We have high standards and expectations in this state, and our leaders aren’t meeting them.
The Minnesota Star Tribune Gov. Tim Walz at the Capitol last month. The governor and the Legislature have so far not completed their mandate in the state Constitution to write a new state budget for the upcoming biennium. (Renée Jones Schneider/The Minnesota Star Tribune)
“I know my job and I didn’t get it done.”
That’s what Gov. Tim Walz told former Montana Sen. Jon Tester on a podcast last week about his No. 2 role on Democrats’ presidential ticket last fall.
News flash: Walz could say the same thing in the present tense about himself and the state’s legislators.
It’s only two weeks since the 2025 legislative session ended with lawmakers not completing the one thing they were required by the state Constitution to do — write a new state budget.
Maybe we shouldn’t be so critical of them? After all, they’ve got nearly a whole month before the state’s two-year fiscal period begins on July 1. They had an evenly split House of Representatives that made it more difficult to agree on things. And the Republican Congress and President Donald Trump, if they ever pass the debt-exploding-and-Medicaid-reducing One Big Beautiful Bill, will force a reworking of Minnesota’s 2025-26 budget.
No. We have high standards and expectations in Minnesota, and our leaders aren’t meeting them.
The state is now giving many of its workers a required 30-day notice that they might be idled next month.
I watch the Legislature not just for how lawmakers are spending Minnesotans’ hard-earned money but for signs that they recognize the big change that is happening in the state economy.
Minnesota is one of the states experiencing ultra-low population growth. Economies grow through three kinds of expansion: more people, more resources, greater productivity. Because Minnesotans can rely less on population growth to fuel our economy, we need to fight more aggressively for resource and productivity improvements.
The state’s economy, which during most of the 20th century grew faster than the national economy, has done that only five times in the past 20 years. Last year, Minnesota’s economy grew 1.1%, less than half the nation’s rate of growth.
Labor productivity rose 0.9% annually during the five years 2019 through 2023. That was 31st among all states, and down from a 1.2% annual average from 2007 through 2019.
Minnesota’s economy is not weak, and Minnesotans’ personal incomes remain relatively high. However, slowing growth is a challenge that accumulates in negative ways over time. Such effects are visible in the parts of the state that are declining in size and economic output.
Walz and some lawmakers recognize it, but many do not. I’m mystified by legislators’ lack of urgency not just about that economic challenge, but getting their work done in general.
Since the official close of the legislative session on May 19, there’s been a breakdown of the joint panel writing a tax bill. The problem happened with provisions that business interests thought were uncontroversial and that Walz supported.
One of those is a tax credit to businesses on research and development spending they do within Minnesota. That credit would cut a mere $43 million of the state’s expected two-year total revenue of $64 billion. Legislative leaders took over the tax bill and clipped the credit to about $40 million, according to a proposal that circulated this weekend.
The credit is similar to an incentive for businesses in Wisconsin, though smaller than in other states.
The leaders also wiped out an existing tax break on electricity costs for operators of data centers in Minnesota. That was aimed at prospective data center projects in the Twin Cities suburbs and greater Minnesota, but it is going to hurt existing centers, including in downtown Minneapolis.
On top of that, they are squabbling over whether to write a bonding bill. The last one was in 2023, ending a three-year gap between such measures. A bill last year to get the state’s bonding efforts back to a routine stalled out.
Going another year without a bonding effort would be a slap at people who work in state offices and college campuses as well as imprudent financial management.
Not only do project costs continue to rise but, right now, so does the cost of financing them with bonds. As interest rates climb, bonds become more expensive for taxpayers to use.
When you see how the bond market is reacting to what Congress is doing with the federal budget, it seems unlikely bond rates will go down soon.
Walz told me in January the hardest budget decisions would get pushed into May. He explained this was the rare time when the budget was coming down outside of a recession and that even Republicans, who talk a big game about cutting spending, would have a hard time doing it.
Indeed, they did. He proposed a $66 billion budget, down from $71 billion in 2023-24. The budget now on the table is $67 billion.
“Everybody says they want to cut, but the minute you say what you want to cut, the special interest groups are all over you,” Walz said then.
Now it’s June. It’s past time for the governor and the Legislature to get it done.
Correction: An earlier version of this column misstated the size of the $40 million proposed R&D tax credit, and the year of the most recent state bonding bill, which was in 2023.
