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Ewald at the Capitol: Anti-Fraud Bill Passes House

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ANTI-FRAUD BILL PASSES HOUSE

After months of negotiations, the House has passed its version of the independent Office of the Inspector General (OIG) bill. SF 856, authored by Reps. Patti Anderson (R, Dellwood) and Matt Norris (DFL, Blaine) and the most high-profile proposal to address fraud in state programs this session, passed 127-5 on May 7.

The legislation would create a new independent office within Minnesota’s executive branch to strengthen oversight, transparency, and fraud prevention across state government programs. The office would have authority to investigate fraud, evaluate agency performance, and issue public reports — with a particular focus on public assistance programs such as WIC and food support.

SF 856 also establishes an Anti-Fraud and Waste Bureau within the OIG with statewide investigative and law enforcement authority. The Inspector General would be appointed by the governor from recommendations made by a legislative advisory commission and could only be removed for cause following a public hearing.

The proposal requires state agencies and nonprofit organizations to make fraud reporting tools more visible online and outlines procedures for referring credible fraud allegations to state officials and the legislative auditor. The bill would take effect Jan. 1, 2027, or upon federal approval.
 

WALZ STATE OF THE STATE ADDRESS

In his final State of the State address, Gov. Tim Walz reflected on his nearly eight years in office. He discussed major events that shaped his time as governor, including the COVID-19 pandemic, social unrest in 2020, and ongoing political divisions. He also acknowledged recent tragedies — including the loss of Speaker Melissa Hortman and her husband, and the shooting of Sen. John Hoffman and his wife. He stressed Minnesota’s resilience and the importance of communities coming together during difficult times.

The governor highlighted legislation passed during his time in office, particularly investments made in the areas of education, children, families and economic development, arguing these policies have helped move the state forward despite recent crises. He also addressed criticism over fraud in state programs, defending his administration’s response while expressing support for stronger oversight and accountability measures.

Walz outlined several priorities he hopes lawmakers will address before his term ends. These include expanding financial support for families through measures like the child tax credit, exploring new policies related to emerging technologies such as artificial intelligence, and continuing economic support for communities facing uncertainty.
 

SENATE PASSES FIREARMS BILL

Less than a year after the Annunciation Catholic Church Shooting, the Senate has passed a sweeping gun bill. It would restrict ghost firearms without serial numbers and binary triggers in addition to outlawing assault weapons and high-capacity magazines. It would also promote school safety programs and mental health services. On the floor on Monday, Republicans introduced an amendment that would have eliminated the proposed gun bans while keeping funding for school safety and mental health programs, but the amendment was not adopted. The bill passed along party lines, 34-33. The bill faces an uncertain path; the House, where the chamber is tied, is divided on gun policy.
 

DHS COMMISSIONER SHAKEUP

This week, Gov. Walz announced that Minnesota Department of Human Services (DHS) Commissioner Shireen Gandhi would no longer hold that post. The governor appointed John Connolly as acting commissioner.

Questions surrounding this leadership shakeup at DHS intensified this week after the newly-appointed temporary commissioner disclosed he will be on medical leave for the next month while undergoing treatment for colon cancer.

Gov. Walz appointed Connolly on Monday, replacing Gandhi just before her scheduled Senate confirmation hearing. Gandhi was reassigned to a deputy commissioner role focused on Medicaid oversight and fraud prevention. During Connolly’s absence, DHS said Gandhi and Deputy Commissioner Andrew Johnson will manage day-to-day agency operations.

The transition comes as DHS faces mounting scrutiny over fraud in public assistance programs, and federal Medicaid funding freezes. In an internal memo, Connolly said his priority is maintaining continuity and strengthening oversight of Medicaid programs while he undergoes treatment.

Republicans criticized the timing of the move, arguing it allowed the administration to avoid public accountability over DHS’s handling of fraud investigations. The Walz administration defended Gandhi’s continued role, saying she has played a key part in efforts to strengthen oversight and combat fraud within the agency. Senate Democrats also said they will continue pressing DHS leadership for answers regarding fraud prevention and misuse of public funds.
 

PERMANENT SCHOOL FUND

The Minnesota Permanent School Fund is a constitutionally established endowment, funded largely by revenue from school trust lands. Approximately 2.5 million acres were granted to the state at statehood to support public education. As stipulated in the state constitution, the fund’s earnings are distributed 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.

This week, the House and Senate passed 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 House bill passed unanimously with no amendments, but it had a different path in the Senate. There, it was amended to require that any future statutory changes to the distribution formula be approved by a two-thirds vote in both bodies, then was passed 59-8. Because the House and Senate versions now differ, the two chambers will need to reconcile the bills before final passage.
 

OMNIBUS BILL PROGRESS

  • SF 476  Human Services Policy: Passed Senate

  • SF 2511 Liquor Omnibus: Signed by Governor

  • SF 3295 Health and Human Services Policy: Passed House/Senate

  • SF 4223 Senate Elections: Passed Senate

  • HF 4240 House Elections: Passed House

  • HF 4252 Higher Education: Passed House

  • HF 4188 Commerce: Passed House/Senate

    • Conference Committee: Koegel, Elkins, O’Driscoll, Perryman (Senate conferees still need to be named)

  • HF 1141 Housing: Passed House/Senate

  • SF 4807 Veterans: Passed House/Senate

  • SF 4760 Public Safety: Passed House/Senate

    • Conference Committee: Latz, Oumou Verbeten, Limmer, Novotny, Witte, Moller, Feist

  • SF 4561 Agriculture Policy: Passed Senate

  • SF 4555 State and Local Government: Passed Senate

  • SF 4067 Firearms: Passed Senate

  • SF 4059 Supplemental Finance: Passed Senate

    • Environment

    • Higher Ed

    • Jobs and Economic Development

    • Education Finance

  • SF 3432 Safety and Security Measures: Passed House/Senate

    • Conference Committee needed

  • SF 3298 Health Professional Scope and Licensing: Passed Senate

  • SF 2373 Labor: Passed Senate
 

IMPORTANT DATES

May 9: Minnesota Fishing Opener

May 18: Adjournment of Legislative Session
 

HELPFUL LINKS TO FOLLOW ACTION AT THE STATE CAPITOL
Minnesota Capitol Building

Ewald at the Capitol: Final Stretch of Session

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FINAL STRETCH OF SESSION

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.
 

REVENUE AND ECONOMIC UPDATE

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.
 

OFFICE OF INSPECTOR GENERAL

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.
 

FRAUD BILLS PASSED

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.
 

OMNIBUS BILLS

Here are the omnibus bills that have been passed off the floor of their respective bodies so far:

  • SF 476 Senate Human Services Policy

  • SF 2511 Liquor Omnibus (signed by Governor)

  • SF 3295 Senate Health and Human Services Policy

  • SF 4059 Senate State and Local Government Policy

  • SF 4223 Senate Elections Policy Omnibus

  • SF 4760 Senate Public Safety Policy

  • SF 4807 Senate Veterans Policy and Supplemental Appropriations

  • HF 4188 Commerce Policy
 

CONSTITUTIONAL AMENDMENT ON
PERMANENT SCHOOL FUND DISTRIBUTION

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.
 

IMPORTANT DATES

April 28: Gov. Tim Walz’s State of the State Address

May 9: Minnesota Fishing Opener

May 18: Adjournment of Legislative Session
 

HELPFUL LINKS TO FOLLOW ACTION AT THE STATE CAPITOL
Minnesota Capitol Building

Ewald at the Capitol: Bills Signed into Law

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LEGISLATORS RETURN AFTER BREAK, ENTERING FINAL STRETCH

Legislators returned to the Capitol this week following the Easter and Passover break and are now entering the final stretch of the 2026 session. With policy committee deadlines in the rearview mirror and just over a month until the May 18 adjournment, legislators now have a week  to finish work on major finance bills ahead of the April 17 deadline. Attention has turned to assembling omnibus bills, though there is still uncertainty about whether agreements on supplemental budget and bonding bills will be reached this year.
 

BILLS SIGNED INTO LAW

As the session continues, a few bills have been signed into law by Gov. Tim Walz.

HF 3615 (Hanson, J.) extends the deadline for hemp-derived products testing allows lower-potency hemp edibles that don’t contain intoxication cannabinoids to be tested at any recognized laboratory by extending the expired laboratory testing requirements. This measure permits testing through May 31, 2027. This gives businesses more time to use out-of-state testing facilities.

SF 3623 (Johnson-Stewart) mandates that a vehicle must stop whenever a school bus’s red lights flash. irrespective of the extension of the stop signal arm. The law also includes a clause that says a school bus’s flashing amber lights alert any oncoming cars that it is halting and will shortly be flashing red lights.

HF 4541 (Perez-Vega) repeals “Cesar Chavez Day” after recent allegations of abuse committed by Chavez.

HF 3425 (Howard) allocates $9 million of remaining supportive housing program grants to address a funding gap with the federal Continuum of Care program. In late 2025, the Department of Housing and Urban Development (HUD) proposed changes to how funding is prioritized for the Continuum of Care program, raising concerns about whether current participants would continue receiving renewals. Legal challenges followed, and a court ordered HUD to maintain its previously announced funding priorities for 2024–2025. At the state level, Minnesota created a supportive housing program funded by the Minnesota Housing Finance Agency (MHFA).
 

FRAUD PREVENTION

Addressing fraud in state programs remains a central focus at the legislature, with growing bipartisan support for establishing a new Office of the Inspector General. While details are still being finalized, inclusion of funding in Gov. Walz’s supplemental budget proposal increases the likelihood the measure will get passed.

At the administrative level, Minnesota Management and Budget has launched a new public-facing reporting tool to make it easier to flag suspected fraud across public programs. The site directs users to the appropriate agency based on the type of concern, ranging from public program misuse to consumer fraud.

The rollout comes as legislators continue to discuss oversight efforts, with additional hearings expected on how agencies are implementing recommendations to prevent fraud and improve accountability.
 

ETHICS COMPLAINTS

House Speaker Lisa Demuth has removed Reps. Elliott Engen (R, Lino Lakes) and Walter Hudson (R, Albertville) from their committee assignments for the rest of the legislative session after Engen was arrested for driving under the influence late last month. Hudson was a passenger in his vehicle.

The House DFL filed an ethics complaint after Engen and Hudson left the House Education Finance committee hearing early to go to a bar, and consumed alcohol before floor session that evening. Under House rules, the complaint would be referred to the House Ethics Committee for review.

Republican House members have filed an ethics complaint against Rep. Alex Falconer (DFL, Eden Prairie) over an alleged conflict of interest related to outside employment with Republicans claiming that Falconer’s actions make him “effectively a legislator lobbyist.”

These ethics complaints must be resolved by the end of session and will add even more tension and political divide to the final stretch of session.
 

STATE OF THE STATE ADDRESS

Gov. Tim Walz will deliver his 2026 State of the State Address on April 28, 2026, during a joint House and Senate session.

The address will likely outline his final term priorities and will be his final State of the State Address.
 

IMPORTANT DATES

April 17: Third Committee Deadline

April 28: Gov. Tim Walz’s State of the State Address

May 18: Adjournment of Legislative Session
 

HELPFUL LINKS TO FOLLOW ACTION AT THE STATE CAPITOL
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