Although the official start of the Minnesota Legislative Session was January 14^th, a House DFL boycott and a temporary power-sharing agreement in the Senate largely prevented the Legislature from conducting business as usual.

The Legislature really began its work in early February, following an agreement between the House GOP and DFL that resulted in the House DFL’s return to the Capitol after denying quorum for almost 4 weeks.

Now that both bodies of the Legislature have been in operation for about a month, here is where things currently stand:

Paid Family Leave Implementation Extension

Among the first batch of bills introduced in the Minnesota House was HF 11 (Baker)/Senate File TBD, which would extend the implementation of the MN Paid Family & Medical Leave program for one year. NFIB testified in strong support of this bill, which would provide additional time for small businesses to adjust to the burdensome requirements of the new program, as well as an opportunity to explore additional ways to make the program less burdensome for small businesses.

This bill is one option being considered to provide some temporary relief to small businesses regarding this massive mandate. Discussions with lawmakers and other stakeholders as to additional options to rein in the program requirements to make it less burdensome and less costly are ongoing and are sure to continue throughout the duration of the 2025 Legislative Session.

Tax Issues

An early NFIB-supported bill that has been moving through the Minnesota House is HF 5 (Joy)/SF TBD, which would repeal the 50-cent retail delivery tax on transactions of $100 or more, as well as the automatic, inflationary increase in the state’s fuel tax. Both measures were passed in 2023 and were opposed by NFIB at the time. The repeal of both measures will reduce operational costs for small businesses that rely on delivery services and will lead to savings for both businesses and consumers.

Another tax relief measure that NFIB is happy to support is SF 44 (Rest)/HF 386 (Norris), which would establish a vendor allowance for retailers who collect state sales tax. This responsibility requires small businesses to incur additional costs associated with administration and compliance efforts, and Senate File 44/House File 386 recognizes the costs that small business owners incur due to the obligations imposed on them by the State and provides them with much needed relief. SF 44 was recently heard in the Senate Taxes Committee and was laid over for possible inclusion.

In addition to these specific proposals, there have also been numerous bills filed that would reduce the state income and/or corporate franchise tax, which NFIB is in full support of.

On the flip side, Governor Walz’s 2025 Budget Proposals includes an extremely modest decrease in the sales tax rate of 0.075%, while expanding the sales tax to legal, accounting, brokerage, trust, and some other bank services. Despite the modest decrease, the expansion of the sales tax would result in $185 million in additional revenue in FY 26-27 and $240 million in additional revenue in FY 28-29. As expected, the budget proposal also includes other fee increases that fall under non-tax revenues.

Health Insurance Costs and Mandates

NFIB testified in support of HF 400 (Perryman)/SF 565 (Frentz), which would require the State to defray the costs of associated with newly mandated health benefits that increase the price of health insurance premiums.

The unsustainable pace at which health insurance premiums have increased has added to the financial pressures faced by many small business owners, and NFIB members have consistently identified the rising cost of health insurance as their top business concern. NFIB supports HF 400/SF 565 because it will help to ensure that small businesses and their employees are not burdened with higher out-of-pocket costs and are able to maintain the affordability of health insurance.

NFIB also signed onto a letter of support for SF 333 (Dahms)/HF 837 (O’Driscoll), which would provide funding for the Minnesota Premium Security Program (“Reinsurance”) through 2027. You can find the full letter here. NFIB has long been supported of the reinsurance program, which has resulted in health insurance premiums that are about 20-25% lower than they would otherwise be. This program has been effective in bringing stability to the individual market, which is an important source of coverage for very small employers and their employees.

If funding for the program is not continued after 2025, health insurance premiums are expected to increase by 25% or more. NFIB will continue to support this bill as it moves through the legislative process.

Constitutional Amendment on State Surplus Dollars

NFIB is pleased to support HF 4 (Johnson, W.)/Senate File TBD, which aligns closely with a 2025 NFIB Member Ballot position supporting an amendment to the state constitution that would adopt limits on state spending growth and require automatic refunds of surplus dollars. The bill was recently heard in the House Taxes Committee, and NFIB voiced our support.

HF 4 proposes an amendment to the Minnesota Constitution that would require a portion of a projected budget surplus to be returned to state taxpayers. Without such a mechanism, NFIB is concerned that spending will continue to increase to unsustainable levels – like the nearly 40% increase in Minnesota’s budget passed in 2023 – and that the costs will be passed onto small businesses.

Earned Sick and Safe Time Reforms

NFIB applauds the re-introduction of HF 1325 (Schultz)/Senate File TBD, which would help to reduce the burden of the Earned Sick and Safe Time (ESST) mandate on small employers. Minnesota’s ESST mandate is one of the most burdensome versions of this law passed anywhere in the country. It even goes further than similar local ordinances in Minneapolis, Duluth, and Bloomington!

The ESST fix-it bill would, among other changes:

• allow small employers with fewer than 25 employees to pay ESST hours at half the employee’s regular rate
• modify covered employment to exclude relatives of an owner, minors under 18, irregular workers, part-time workers, and seasonal workers
• allow employers to impose a 90-day waiting period before new employees can use ESST
• allow employers to withhold ESST payment when employees do not comply with notice or documentation requirements

These changes would provide some balance to the badly skewed ESST law and enable employers to prevent abuse of ESST.

Minimum Wage Increase

SF 671/HF TBD has been introduced, which would phase in an increase to the state’s minimum wage to $20 per hour by August 1, 2029. While this bill has not yet been scheduled for any hearing and the prospects for it are unlikely, NFIB stands opposed to minimum wage increases and will actively oppose the bill if it moves forward.