ST. PAUL — Wealthy Minnesotans could see their income taxes hiked and working families and businesses could see a tax break.

The state's peacetime emergency could come to a close and the governor's executive orders around COVID-19 could come to an end.

Schools could see a boost in funding and police could face additional rules around their conduct.

The decisions are all before the divided state Legislature as it enters the final week of the 2021 legislative session. And in the days ahead, lawmakers could determine whether the changes take effect or fall by the wayside.

As the Legislature enters the final run-up to its May 17 deadline, here are some of the biggest issues to watch.

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The budget

The one thing lawmakers must do before they call it a year is write and pass a roughly $50 billion two-year state budget. The Constitution requires it, and if they can’t figure out a compromise by June 30, the state could face a government shutdown.

Senate Republicans and House Democrats have put up different proposals to fund state government, schools, health care programs and law enforcement agencies that stand about $1 billion apart. They also included several policy priorities in those plans.

MORE FROM THE CAPITOL: Minnesota lawmakers still at odds over taxing, police laws; state ekes out a Census win over New York

Over the next two weeks, lawmakers will get budget targets for different areas that can help determine how much the state will spend on all of its responsibilities. A key issue splitting lawmakers is how to spend $1.6 billion in state general fund surplus dollars and $2.6 billion in aid set to come to the state from the feds.

Republicans said the one-time funds should help the state recover from COVID-19 and address areas that could use additional support. And they’ve called on Gov. Tim Walz to let them help determine how federal aid funds get spent. Democrats, meanwhile, said the state needs additional ongoing revenue to help address ongoing needs in schools, programs for families and workers and state agencies that have led the state’s pandemic response plan.

Legislative leaders last week said they remained hopeful that they could reach an agreement and finish their work on time. But history suggests they might need overtime to get a budget done.

COVID-19 response and peacetime emergency

Minnesota Gov. Tim Walz on Friday, March 13, 2020, declared a peacetime state of emergency to deal with the coronavirus pandemic and rolled out new restrictions on large group gatherings. Dana Ferguson / Forum News Service
Minnesota Gov. Tim Walz on Friday, March 13, 2020, declared a peacetime state of emergency to deal with the coronavirus pandemic and rolled out new restrictions on large group gatherings. Dana Ferguson / Forum News Service

One of the biggest sources of friction this year has been around the COVID-19 pandemic and the state’s response to address it. The governor in March of 2020 issued a peacetime emergency as the pandemic bore down in the state. And every month since, he has asked the Legislature or Executive Council to grant a 30-day extension.

The emergency lets Gov. Tim Walz enact law quickly and without the approval of the Legislature. He has said the flexibility is critical in responding to COVID-19 and has helped the state stave off COVID-19 cases and deaths. It has also allowed the state to draw down federal emergency funds, activate the National Guard and form connections that allowed for mass testing and vaccination.

The emergency powers have enabled the state to shut down schools, businesses and social events, put in place a mask mandate and temporarily required Minnesotans to stay home unless performing essential tasks.

RELATED: Most of Minnesota's COVID-19 restrictions will end May 28; mask mandate will end in July

Republican lawmakers have attempted to end the peacetime emergency and to roll back the governor’s executive orders with little success. And they said the governor should close out the peacetime emergency or face pushback from them over DFL-proposed budget priorities.

Democrats, meanwhile, have maintained that the state would lose federal funding if the emergency ended and they pressed GOP lawmakers to keep in place protections for renters and state infrastructure for COVID-19 testing and vaccination.

Walz on Thursday, May 6, announced a timeline to end most of the emergency orders he'd issued. But he said he would continue extending the peacetime emergency and orders around the state's eviction moratorium, vaccination and testing structures and price gouging.

Police accountability and transparency

Members of the People of Color and Indigenous Caucus, law enforcement officers and state leaders on Thursday, July 23, 2020, posed for a photo after Gov. Tim Walz signed into law a package of police accountability measures. (Dana Ferguson / Forum News Service)
Members of the People of Color and Indigenous Caucus, law enforcement officers and state leaders on Thursday, July 23, 2020, posed for a photo after Gov. Tim Walz signed into law a package of police accountability measures. (Dana Ferguson / Forum News Service)

Heading into a bipartisan conference committee to hammer out the details of a public safety and judiciary omnibus, Democrats and Republicans appeared to be on two different pages: Democrats insist further police reforms are necessary in the wake of the deaths of George Floyd and Daunte Wright, while Republicans say last summer’s bill package was sufficient enough to address police brutality.

On Monday, May 3, Sen. Warren Limmer, R-Maple Grove, who is co-leading the conference committee, said that Senate Republicans want to keep the omnibus “narrow” and focused solely on the state’s public safety budgets, not delving into policy debates. Limmer was met with sharp resistance from Democrats, who have been trying for months to pass further police reforms, and see the omnibus as the best opportunity to push them through the Republican-controlled Senate.

Saying there is much legislative work to be done on the issue, Democrats have taken to pointing their fingers at Senate Republicans for the lack of movement on the issue. Gov. Tim Walz said he “will use the platform that I have to make sure that Minnesotans know who's holding up the progress that Minnesotans want."

House Democrats’ version of the public safety omnibus bill includes a slate of reforms, including studying police officers’ qualified immunity, banning traffic stops for minor vehicle infractions, establishing citizen oversight councils of police departments and more.

Taxes

Gov. Tim Walz and Democrats have proposed tax increases on those who make $500,000 a year or more as well as on some capital gains. The new revenue would fund boosts to schools, health care programs, workers and families, they said. After a year of disproportionate losses and gains due to COVID-19, DFL lawmakers said the state should pursue a reset to give those hit hardest an edge.

Republicans have said they’ll block any proposed tax increases and called on Democrats to constrain spending to current levels plus whatever can be covered by $1.6 billion in general fund surpluses and $2.6 billion federal COVID-19 aid.

RELATED: Tax relief, proposed hikes at the fore as Minnesota legislators start to hammer out tax bill

The Senate and House have also split over the best path for targeting tax relief coming out of the pandemic. The Senate approved a plan to fully erase state income taxes on Paycheck Protection loans and to waive taxes for some unemployment income for those laid off last year. House Democrats, meanwhile, have sought to focus exemptions on the PPP loans on businesses below a certain threshold and to erase income taxes on an unemployment insurance top-off provided by the federal government.

The head of the House Tax Committee said the Legislature would likely pass just one tax bill this year and he hoped to include other provisions in the bill beyond the PPP loan exemptions. Republicans have called for the quick passage of a bill solely focused on tax relief.

Bonding

If debate over a bonding bill feels familiar, that’s because it is: It was only in October 2020 that the divided Legislature finally settled on a $1.9 billion capital investment package, months after such bills are typically passed in even-numbered years.

But state lawmakers already are looking to invest more, hoping to borrow money at still-historically low interest rates to invest in housing and infrastructure projects across Minnesota. And after months of economic recession due to the pandemic, they say construction projects can help get Minnesotans back to work, while addressing infrastructure needs that will only become more urgent (and expensive) the longer they are put off.

MORE FROM ST. PAUL: Read more from FNS reporter Dana Ferguson

House Democrats in April released their own roughly $1 billion package, which includes $300 million toward short- and long-term housing projects, nearly $15 million for “equity-focused” projects for communities of color, and more.

Whether a bonding bill goes through, though — and how robust it will be — depends on Republican approval in both the House and Senate. On the other side of the Capitol, the Senate’s capital investment committee, chaired by former-Democrat, now Independent Sen. Sen. Tom Bakk from Cook, has been slow to the draw, holding few hearings and not passing legislation yet.

Minnesota Sen. Tom Bakk, I-Cook, shown here in a screengrab of video from the Senate floor, speaks to colleagues on Thursday, March, 11, 2021, about a proposal to provide tax relief to business owners and Minnesotans that received unemployment insurance in 2020. (Forum News Service)
Minnesota Sen. Tom Bakk, I-Cook, shown here in a screengrab of video from the Senate floor, speaks to colleagues on Thursday, March, 11, 2021, about a proposal to provide tax relief to business owners and Minnesotans that received unemployment insurance in 2020. (Forum News Service)

K-12 education

The biggest divides in school funding center around how much schools are set to get in the budget and whether the state will use some of that money to let families enroll their students in private or parochial schools.

Senate GOP lawmakers have proposed letting Minnesota families use state funds to offset the cost of private school tuition if they’d prefer to enroll a student there rather than in public school. Democrats and public school teachers have said the plan would pull funds from schools that are already facing layoffs due to declined enrollment due to the pandemic.

House Democrats have proposed putting additional funds toward public schools compared to current rates in an effort to balance out the enrollment irregularities.

Clean car rule

An electric car charging station. (Forum News Service file photo)
An electric car charging station. (Forum News Service file photo)

Senate Republicans on Tuesday, May 4, threatened to hold up funding for the Minnesota Zoo, state parks and research on chronic wasting disease in deer if DFL lawmakers blocked a proposal to eliminate Minnesota Pollution Control Agency rulemaking around clean car emission standards.

The Walz administration rolled out the new emissions rules modeled after ones implemented in California and 15 other states in an effort to reduce greenhouse gas emissions. The rules would require automakers to expand electric vehicle options in Minnesota. An administrative law judge approved the change on Friday. Several states have approved the policy through similar rulemaking processes.

Senate Majority Leader Paul Gazelka, R-East Gull Lake, walked the threat back slightly later in the week and he issued an offer letter with his caucus’ priorities that called for delaying the standards by two years.

Democrats have supported the rule change and pushed for other measures aimed at moving the state away from energy production measures that emit greenhouse gases.

RELATED: Walz administration pushing forward with proposed clean car rule

Paid family leave, earned sick and safe time

Despite opposition from Republicans and the Minnesota Chamber of Commerce, House Democrats have pressed forward with proposals to ensure Minnesota workers have access to paid family and medical leave through their employers and can accrue sick and safe time.

The state has required employers to offer paid time off if workers need to quarantine or recover from COVID-19 during the pandemic. And moving forward, DFL lawmakers said workers across the state should have a certain amount of time built in to take care of themselves or others rather than facing termination or wage loss for taking the time off. The proposal would let employees build up a minimum amount of sick and safe time each year if their employers didn't already offer the benefit.

Democrats have also proposed creating a paid family leave program, similar to the state's unemployment insurance program. Employees and employers would pay in to help fund benefits that workers could take if they needed to take time off of work to care for a new baby or ailing loved one.

Voter ID

The Minnesota Senate on Monday, May 3, approved a proposal to require photo identification to cast a ballot in the state, setting up a collision course with Democrats who oppose the plan.

Senate Republicans prioritized the plan in budget discussions and said it was key to preventing voter fraud and rebuilding faith in Minnesota’s elections. Democrats, meanwhile, said the plan could pose a hindrance to Minnesotans hoping to vote on Election Day and could sink the state’s highest-in-the-nation voter participation rate.

House Democrats have passed legislation aimed at creating an automatic voter registration system and restoring the right to vote to people convicted of a felony after they’re served their prison sentence. The Democrats said they’d oppose the voter ID requirement in budget negotiations, while Republicans said they’d block the effort to restore the vote to felons.

Recreational marijuana

After nearly a dozen hearings on a bill to legalize recreational marijuana use for Minnesotans 21 and over, Democrats and Republicans may have broken through partisan gridlock to agree on a path forward.

The bill is being championed by House Majority Leader Ryan Winkler, D-Golden Valley, who has said that Minnesota’s prohibition on recreational marijuana does “more harm than good.” A legal market could bring the state extra tax revenue, and lead Minnesotans away from utilizing the black market. Legalizing recreational marijuana and expunging past marijuana-related criminal convictions can also help alleviate the racial disparities in drug enforcement, proponents say.

Over the course of 11 committee hearings and hours of testimony, Democrats and Republicans have gone back and forth over the logistics, enforcement and safety of a recreational program. The end to the partisan debate could be in sight, though: During a Wednesday, May 5 hearing in the House’s taxes committee, lawmakers passed an amendment that Rep. Patrick Garofalo, R-Farmington, called “a gamechanger.”

Garofalo’s amendment requires extra tax revenue generated from the sale of legal marijuana be put toward a tax relief account. While he said he’d like to see more changes to House File 600, he said his amendment is “a very positive movement towards gaining additional support from conservatives.”

At the end of the day, though, Republicans who control the Senate have to get on-board before the bill can reach Gov. Tim Walz’s desk for his signature.

Follow Dana Ferguson on Twitter @bydanaferguson and Sarah Mearhoff @sarah_mearhoff