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It’s the final stretch of the 2026 legislation session and dynamics at the Capitol are still uncertain, as a tied House has stalled the traditional process of moving companion omnibus bills into conference committees. Legislators say the lack of alignment between chambers is making negotiations less predictable, with some raising concerns about a lack of coordination between both bodies.
At a recent press conference, Gov. Walz emphasized that he will not sign a budget that fails to address the state’s structural imbalance and emphasized a continued focus on fiscal responsibility in the final weeks of session. Leadership is expected to set joint budget targets soon, potentially around the fishing opener. Walz also noted ongoing discussions around HCMC funding outside the current budget framework, highlighted tensions between the House and Senate, and pointed to fraud prevention, shifting revenue streams, and property tax pressures as key issues shaping negotiations.
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REVENUE AND ECONOMIC UPDATE
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Minnesota’s fiscal outlook took a slight downturn in the latest update from Minnesota Management and Budget. April figures show revenues falling $182 million short of the February forecast, a 4.6% gap.
The bigger concern is the shifting economic outlook. Growth expectations for 2026 have been revised down to 2.1%, and projections for inflation, unemployment, and interest rates have all moved in less favorable directions. While a recession isn’t currently anticipated, the report signals that slower growth could raise the risk of an economic downturn, with the state’s outlook remaining vulnerable to changes in financial, fiscal, and trade conditions.
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OFFICE OF INSPECTOR GENERAL
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Several proposals have been put forward this year attempting to address fraud in state programs, the highest profile being a bill to establish an independent Office of the Inspector General. Early estimates suggest the watchdog program would cost about $15–16 million to launch and operate in its initial years. While there is bipartisan support for the concept, legislators are still debating the agency’s structure, authority, and overall cost.
The proposal is part of a wider effort to prevent future fraud, but disagreements could impact whether it is approved before the legislative session ends. While an OIG bill was passed with bipartisan support by the Senate last year, the journey in the House has been more difficult. The House version now has bipartisan authors, but a key disagreement between Democrats and Republicans is whether there should be a law enforcement division within the agency. Democrats have said this provision would be redundant because the MN Bureau of Criminal Apprehension already serves this purpose and expressed concerns over the price tag. Rep. Patti Anderson (R, Dellwood), the lead Republican co-author, stressed that having a law enforcement component is standard practice and essential to the proposal.
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FRAUD BILLS PASSED
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Legislators continued their focus on combating fraud in state programs on Monday with unanimous House passage of HF 4425. Sponsored by Rep. Andrew Myers (R, Tonka Bay), the bill extends the statute of limitations for Medical Assistance fraud and other theft of government funds from 6 to 10 years. Myers said the change reflects the complex, often multi-layered nature of fraud cases, which can take years to uncover. The bill passed 133-0 and is headed to the Senate.
The House also passed HF 3621 unanimously. This bill builds off legislation passed last year by expanding state agencies’ ability to withhold payments in suspected fraud cases by lowering the standard to a “credible allegation,” removing the 60-day limit, and applying it to both individuals and entities. It also allows cross-agency withholding, replaces formal appeals with agency reconsideration, and makes the authority permanent.
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OMNIBUS BILLS
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Here are the omnibus bills that have been passed off the floor of their respective bodies so far:
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SF 476 Senate Human Services Policy
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SF 2511 Liquor Omnibus (signed by Governor)
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SF 3295 Senate Health and Human Services Policy
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SF 4059 Senate State and Local Government Policy
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SF 4223 Senate Elections Policy Omnibus
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SF 4760 Senate Public Safety Policy
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SF 4807 Senate Veterans Policy and Supplemental Appropriations
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HF 4188 Commerce Policy
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CONSTITUTIONAL AMENDMENT ON
PERMANENT SCHOOL FUND DISTRIBUTION
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The Minnesota Permanent School Fund is a constitutionally established endowment, funded largely by revenue from school trust lands, approximately 2.5 million acres granted to the state at statehood to support public education. The fund’s earnings are distributed, as stipulated in the constitution, annually to school districts and charter schools on a per-pupil basis, while the trust lands themselves generate ongoing revenue through timber sales, mineral leases, and other uses managed by the state.
The Minnesota Legislature is considering bipartisan legislation (SF3593/HF3900) to place a constitutional amendment on the November 2026 ballot to change the distribution formula, which ultimately could mean increased payments to schools from the state’s Permanent School Fund.
The bill has passed out of its required committees and is awaiting action by the full House and Senate. Once the House and Senate pass the legislation, the questions will be before the voters on the ballot in the November 2026 election.
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