ST. PAUL — State lawmakers this week debated whether to exempt federal business loans and unemployment benefits from state income taxes, a year after the first COVID-19 cases were reported in Minnesota

The pandemic struck the state's economy, as did executive orders temporarily forcing closures or capacity limits, but state economists said the hit wasn't as dire as they'd initially expected. And budget forecasts replaced a projected $1.3 billion budget hole with a $1.6 billion surplus.

The sunnier outlook for the state reignited discussions about how the extra funds could best be spent. With a March 15 deadline for some business owners to file income taxes, business leaders pressed legislators to waive state income taxes so they wouldn't have to pay for the loans they took out under the impression they'd be exempt.

Legislative leaders also worked in private to compromise on a security funding package days before a high-profile murder trial was set to start in Minneapolis. While they provided few details, the leaders on Thursday, March 4, said they felt hopeful they could strike a deal by next week.

And two plans related to cannabis advanced in either chamber. Senators voted to expand the state's medical-marijuana program to include dried marijuana flowers, while another House committee voted in support of legalizing cannabis for recreational use.

Newsletter signup for email alerts

Here's a look at what lawmakers worked on this week at the Capitol and what's on deck for next week.

A deal starts to jell on tax relief package

Legislative leaders entered closed-door discussions this week in an attempt to strike a compromise that could get tax relief to business owners that pulled down federal loans and Minnesotans laid off last year that received unemployment insurance benefits.

With a March 15 deadline for some business owners to pay state taxes on the Paycheck Protection Program loans, lawmakers said they needed to get a bill to the governor's desk within weeks. And they started crafting a bill that they thought could satisfy both Democrats and Republicans.

In a Tuesday, March 2, committee hearing, senators amended the bill to include some tax relief for Minnesotans that collected an additional $600 a week through unemployment insurance. Their proposal would let individual filers subtract up to $1,500 in additional unemployment payment income from their taxable income. And joint filers could have up to $3,000 waived.


Meanwhile, the more than 100,000 business owners that used federal loans to help keep their employees on payroll during the pandemic wouldn't have to pay state taxes on those loan dollars.

The proposal is set to come up for a floor vote next week and Tax Committee leaders in both chambers said they were optimistic that a plan could pass this year.

But an agreement in the divided Statehouse could come down to what makes it into the final bill. Democrats have argued that tax relief should be tailored to provide support to businesses struggling the most amid the pandemic and to unemployed workers in sectors that have been hit the hardest, like the state's hospitality workers.

Republicans and an independent lawmaker, meanwhile, said the state's economic recovery will hinge on helping businesses weather the economic hit they've faced due to the pandemic and state efforts to curb it. And they raised concerns about piling on too many other policies to the bill that could pull support.

SAFE Act funding on the horizon?

RELATED: Read more about the SAFE Account

Senate Majority Leader Paul Gazelka on Thursday, March 4, also said legislative leaders remained in negotiations about a plan to put up state funding for security preparations for the trial of Derek Chauvin, a former Minneapolis police officer facing second-degree murder charges in the death of George Floyd.

"I think we're fairly close. God willing, we'll get it done on Monday but it is a bill that I think we recognize there are places around Minnesota, whether it's Minneapolis or the north, where the pipelines are, where there's a benefit of coordination for extra police help," Gazelka, R-East Gull Lake, said Thursday.

The Senate passed a proposal to have cities, like Minneapolis, that might require additional backup in an emergency situation to pull from their local government aid dollars if they can't repay the funds by other means. And the House of Representatives took up then voted down on a bipartisan basis a plan to set aside $35 million for law enforcement emergencies that could be used to repay police departments tapped to assist others.

Public safety officials have said the fund would be helpful in getting more agencies to volunteer to assist Minneapolis should violence occur around the trial. And if state funds went unused, they could be saved for possible emergencies anywhere in Minnesota.

FOLLOW: The Derek Chauvin trial begins Monday, March 8. Follow our coverage here.

Senate pushes to expand medical cannabis program

A jar of marijuana buds. Shutterstock photo
A jar of marijuana buds. Shutterstock photo

The Minnesota Senate Health and Human Services Finance and Policy Committee this week advanced a plan that would allow patients on the state's medical-marijuana program to smoke cannabis as part of their treatment plan.

Minnesota is the only state with a medical marijuana program that prohibits the production or sale of dried marijuana flowers that can be smoked. Instead, patients in the program can use oils and other byproducts that contain THC, but patients in the state's program have said the current constraints are expensive and they limit consumer and producer options.

The Senate panel passed a bill that would expand the state program to allow dried marijuana flowers and would extend a COVID-19 era policy that allows for curbside pickup of medical marijuana products. Minnesotans struggling with opioid addictions could also access medical marijuana as a treatment under the plan.

The committee's chairwoman on Tuesday sought to ease concerns around the proposal, noting that the potential expansion of the medical cannabis program was not meant to signal support for legalizing marijuana for recreational use.

"This is a sincere step to update our medical cannabis program. It is not a path to legalization,” Sen. Michelle Benson, R-Ham Lake, said.

On Wednesday, March 3, a DFL plan in the House cleared the Workforce and Business Development Committee and, this time, picked up Republican support.

Follow Dana Ferguson on Twitter @bydanaferguson, call 651-290-0707 or email