Legislative Updates

On Monday, May 17, the Legislature officially adjourned in accordance with its constitutional deadline. That said, as of yesterday the bulk of negotiations that will make up the final two-year budget agreement had just begun.

That’s because yesterday Governor Tim Walz, Senate Majority Leader Paul Gazelka (R-East Gull Lake) and House Speaker Melissa Hortman (DFL-Brooklyn Park) finally reached a global spending agreement that provides needed guidance for conference committees from agriculture to health care to begin negotiating their respective budgets. While the agreement came long past their self-imposed deadline and just hours before both bodies adjourned, legislative leaders celebrated this agreement and highlighted the challenges that had made a budget deal illusive including remote work and vast ideological differences. You can read the broad two-page deal here.

Important for MFU members, joint budget targets included $10 million in new investments in the agriculture budget. This is short of the $11.5 million increase the House had proposed, but by far and above the zero increase put forward by the Senate. The deal also includes $70 million for broadband, a historic investment, and provides $75 million from the American Rescue Plan Act to fund summer learning programs.

“We appreciate the work that the Governor and legislative leaders put in to set budget targets and are encouraged to see new investment in agriculture on the table,” said MFU President, Gary Wertish in a release.

The $10 million target for agriculture reflects MFU’s call for a strong agriculture budget and leaves room for needed new investments including:

• Expanding small and mid-scale meat and poultry processing.
• Biofuels infrastructure to expand the use of E15 and higher blends.
• Support for emerging farmers and assisting in land access and farm transitions.
• Expanding the Farm Advocate Program.
• Funding the noxious weed program.
• Funding the Market Bucks and Good Food Access programs.
• Expanding Farm to School and early care programs.

You can read about MFU’s priorities for in this letter to committee members here. These priorities and others will be negotiated ahead of an expected Special Session on Monday, June 14. In order to have bills ready, the budget deal stipulates that conference committee chairs must negotiate budgets by Friday, May 28 and have policy disagreements reconciled by June 4. The final deadline for passing a budget is June 30 when funding expires and the state could face a shutdown.

Budget targets are an important step forward. That said, it’s important to note that significant policy issues including police reform and accountability, car emissions standards, and the Governor’s emergency powers were not included in the agreement and still need to be addressed.

Outside budget talks, the agriculture conference committee, led by Chairs Sen. Torrey Westrom (R-Elbow Lake) and Rep. Mike Sundin (DFL-Esko), met over the weekend to reach an agreement on some limited policy changes. These changes, which were approved on a bipartisan basis in both bodies include:

• A 5-year reauthorization of the Farmer-Lender Mediation program, while retaining the 90-day timeline. MFU worked hard on this provision and is glad to see the future of the program secured going forward.
• A deal to help producers who sell food under Minnesota’s Cottage Food exemption from licensure by allowing LLCs to participate and allowing participants to sell pet treats.
• An exemption from licensure for people who process less than $20,000 of wild game or fowl (or up to 200 deer) per year.
• Adding another livestock producer to the Board of Animal Health and ensuring that at least one of the four producers on the board is a member of one of Minnesota’s 11 Native tribes.
• Requires a report on proposed changes to the Agricultural Chemical Response and Reimbursement Account (ACRRA) program and not increasing the program’s cap, which could result in increased costs for farmers.
• Other policy changes that can be found here.

“We’re especially pleased that Farmer-Lender Mediation is reauthorized in this policy bill,” President Wertish said. “We’d like to thank Rep. Todd Lippert (DFL-Northfield) for pushing for this program throughout the pandemic to support farmers in financial crisis.”

Legislators and the Governor also reached an agreement to conform with the federal government forgive Paycheck Protection Program (PPP) loans from state income taxes. This is important to many farmers, including sole proprietors, who received these loans during the past year. The Department of Revenue (DOR) is currently working on a solution to ensure that people don’t have to refile their taxes due to this agreed-upon change.

Energy highlight: ECO Act passes floor votes

A significant overhaul of the state’s energy conservation programs, championed by Sen. Jason Rarick (R-Pine City), Sen. Nick Frentz (DFL-North Mankato) and Rep. Zack Stephenson (R-Coon Rapids) was approved by both the House and the Senate and will get the Governor’s signature. This bill, the Energy Conservation and Optimization (ECO) Act, was supported by MFU because it stands to lower energy costs, create jobs in rural areas, and contribute to combatting climate change. It builds on the popular Conservation Improvement Program (CIP), which members have used to finance energy efficiency projects on their farms.

“The Conservation Improvement Program has been saving Minnesotans money on their utility bills for nearly 40 years and we’re pleased its legacy will continue,” said Michael Noble, executive director of Fresh Energy. “This bill is a powerful model for how stakeholders and legislators can collaborate on policy that will benefit all Minnesotans and help the state meet decarbonization goals in an equitable way.”

The language in the ECO Act is the result of significant stakeholder input from electric co-ops, municipal utilities, investor-owned utilities, the state’s largest natural gas utility, clean energy advocates including Center for Energy and Environment (CEE) and Fresh Energy, consumer advocates including the Energy CENTS Coalition and Citizens Utility Board (CUB), and others. The ECO Act is a critical component of Governor Tim Walz’s plan to eliminate greenhouse gas emissions from electricity in Minnesota by 2040.

Read more from Fresh Energy here.

National Farmers Union and Group of Cattle Producer Organizations Hold Historic Talks to Address Problems in Marketplace 

National Farmers Union (NFU) recently joined five other organizations that represent cattle producers to agree to work jointly on issues in the cattle marketplace.

On Monday, May 10, member-leaders of American Farm Bureau Federation, National Cattlemen’s Beef Association, National Farmers Union, R-CALF USA, and the United States Cattlemen’s Association met in Phoenix, Ariz.

These groups convened at the request of Livestock Marketing Association to discuss challenges involved in the marketing of finished cattle with the ultimate goal of bringing about a more financially sustainable situation for cattle feeders and cow-calf producers.

“Unfair markets and a lack of competition in the beef industry has been extremely harmful to producers and consumers alike, especially during the last year,” said NFU President Rob Larew, who was among the participants in the meeting. “Many sectors within agriculture, including beef, are dominated by just a handful of multinational corporations. The time for action is long overdue, and NFU is glad to be a part of this effort to bring strong, swift, and meaningful reform.”

The group talked openly and candidly about a wide range of important issues facing our industry today, including but not limited to:

• Packer concentration,
• Price transparency and discovery,
• Packer oversight,
• Packers and Stockyards Act enforcement,
• Level of captive supply, and
• Packer capacity.

The group also agreed to each consider these action items:

• Expedite the renewal of USDA’s Livestock Mandatory Reporting (LMR), including formula base prices subject to the same reporting requirements as negotiated cash and the creation of a contract library.
• Demand the Department of Justice (DOJ) issue a public investigation status report and as warranted, conduct joint DOJ and USDA oversight of packer activity moving forward.
• Encourage investment in, and development of, new independent, local, and regional packers.

This unprecedented meeting brought together diverse producer organizations to identify issues and discuss potential solutions. These issues and action item lists are not comprehensive, due to time constraints of this meeting. Attending organization representatives were pleased to have reached consensus on many issues and are committed to the ultimate goal of achieving a fair and transparent finished cattle marketing system.

We are now less than a week away from the end of the regular state legislative session and days past a self-imposed deadline for a broad agreement on budget targets. The May 17 constitutional deadline for legislators to complete Minnesota’s next two-year budget is less than a week away. And last Friday, legislative leaders missed their self-imposed deadline to come to an agreement on the overall budget. This date was important not only because they set it, but also because that week was needed to negotiate the spending within the various budget bills—including for agriculture, taxes, and healthcare—and then for nonpartisan staff to draft the hundreds of pages of legislative text that make up the massive spending deals. With each passing day, legislators are more likely to need to push budget talks to a special session. And at this point at least a short special session to pass the budget is likely, if not guaranteed.

Legislative leaders in the Republican-led Senate and DFL-majority House are still trading offers. However, neither side has been quick to give up on their priorities in the name of compromise. That’s because absent a budget deal, state government will not face a shut down until the beginning of July. This makes the de facto deadline June 30, which is still more than a month away. Not only that, but Governor Walz has said, that he plans to extend his emergency powers to do with the pandemic for another month, ensuring that he will need to call another special session in mid-June.
Though some of the disagreements House and Senate leaders and the Governor have to do with money, the caucuses are not terribly far apart when it comes to overall spending. Instead, they need to reach agreement on a number of policy issues including whether to disallow certain traffic stops for non-safety-related moving violations, tax breaks for large businesses, the future of Walz’s emergency powers, and how to spend the $2.8 billion in federal relief from the American Rescue Plan Act (ARPA).

Details about how the state can spend ARPA funds were released by the federal government on Monday, May 10. However, instead of providing room for a compromise budget deal, the funding passed by Democrats in Congress and signed by President Biden on March 12 is a source of disagreement. State-level Republicans want to make sure that they get a say in where and how the funding is spent. Unlike the CARES Act dollars which went out at the end of last year, the state, counties, tribes, and cities will have three years to spend this money. According to the Treasury, funding can go to:

• Support urgent COVID-19 response efforts to continue to decrease spread of the virus and bring the pandemic under control
• Replace lost revenue for eligible state, local, territorial, and Tribal governments to strengthen support for vital public services and help retain jobs
• Support immediate economic stabilization for households and businesses
• Address systemic public health and economic challenges that have contributed to the inequal impact of the pandemic.

You can read the 150-page guidance document that state officials are wading through here. Soon after ARPA was past, MFU submitted recommendations for spending priorities, including building out local meat and poultry processing, biofuels infrastructure, providing direct support to farmers in crisis, and connecting emerging farmers with assistance. It is still valuable to reach out to your elected officials on this or other budget items—and know that while the state is receiving $2.8 billion another $2 billion is going directly to counties, cities and tribes.

Outside of federal spending, the state tax bill is central to the $50-something billion budget deal. That’s because the state relies substantially on taxes to fund state services from maintaining infrastructure, to funding meat inspection, to supporting rural hospitals. Well over half (60%) of the state’s budget comes from taxes, with about a quarter coming from federal passthrough funding and the remainder from service fees and other sources.

MFU has paid close attention to the Tax Committees this year, not only because it is central to the overall budget, but also because there are a number of provisions that members have expressed are important to them. First, central to both the House and Senate tax proposals is state tax forgiveness for income from federal Paycheck Protection Program (PPP) loans, which farms and other businesses received to keep them afloat through the pandemic. This would match a federal provision past in December. Yet to be determined is whether the state should fund a tax break for very large businesses—many of which did very well through the pandemic—by forgiving loans of $350,000 and up.

We have also heard from members affected by the fact that the PPP program ran out of funding for most borrowers last week, well ahead of the May 31 deadline for applications, and have weighed in with members of our federal delegation.

The House tax bill also includes changes to the Beginning Farmer Tax Credit (BFTC), which MFU worked hard on this session. These provisions would open up the credit to family members, provide an added leg up to emerging farmers, and provide the Minnesota Department of Agriculture (MDA) funding to get the credit application online and improve its administration. You can read a letter that MFU helped lead to tax committee conferees here.

Another provision in the tax bill would grandparents, stepparents, stepchildren, uncles, aunts, nephews, and nieces to the list of qualifying relatives for agricultural relative homestead. Prior to this change, only children, grandchildren, siblings, or parents of the owner of the agricultural property or of the spouse of the owner qualified for the credit. This change means that qualifying relatives are the same for agricultural relative homesteads and residential relative homesteads. Tax committee conferees who will be deciding these and other important issues are:

• Chair Paul Marquart (DFL-Dilworth)
• Rep. Cheryl Youakim (DFL-Hopkins)
• Rep. Kaohly Vang Her (DFL-St. Paul
• Rep. Dave Lislegard (DFL-Aurora)
• Rep. Greg Davids (R-Preston)
• Chair Carla Nelson (R-Rochester)
• Sen. Bill Weber (R-Luverne)
• Sen. Jeremy Miller (R-Winona)
• Sen. Thomas Bakk (I-Cook)
• Sen. Ann Rest (DFL-New Hope)

The Agriculture and Broadband conference committee held walkthroughs last week and adopted compromise language on a number of largely non-controversial policy provisions. Important for MFU members, the House and Senate came to an agreement on changes to the Cottage Food exemption from licensure for people who cook food for sale in their home kitchens. You can read that final amendment here.Outside of that a couple other non-spending items, the landscape has remained largely the same as the committee waits for updated budget targets from legislative leadership.

With the May 17 end of session approaching, legislators have been working long hours debating the large budget and policy proposals that fund the state government. These omnibus bills – catchall legislative proposals that cover a particular area – are the product of each committee’s work throughout this session and pull together proposals brought forward by legislators. With rare exception, this is how policy proposals make their way through the Legislature. If you’re interested in catching up on floor debates, you can find recordings on the Senate and House YouTube channels.

This week, the House and Senate are set to finish approving their respective omnibus proposals, largely along partly lines. This means that focus will turn toward conference committees – new, joint committees typically made up of five Senators and five House members. They will be charged with hammering out a compromise position on budget and policy proposals that can pass both the Republican-led Senate and the DFL-led House.

For the agriculture and broadband omnibus bills (SF958 / HF1524), conferees are:

• Sen. Torrey Westrom (R-Elbow Lake) Co-Chair
• Sen. Gene Dornink (R-Hayfield)
• Sen. Mike Goggin (R-Red Wing)
• Sen. Bruce Anderson (R-Buffalo Township)
• Sen. Erin Murphy (DFL-Saint Paul)
• Rep. Mike Sundin (DFL-Esko) Co-Chair
• Rep. Samantha Vang (DFL-Brooklyn Center)
• Rep. Gene Pelowski (DFL-Winona)
• Rep. Todd Lippert (DFL-Northfield)
• Rep. Nathan Nelson (R-Hinckley)

“The conference committees are up against the challenge of crafting a budget in a divided government, but I’m hopeful that the agriculture conferees will find plenty to agree on,” said MFU President, Gary Wertish, in a release announcing conferees. “I’d like to congratulate Chairs Sundin and Westrom on their leadership of the committee and thank each of the conferees for serving.”

While we do not agree with every conferee on every issue, MFU has a strong working relationship with many of them which will help us make our voice heard throughout the last weeks of the session. You can find an updated list of legislators appointed to other conference committees here.

Joint budget targets, yet to be set by Senate and House leadership and the Governor, will define the budget that each conference committee has to work with, setting the bounds for their work. For agriculture, for example, the House proposed spending $11.5 million in new money on biofuels, meat processing, emerging farmers, and a number of other priorities, while the Senate proposed spending zero. Of course, agriculture is a small budget. Overall, the House proposed a $52.5 billion budget to support new investments aimed at helping students, workers and businesses overcome the COVID-19 pandemic, while the Senate proposed a $51.9 billion.

Developing a broad budget deal will be challenging and likely hinge on agreement about taxes, police reform, and spending federal relief dollars. An agreement on taxes is important, because it defines how much the state is able to spend. According to the Minnesota constitution – and unlike the federal government – Minnesota must pass a balanced budget.

To “[stand] up for those who have been hit hardest by COVID-19” and support additional spending in the ag bill and across the budget, House Tax Chair Paul Marquart’s (DFL-Dilworth) tax bill (HF991) proposes increasing taxes on the top .7 percent of income earners and works to prevent multinational corporations from sheltering income oversees. The income tax provisions would affect couples earning $1 million a year (approximately $20,000 every week). Important to many MFU members, Chair Marquart’s bill also holds income from Paycheck Protection Program (PPP) loans of up to $350,000 harmless from income taxes, provides additional aid to small businesses who weren’t able to receive a loan, and expands the Beginning Farmer Tax Credit (BFTC). You can read a summary of the House tax bill here.

The Senate, on the other hand, has drawn a hard line on raising new revenue, even from high income earners. Their bill (SF961), authored by Chair Carla Nelson (R-Rochester), doesn’t raise significant new revenue. Significant to many MFU members, her bill also conforms with the federal government in holding all PPP loans harmless from income taxes. It also includes a 5 cent per gallon tax credit for fuel retailers who sell ethanol blends above E15 and adds grandparents, stepparents, and others to the definition of “qualifying relative” for the purposes of agricultural relative homestead. A summary of the Senate bill can be found here.

Second, police accountability and reform is a top priority for many legislators and their constituents who have been rocked by recent events – including ex-Minneapolis police officer Derek Chauvin’s murder of George Floyd – making it likely central to a global deal.

Finally, agreement on how to dish out the approximately $2.6 billion in federal relief dollars coming to Minnesota from the American Rescue Plan Act signed into law by President Biden will affect the overall budget and will be a key negotiating point for legislators who have thoughts about where money should be spent.

These difficult dynamics make it possible that it will take time for caucus leadership and Governor to develop joint budget targets. That said, conference committees can and will start meeting to discuss the merits of various policy provisions that won’t significantly affect the budget.

For example, Chair Sundin’s House agriculture bill includes a number of policy proposals. Non-budgetary proposals that MFU supports include:

• Reauthorizing Farmer-Lender Mediation and extending the timeline for mediations by 30 days, providing important relief for farmers who are facing financial crisis and are—at times—at risk of losing their home and farm. Like so many other sectors of the economy, the effects of the pandemic were not uniformly felt and many farm families are still struggling. This was championed by Rep. Lippert and Senator Kent Eken (DFL-Audubon) in the Senate.
• Reauthorizing Cooperative Development Grants to help farmers add value to their products and build new, more resilient models in the wake of COVID-19. Vice Chair Vang championed this provision which could help emerging hemp farmers build food businesses and keep wealth in their communities.
• Supporting small food businesses who operate under the Cottage Food exemption by continuing to develop a compromise that allows small food business to start and grow under the exemption from licensure, which was also championed by Vice Chair Vang.

All provisions in the House bill remained the same as it was passed off the floor and are detailed in this letter MFU sent to committee members. The bill also adds two members to the Board of Animal Health (BAH) and allows the Governor to appoint the Board’s director, changes largely framed within the broader work to curb the spread of Chronic Wasting Disease (CWD). Additionally, it requires that manufacturers of treated seed to put a caution statement on packages and makes clear that using treated seed for producing food, fuel, or oil (none of which is standard practice) is not allowed. You can find a House research summary of those provisions and others here.

In the Senate, Chair Westrom’s bill also makes changes to improve access to the Cottage Food program for farmers and others who are starting small food businesses. In addition, he proposes preventing the Minnesota Pollution Control Agency (MPCA) from restricting farms from applying manure in February, March, September, and October. You can read a summary of those provisions and others here and read MFU’s comments on the bill here.

The House Health and Human Services Finance bill (HF2128), authored by Chair Tina Liebling (DFL-Rochester) and passed by the House on Monday includes a number of policy provisions MFU strongly supports. Importantly, the bill would guard patients and taxpayers against exorbitant drug price increases and requires the Commissioner of the Department of Human Services (DHS) to develop a proposal for establishing a public option for purchasing health insurance coverage. While this doesn’t go as far as we’d like in allowing Minnesotans to ‘buy-in’ to public programs, the move would represent a positive step forward.

Amid a relentless news cycle—and with urgent issues demanding their attention—legislators continued to meet for marathon floor sessions to advance budget bills ahead of their constitutional adjournment date on May 17. A final deadline for budget negotiations is June 30, at which point Minnesotans will face a government shutdown absent a deal on the budget.

Last Friday, Minnesota House Ag Chair, Mike Sundin (DFL-Esko) met with MFU County Officers to discuss the agriculture finance and policy package crafted by his committee (HF1524). His proposal, which includes a $11.5 million increase to Minnesota’s agriculture budget, includes provisions reflecting MFU priority issues including expanding meat processing, advancing the market for biofuels, supporting cooperative development, and helping emerging farmers.

This package has the strong support of MFU and was approved by his committee with the vote of Republican Lead Paul Anderson (R-Starbuck), who took a leadership role in crafting the biofuels infrastructure grant program included in the bill. His support highlights the bipartisan nature of the bill as it heads to the House floor for the consideration of the full body this Wednesday, April 21.

Rep. Sundin provided us with more specifics:

“The bill funds our noxious weed program, more resources for meat and poultry inspection, our industrial hemp program, and mental health outreach to allow Minnesota’s Farmer and Rural Helpline to continue operating.

Additionally, the bill includes the following measures:

• new revenue from pesticide sales to fund pesticide education and equipment and additional staff to ensure that lakes, rivers and drinking water sources have safe pesticide levels
• farm safety grants
• funding for an Emerging Farmer Office at MDA
• funding for our county fairs
• requires people who label and sell agricultural, vegetable, flower or wildflower seed treated with neonicotinoid pesticides to include a caution statement on the product label
• allows Minnesotans who sell homemade, shelf-stable foods and beverages such as baked goods, to more than quadruple their annual sales without a license
• exempts small meat processors (with annual sales less than $20,000) who process fowl and game for hunters from state regulation
• adds two members to the Board of Animal Health: one veterinarian and one person who has knowledge of animal health and is a member of a federally recognized tribe located in Minnesota
• increases the period in which creditors are prohibited from enforcing debts subject to the Farmer-Lender Mediation Act from 90 days to 120 days
• Agriculture is a relatively small part of the state budget but plays an enormous role in our state’s economic opportunity, not to mention ensuring we all have food to eat. I’m grateful for our farmers and everyone who works in agriculture, and this bill will help ensure a stronger future. A summary of the bill can be accessed here.”

You can tune in to watch debate of the House agriculture package here on their YouTube channel—please let us know your thoughts.

Last Wednesday, April 14, Senate Ag Chair Torrey Westrom (R-Elbow Lake) presented his omnibus agriculture finance and policy proposal to his Senate colleagues just before the dinner hour.

“This bill, the highlights are about broadband, biofuel, and meat processing,” Sen. Westrom explained in introducing how the package was designed to prioritize needs experienced by farmers and others in rural Minnesota. The package includes $40 million in new funding for border-to-border broadband development across the state and reprioritizes grant funding to go toward biofuels and meat processing.

Importantly for MFU, Chair Westrom included a provision that would support the development of a meat processing technical training program at the Minnesota State College System, including a mobile slaughter unit that will be used for training.

“This is an important opportunity, not only for our students, but also for workers who need retraining due to COVID-19,” explained Senator Carrie Ruud (R-Breezy Point), who led this proposal in the Senate. She also highlighted how the mobile slaughter unit could help serve small farmers, through doing on-farm slaughter.

The bill passed off the floor with bipartisan support (48-18), though some DFL members expressed concerns about the package.

“I think the biggest weakness of the bill was the zero base target,” explained ranking minority member, Erin Murphy (DFL-St. Paul), who ultimately voted for the proposal. “There are things like Farmer-Lender Mediation, the Farm Advocates Program, additional funding for mental health care . . . and food insecurity,” which is addressed by programs like Market Bucks.

Senator Foung Hawj (DFL-St. Paul) also expressed concerns about Urban Ag Grants going unfunded in the proposal and talked about the need to support urban youth who want to build a life in agriculture.

MFU expressed support for the additional investments in the package and echoed calls to restore cuts to programs as the bill works its way through conference committee. You can watch the full floor debate here.

On another top priority for MFU, omnibus healthcare legislation that includes provisions that would move us toward a public option (HF2128) is advancing through the Minnesota House. While it does not create a public ‘buy-in’ option like previous legislation that MFU strongly supported (HF11), it does call for a the Minnesota Department of Human Services (DHS) to work with the federal government and others to develop a more detailed proposal for creating a public option. This is an important step that will help MFU and others make a stronger case for expanding access to MinnesotaCare in future sessions.

On a related note, the American Rescue Plan (ARP) Act made changes to health insurance benefits. If you are shopping for health insurance on the individual market, you should review what tax credits you are eligible for via MNSure.

On the federal level, legislators have been busy working on climate-related proposals, including the Growing Climate Solutions Act, which seeks to provide more certainty to farmers who are working to earn a fair return from carbon markets. This effort was endorsed by National Farmers Union.

Senator Smith also led on bipartisan legislation to help farmers adopt voluntary conservation practices and help mitigate the effects of climate change. The Conservation and Innovative Climate Partnership Act, led by Sen. Smith and Sen. Todd Young (R-Ind.) will help get more university ‘boots on the ground’ experts to partner with farmers to meet their conservation goals.

“Strong farm programs that encourage conservation and climate practices will help farmers maintain sustainable and productive operations well into the future,” said Sen. Smith. “They will also help us reduce greenhouse gas emissions to fight climate change. This bill connects farmers with the information and resources they need to take action.”

Last week, Senate Ag Chair Torrey Westrom (R-Elbow Lake) and House Ag Chair Mike Sundin (DFL-Esko) released their respective budgets (SF958; HF1524) and passed them out of committee. Both included key priorities that MFU helped shape throughout the session, including investments in meat processing and expanding the use of biofuels. These omnibus bills—large packages that include a number of distinct proposals—fund the Department of Agriculture (MDA), the Agricultural Utilization Research Institute (AURI), and the Board of Animal Health (BAH).

Since the Legislature convened in January, MFU has been clear about the need for a strong budget that not only preserves programs, but also invests in new initiatives that help farmers and others meet challenges presented by COVID-19 and set them on a path toward sustainable long-term recovery. As of the latest estimates, the Legislature is facing a $1.6 billion surplus going into the next two-year budget cycle. This is good news for MFU and others who want new investments and is largely due to the massive infusion of federal support brought about through the American Rescue Plan Act, which was signed by the President in March.

Within the context of a $1.6 billion surplus, Speaker Melissa Hortman (DFL-Brooklyn Park) and her team granted House Chair Sundin a $11.5 million target. In the Senate, on the other hand, Majority Leader Paul Gazelka (R-East Gull Lake) granted Chair Westrom a zero target for agriculture. This means that if he wants to do anything new, he will need to cut something else in his budget.

“While agriculture is the foundation of Minnesota’s economy—generating $112 billion in economic impact and supporting more than 430,000 jobs—our budget for MDA makes up less than 1% of the state’s overall budget,” said MFU President Gary Wertish, making the case for a strong budget to the Senate Ag Committee last week. “We support growing our investment in farmers and rural communities.”

Despite differences in budget targets, both bills included new initiatives strongly supported by MFU. These included provisions to:

• Expand small and mid-sized meat and poultry processing to address the bottleneck experienced by producers across the state. Both bills invest in expanding the state’s inspection program and investing more in helping processors start new plants or expand their capacity, reflecting recommendations in the Governor’s budget request.
• Fund biofuels infrastructure through a grant program to fuel retailers, which will expand the use of higher-octane, cleaner-burning biofuels. This again reflecting the Governor’s budget request and follows recommendations put forward by his biofuels council.
• Invest in farm and rural mental health to ensure that farmers facing stress and crisis have help when they need it most.
• Support small food businesses who operate under the Cottage Food exemption by continuing to develop a compromise that allows small food business to start and grow under the exemption. In addition to these changes, we ask that you clarify participants ability to sell pet treats (SF1610/HF2014).

These provisions all reflect MFU priorities that were included in the Governor’s budget for agriculture. The House bill invests portions of the addition $11.5 million he has in his budget target in MFU priorities including:

• Additional investments in meat processing including new general funds dollars for grants and funding for a meat scientists at AURI.
• Reauthorizing Farmer-Lender Mediation and extending the timeline for mediations, providing important relief for farmers who are facing financial crisis and are—at times—at risk of losing their home and farm. The bill extends the program for another 5-year period (from 2022 to 2027) and lengthening the timelines for mediation by 30 days (90-120). This legislation was drafted by MFU and was championed by Representative Todd Lippert (DFL-Northfield).
• Supporting the voluntary adoption climate-smart practices that promote soil health and provide other ecosystem services, as recommended in the Governor’s budget.
• Funding the Emerging Farmers Working Group and an additional outreach position, which will both improve MDA’s outreach to and service of Black, Indigenous, people of color and immigrant farmers. These initiatives were championed by Vice Chair Samantha Vang (DFL-Brooklyn Center) and Representative Jess Hanson (DFL-Burnsville)
• Reauthorizing Cooperative Development Grants to help farmers add value to their products and build new, more resilient models in the wake of COVID-19, an effort led by Vice Chair Vang.
• Assisting in land access and transition to help the next generation of farmers get on the land and build a life in agriculture.
• Expanding the Farm Advocate program by increasing funding by $20,000 per year, allowing MDA to contract an additional farm advocate, providing needed capacity to the program.

In written testimony on the final House package, Gary shared that “the pandemic’s disruption of our largely consolidated food system made it all the more apparent that farmers, consumers, workers, and rural communities will all benefit from a food system that is more distributed, resilient, and fair. The new investments outlined in this package are a meaningful first step.”

To the Senate package, Gary’s letter thanked committee members and made the case for securing additional general fund dollars for new investments so that existing budget items are not displaced. An unwelcome result of including new funding for meat processing and biofuels (which MFU supports) without increasing the size of the overall budget, is that some other programs would go unfunded. For example, if the senate budget were put into law, Urban Agriculture Grants and Sustainable Agriculture Demonstration Grants in MDA’s AGRI program would go unfunded.

That said, as Chair Westrom has acknowledged, both bills have a long path to enactment and will need to be reconciled in conference committee. On Wednesday, his bill passed the Senate Finance Committee and can now be considered by the full Senate. During that hearing, he highlighted the bills investment in developing a meat processing technical training program at the Minnesota State College System which incorporates slaughter through a mobile unit. MFU helped put forward this proposal (SF2196;HF2316), which was championed by Senator Carrie Ruud (R-Breezy Point) and Representative John Poston (R-Lake Shore). This will help serve local producers, address workforce needs experienced by processors, and train new entrepreneurs to take over existing plants.

As described by Commissioner Thom Petersen, processing is a key challenge for processors. Throughout last year, plants shared that “it’s great to expand, and great to do more, but they need workers,” he explained in the Senate Finance Committee.

On Friday, March 26, the legislature adjourned for a break that will last until Tuesday, April 6. While many legislators and others who work at the capitol will enjoy a welcome break and enjoy time with family, committee chairs are hard at work negotiating their respective budget bills. These ‘omnibus’ bills, which fund state agencies including the Minnesota Department of Agriculture (MDA), are the way most policy and funding initiatives make their way through the legislative process.

While we will not see the House or Senate Agriculture Chair’s bills until legislators return next week, we do have some context for what they will look like.

First, we know some about what money is available. As of the latest estimates, the legislature is facing a $1.6 billion surplus going into the next two-year budget cycle. This is much improved from estimates at the start of session, which forecast a deficit due to economic hardship wrought by COVID-19. This rosier picture of state finances is largely due to the massive infusion of federal support brought about through the American Rescue Plan (ARP) Act, which was signed by the President earlier this month, in addition

Within this estimated surplus, Majority Leader Paul Gazelka (R-East Gull Lake), Speaker Melissa Hortman (DFL-Brooklyn Park), and their respective teams set budget targets for each committee.

In the Senate, leaders gave the Agriculture Committee no increase in their budget, with the exception of one-time spending for broadband. This means that Senate Ag Chair Torrey Westrom (R-Elbow Lake) will have little room for new investments in things like small and mid-scale meat processing, biofuels infrastructure, or support for emerging farmers. If he wants to do anything new, he will need to cut something else—and that is out of an agency that makes up less than half of a percent of the overall state budget.

In the House, on the other hand, leadership proposed increasing the budget for agriculture by around $11.5 million. This leaves more room for House Ag Chair Mike Sundin (DFL-Esko) to make new investments. However, the great needs across so much of the state mean that he will have to make tough decisions as well.

Second, for predicting what House and Senate Agriculture omnibus bills might look like next week, we know each chairs priorities. Importantly for MFU, each committee heard bills related to a number of our key priorities including meat and poultry processing, biofuels, wolf depredation compensation, and other issues. In the House, Chair Sundin heard the Governor’s budget proposal, which will likely form the basis for his recommendations.

“While agriculture is the foundation of Minnesota’s economy—generating $112 billion in economic impact and supporting more than 430 thousand jobs—our budget for MDA makes up less than 1% of the state’s overall budget,” said MFU President Gary Wertish in written testimony to the committee. “We support growing that investment in farmers and rural communities.”

Third, we know that significant resources are coming to the state from the American Rescue Plan Act. Under the law, nearly $5 billion will come to Minnesota, including upwards of $2.5 billion to state government. This will help state agencies, including MDA, respond to the pandemic, much as CARES Act dollars did last year. In written comments about this new funding, President Gary shared support for expanding meat and poultry processing to meet producers demands, getting the biofuels industry back on its feet, supporting emerging farmers, and providing assistance to farmers in crisis.

Even outside of budget talks, MFU has a busy week. On Wednesday we shared strong support for House Tax Chair Paul Marquart’s (DFL-Dilworth) bill to strengthen the Beginning Farmer Tax Credit. His bill (HF1456) would allow family members (kids and grandkids) to use the credit for sale of agricultural assets (land, equipment, livestock), to assist in generation farm transition. Additionally, his bill would double that same credit for black farmers, indigenous farmers, and farmers of color (BIPOC farmers) recognizing that they often have a steep hill to climb in accessing land. According to MDA’s Emerging Farmers’ Report, BIPOC people make up less than one percent of the states farmers.

“This will provide additional and needed support to emerging farmers who too often are not coming into a generational operation, and who could benefit from the working relationships the credit helps broker with established farmers,” said President Wertish in written testimony.

MFU member Brad Kluver (Northfield) testified about his experience using the credit and how it could reach more beginning farmers by expanding to family members. He shared from personal experience how farm transitions can be complex, costly, emotional, and seldom easy. Any leg up for beginning farmers is a win for the state.

Finally, Senate Ag Chair Torrey Westrom heard a proposal to help develop a meat processing technical training program at the Minnesota State College System, which was strongly supported by MFU. The bill (SF2196), led by Senator Carrie Ruud (R) would provide grants to two year colleges for renovating their facilities, designing curriculum, purchasing equipment, and building market channels for end products. Importantly, this bill would also fund a mobile slaughter unit that could be used to incorporate slaughter into the curriculum, while also serving the needs of local producers.

There is precedent for this type of investment. Montana Farmers Union recently partnered with the state to purchase a USDA-inspected mobile slaughter unit to be used in part for technical training.

On Thursday, March 11, President Biden signed the American Rescue Plan, a $1.9 trillion COVID relief package that will send $1,400 checks to most Minnesotans, provide resources for reopening schools, improves vaccine distribution to rural communities, increase the child tax credit and otherwise address the public health and economic needs of the country. This package is important for the state legislative session because it provides nearly $5 billion to Minnesota’s state, local and tribal governments. For context, Minnesota’s last biannual budget was approximately $48 billion. The stimulus payments and other initiatives aimed at jumpstarting the economy also improve the state budget officer’s revenue estimates (i.e. from collecting more taxes on purchases), contributing to a one-time projected surplus of $1.6 billion going to into the upcoming two-year budget cycle. This shot-in-the-arm from the federal government will make it more likely that legislators can deliver on MFU priorities like broadband development, meat processing and biofuels infrastructure—all of which require new spending.

Related to previous COVID relief, and important to MFU members who received forgivable Paycheck Protection Program (PPP) loans, the Minnesota Senate passed legislation that would conform with federal law and make sure that farmers and others won’t owe income tax on those relief funds. Senator Tom Bakk (I-Cook) led the $438 million package, which passed on with bipartisan support (55-12) in the Senate, though some DFLers raised concerns that, while important, the package should have done more for workers. MFU shared testimony in support of conforming with federal tax law—and doing so ahead of the end of session—because many farmers are already filing their taxes.

“PPP loans helped many of these farmers other rural small businesses cashflow their operations and retain employees through the ups and downs of the pandemic,” MFU President Gary Wertish shared in written comments. “This would provide needed relief to farmers and others, many of whom have seen their operations negatively impacted by the COVID-19 pandemic.”

The proposal still needs to be approved by the Minnesota House and signed by the Governor. On Monday, the House declined to suspend the rules to take up a vote and referred the Senate-passed package to the House Tax Committee where Chair Marquart (DFL-Dilworth) has been working hard to develop consensus around a similar proposal. PPP loans, which are forgivable if used for payroll and eligible expenses and are available to sole proprietors (which includes many farmers), are still available to new applicants until March 31. Since these loans are administered through local lenders, a good first step is to contact your lending agent to confirm that they work with Small Business Administration (SBA).

Also in the tax committee, MFU shared testimony in support of expanding a tax exemption for capital equipment purchases to meat processing plants. This initiative, brought forward by Rep. Swedzinski (R-Ghent), is another way to support the development of new small and mid-scale processing plants, for whom startup costs is a key concern. This type of an initiative would pair well with present and proposed state and federal investments in meat processing.

In the House Agriculture Committee, Chair Mike Sundin (DFL-Esko) heard legislation that would reauthorize cooperative development grants at the Minnesota Department of Agriculture (MDA). Vice Chair Samantha Vang (DFL-Brooklyn Center) introduced this legislation, which was brought forward by MFU. Mirroring a similar program that was available at the MDA some years ago, this proposal would allow the department to make grants to farm cooperatives of up to $50,000 for startup costs including of organizational development, financing, marketing analysis, and other investments need to start a processing or marketing agricultural products.

In introducing the bill to the committee, Vice Chair Vang shared how this initiative will help Minnesota farmers who are “growing new, often high-value crops, for which the market and supply chain is still emerging.” She is a champion for Minnesota’s industrial hemp industry in Minnesota.

MFU member and founding member of the Perennial Promise Growers Cooperative, Ben Penner, shared how this proposal would help his cooperative get off the ground and build a sustainable market for perennial grains developed by the University of Minnesota’s Forever Green Initiative. Miah Ulysse, representing 40 Acres Coop, talk about how his could help the black-owned hemp cooperative add value to their products through processing. The bill will be considered for inclusion in the Agriculture Omnibus Finance bill—the final end-of-session package that funds MDA.

On Monday, Chair Sundin’s committee held the first hearing of the Governor’s budget recommendations, which form the basis for the Ag Omnibus Bill. MFU shared strong support for increasing access to meat processing, investing in climate-smart agriculture, helping stations upgrade their pumps to use higher blends of biofuels, supporting land access and farm transition, and a number of other important initiatives.

“While agriculture is the foundation of Minnesota’s economy—generating $112 billion in economic impact and supporting more than 430,000 jobs—our budget for MDA makes up less than 1% of the state’s overall budget,” said President Wertish in written comments. “We support growing that investment in farmers and rural communities.”

President Wertish also gave strong testimony in support of increasing the state’s biofuel blend rate from 10 to 15% in the coming years. He explained to House Commerce Committee members that this provides important benefits to not only farmers, but also urban and suburban residents who will experience improved air quality and lower prices at the pump.

In the Senate, Chair Torrey Westrom’s (R-Elbow Lake) committee heard a proposal to increase funding for Minnesota’s Farm-to-School programs, which can strengthen local markets for producers all while introducing young people to nutritious food. This legislation, led by Senator Mike Goggin (R-Red Wing) seeks an additional $4 million for successful programs currently serving students and farmers at MDA.

MFU has also shared testimony in support of these initiatives and others, including making Community Solar more available to farmers, establishing an special license plate to pay for ag education, funding the emerging farmers working group and funding reimbursements for producers who experience wolf and elk depredation.

Minnesotans received encouraging news at the end of February when the state’s Office of Management and Budget (OMB) released an updated forecast estimating the difference between state revenues (i.e., taxes and fees) and state expenditures (i.e., state staff salaries, grant programs and tax credits). The forecast showed a projected $1.6 billion surplus, a much brighter picture than the $1.27 billion deficit projected in November.

While this is certainly good news, officials were quick to note that this is likely a short-term surplus due to lower spending on state services during the current budget cycle and higher projected revenues going forward, thanks to a likely $1.9 trillion federal stimulus package that is still under negotiation. To put that surplus in perspective, last biennium’s budget came in at around $48 billion. Still, there are opportunities to make short-term investments that will have long-term positive impacts for agriculture.

MFU priorities earned hearings in key House and Senate committees. In early March, Senate Agriculture Committee Chair Sen. Torrey Westrom (R-Elbow Lake) and his committee heard Sen. Andrew Lang’s (R-Olivia) bill that would invest $1 million in local meat and poultry processing facilities across the state and to start new plants. This proposal reflects an investment outlined in the Governor’s budget. MFU Executive Committee Member Josh VanDerPol testified about what this investment could mean for his farm business, Pastures ‘a’ Plenty. President Gary Wertish added in written testimony that this is a “top concern” for MFU members across the state.

“[This investment will] help new and existing meat and poultry processors expand their capacity to provide needed relief to farmers who are wondering how they will bring their animals to market,” President Wertish said. “At MFU, we continue to hear from farmers who are considering building their own plants, in large part due to their frustration with trying to find slaughter capacity near their farm.”

Legislation to move the state’s biofuel blend standard from 10% to 15% (SF 1178/HF 1433) was put forward by Governor Walz, carried by Chair Westrom and Rep. Luke Frederick (DFL-Mankato), and supported by MFU and others. In committee hearings, President Wertish gave strong testimony referencing not only market benefits for many farmers, but also the opportunity to reduce greenhouse gas emissions.

Bipartisan legislation to make needed investments in broadband development across the state (SF 22; HF 14) was also heard in both houses.

“Family farmers rely on the internet to connect with customers, monitor market trends, educate themselves on the latest farming methods, and make use of modern farming technology—it’s increasingly essential to running a farm business,” said President Wertish in written testimony. “High speed internet isn’t a luxury—it’s a need.”

Finally, one bill that has only received formal hearings in the House so far is an effort to reauthorize the state’s Farmer-Lender Mediation program and extend the timeline for farmers from 90 to 120 days. This legislation (SF 1329; HF 80) is championed by Rep. Lippert (DFL-Northfield) in the House and Sen. Kent Eken (DFL-Twin Valley) in the Senate. Rep. Lippert has heard from constituents and others about the importance of this program—it can help farmers and lenders find mutually agreeable ways to resolve agricultural debts. MFU strongly supports this program and President Wertish testified multiple times on how it helps level the playing field for farmers who are facing extreme financial stress.

MFU has weighed in on a host of other issues including creating a public buy-in option for health care, strengthening energy conservation, expanding the Beginning Farmer Tax Credit, creating a special agricultural license plate to fund ag education, federal tax conformity and supporting county fairs.

The start of February brought colder weather and ramped up legislative work, both on the state and national level. In Minnesota, the state legislature dug into details of Governor Walz’s budget proposal, and on the federal level, Congress held confirmation hearings for key cabinet officials, including former Secretary Tom Vilsack for USDA, and advanced another COVID relief package through key procedural hurdles.

As always, and though now via phone and Zoom, MFU is working hard to make sure that legislators, cabinet officials and other policymakers understand the needs and perspectives of family farmers and rural communities.

At the start of this month, the Minnesota House and Senate agriculture committees spent committee time considering the budget proposals brought forward by Governor Walz. These proposals will form the basis for the agency funding and policy bills, which will be formally released in the coming days. They also reflect the Governor’s “opening offer” on budget negotiations with the House and Senate. The Governor’s budget includes many of MFU’s key priorities, including investing in small and mid-scale meat processors, funding for broadband buildout across the state, investments in biofuels, farm transition and investments in climate smart agriculture.

While the state’s budget is limited due in large part to the need to balance spending with revenues each biennium, many of these proposed investments could leverage additional federal dollars, maximizing their impact and bringing more investment to the state. For example, as part of the $900 billion COVID-19 relief package passed in December, Congress approved a modified version of the RAMP-UP Act which invests $60 million in upgrading custom exempt and ‘equal to’ processing facilities to federal inspection standards. This bill was a top priority for National Farmers Union (NFU) and was championed by then-Chair Collin Peterson (D-MN7), Senator Amy Klobuchar (D-MN). The $1 million for meat and poultry processing in the Governor’s budget could help match these federal funds, attracting more investment to Minnesota.

Similarly, the Governor’s proposed investments in biofuels infrastructure will leverage federal investment and could help serve as a match for federal dollars. We were pleased that he submitted a letter to President Biden last week in support of the biofuels industry, on behalf of the Governors’ Biofuels Coalition which Walz chairs.

In Minnesota, much of the conversation about the budget has centered on how to make up for a projected $1.28 billion budget shortfall going into the next two years. The Governor proposes closing the gap through a mix of tapping the state’s reserves, carrying over some funding from the current budget, and increasing taxes on the 0.7% of the highest income earners in the state (couples earning over $1 million annually), and some corporations.

Those families in lower tax brackets would see a modest decrease in their tax liability under the Governor’s plan.

Next week, the Legislature will receive an updated forecast estimating the difference between state revenues (i.e. taxes and fees) and state expenditures (i.e. state staff salaries, grant programs and tax credits). This will revise the December forecast estimating a $1.28 billion shortfall and will provide the basis for budget negotiations going forward.

Coming soon after the February forecast is the first legislative deadline on Friday, March 12. Prior to this deadline, most policy bills need to have been approved by at least one committee or they’re no longer up for consideration. This helps legislators, advocates like MFU, and members of the public narrow their focus to a smaller number of proposals. This is particularly important given that well over 1,000 bills have been introduced so far this session—and more are coming.

Instead of voting to approve a measure, committees can also lay the bill over for possible inclusion—if you watch the agriculture committees, you’ll see them take this tack often, including for MFU priorities. This means that the committee has considered the proposal and could add a version of it to the omnibus finance or policy bill. This is what was done with Rep. Lippert’s (DFL-Northfield) bill to lend more time to farmers who are subject to farmer-lender mediation, the first bill heard by the House ag committee.

On the federal level, the Senate Ag Committee considered the nomination of Agriculture Secretary Tom Vilsack, who has been re-nominated to serve in that post by President Biden. As part of the hearing, Senator Klobuchar (D-MN) confirmed his strong support for biofuels and Senator Smith (D-MN) asked him about his plans equitably administer programs and make sure that underserved producers are supported by the USDA. If you want a window into the early days of the new USDA, you can watch the full hearing here.

Also in Washington, progress continues on President Biden’s $1.9 trillion stimulus package, which includes larger stimulus checks, additional aid for folks who are unemployed, and funding to ramp up vaccinations. Important for agriculture and as highlighted by National Farmers Union, the bill includes $16.1 billion in support for farmers, farm workers, people facing hunger, meat processors and others.

Progress on this package is also important for state legislative work given that Biden has proposed sending significant funding to state and local governments, schools and others.