude deciding how to spend $8 billion. Maybe it’s just a Republican thing.” 

Walz administration dials up emergency powers into overdrive. Now saying capital projects/revenue of billions of dollars only requires CONSULTATION of legislature not AUTHORIZED appropriations.

Just like emergency powers, no sign that Team DFL is going to disagree with the King.

— Representative Pat Garofalo (R) (@PatGarofalo) March 22, 2021

The leading GOP budget writer in the Legislature also objected to the Walz letter. “The legislature is in session to pass a state budget,” Senate Finance Committee Chair Julie Rosen, R-Fairmont, said in a statement Monday. “It’s incredibly disappointing the governor is going to go it alone with the federal funds and limit the input from local leaders across the state. Nonetheless, we will do our best to work with the Governor to ensure the funds are distributed fairly across the state and prioritized to mitigate the impacts COVID-19 has had on businesses, employees, families, seniors, and students.”

Rosen has a bill to change the way the Legislative Advisory Commission responds to governor requests, but it would need House agreement and a Walz signature to become law, making it unlikely given the current impasse over Walz’s powers during the pandemic. 

Several times over the last year the Legislature has attempted, with limited success, to pass legislation to spend the money rather than allow Walz to act alone. While lawmakers did agree on distributing $841 million to cities, counties and townships, no deal was reached on rental and mortgage assistance, which meant Walz alone created a $100 million fund for the purpose.

Walz also used CARES Act money for a variety of purchases, including COVID-19 testing and tracing, food assistance for children, seniors and low-income residents, emergency child care grants, small business grants, help to schools for distance learning and return to school costs, grants to farmers and money to relieve crowding at homeless shelters.

With the ARP money, the state will not dictate the spending for all of the $8 billion-plus coming to Minnesota from the federal act. Of that total, more than $1.3 billion is being sent directly to school districts, $552 million to colleges, $550 million in grants to child care providers and in child care supports and $348 million to transit agencies, all based on existing federal funding formulas.

But the state will control billions of dollars, much of it coming from its share of a $350 billion appropriation to state and local governments under the ARP. The state expects to get $2.76 billion that it can spend on COVID-related costs, including covering $450 million in revenue losses over the last year, reimbursing itself for the $750 million it spent with state revenue to fight the pandemic or for other new expenditures.

Even that number does not include more than $200 million for rental and mortgage assistance or for costs related to vaccination ($85 million), virus testing ($751 million) or genome testing meant to identify new variants ($17.5 million).