On Monday, June 9 state lawmakers fulfilled their constitutional obligation to finalize a new state budget for everything from road construction to education. Legislative leaders and the governor reached this deal despite a strained budget outlook and a historically divided legislature. Out of 201 lawmakers, Minnesotans elected 100 Republicans and 101 DFLers, delivering a house that was evenly divided (67-67) for the first time in nearly five decades.

Despite these challenges—and through the hard work of members who took time to travel to St. Paul, host farm tours, and contact their representatives—the budget reflects a step forward for several of MFU’s grassroots priorities in agriculture, taxes, healthcare, education, and other areas. In all, MFU testified over 30 times, helped draft legislation and amendments, wrote detailed comments for committees, and otherwise maintained a strong presence at the State Capitol.

Thank you to all who showed up to testify, to join for lobby day, or to help inform our grassroots policy priorities.

The 14 bills that made up the bulk of the new $67 billion budget were negotiated after the legislature’s constitutionally required adjournment on Monday, May 19. Passage averted a partial government shutdown on July 1 and more layoff notices which needed to be sent on June 10.

Not included in agencies that were primed to shutter absent a new budget was the Minnesota Department of Agriculture. That’s because in a bright spot of early bipartisan agreement—and one day before the legislature was set to adjourn—the Minnesota House and Senate passed a new, two-year budget for agriculture programs on a broad bipartisan basis. Out of 201 legislators, only 12 legislators voted against the final package.

The ag bill was negotiated by Senate Chair Aric Putnam, DFL-St. Cloud, and House Co-Chairs Rep. Paul Anderson, R-Starbuck, and Rep. Rick Hansen, DFL-South St. Paul. According to an agreement negotiated by legislative leaders and the governor, the package increase general fund investment in agriculture programs by $9 million over the next two years and $3 million in the following. This increase is notable given the long-term fiscal challenges facing the state and the steep cuts in other jurisdictions. You can read more about the agriculture budget and see how each lawmaker voted here.

Also during regular session, the legislature also approved the Legacy omnibus, which appropriates funding levied according to the Clean Water, Land and Legacy Amendment passed in 2008. In addition to funding water quality programs at Minnesota Department of Agriculture and crop development at the University of Minnesota, the bill includes a new appropriation to the Minnesota FFA to celebrate and educate the public about FFA’s 100-year legacy. MFU’s legislative intern, Amber Findlay, from Herman, testified in support of this initiative.

“MFU understands the importance of investing in programs that connect students to agriculture,” Findlay said in testimony. “I was proud to be a part of the FFA organization, and I loved seeing how the organization propelled myself and my brother towards success in our college careers. FFA has been a cornerstone of leadership development and agricultural education for a century, and this funding will ensure that students have new opportunities to explore the cultural and historical aspects of agriculture.”

Tax provisions

When regular session adjourned, lawmakers continued their deliberations through informal “working groups.” Though—much to the ire of lawmakers on both sides of the isle—much of the actual negotiating was done behind closed doors.

In the Senate Tax Committee, Chair Anne Rest, DFL-New Hope, carried in a Senate offer that included long list of agriculture provisions including lifting the cap on total state funding for the Beginning Farmer Tax Credit, piloting a new $5 per acre tax credit for farms enrolled in Minnesota’s Agricultural Water Quality Certification Program (MAWQCP), increasing aid for Soil and Water Conservation Districts (SWCDs), extending the state tax credit for Sustainable Aviation Fuel (SAF), and more. Much of this was championed by the Senate Agriculture Chair and member of the Tax Committee, Aric Putnam, who made an impassioned case for investments in agriculture during multiple public meetings.

Ultimately—and through negotiations with the House—the tax bill was narrowed significantly. In part, House lawmakers highlighted that this avoided cuts to aid for counties and local governments. Despite a more limited proposal, one important and long-awaited MFU priority was retained in the final deal.

The final Tax Bill expands the Agricultural Homestead Tax Credit to those farming small acreage, a proposal MFU worked hard on with Chair Putnam, Sen. Steve Drazkowski, R-Mazeppa, Rep. Kaohly Her, DFL-St. Paul, and others. Under current law, farmers can qualify for Ag Homestead—and often agriculture zoning—only if they cultivate 11 or more contiguous acres. This leaves many beginning, vegetable, cut flower, and other farmers operating on fewer acres unable to benefit from this keystone credit.

After many years of work—including before my time with MFU—the 2025 tax bill will allow farmers living on parcels that are less than 15 acres to qualify for ag homestead if they are engaged in market farming and demonstrate at least $20,000 in gross income on their Schedule F. This compromise ensured key support from the Association of Minnesota Counties and members of both caucuses at the legislature. The deal also ads cut flowers to the definition of agricultural products, ensuring that they and other farmers on small acreages will benefit from targeted tax relief and ag zoning.

Large Animal Veterinarian Loan Forgiveness remains

Also during Special Session, the legislature approved a new Higher Education budget that retains funding Large Animal Veterinarian Loan forgiveness, a program that was targeted for cuts. While not nearly enough to solve the shortage of large animal veterinarians, MFU was eager to highlight that somewhere near 95 percent of those who’ve received loan forgiveness have stayed to practice in rural areas.

Republican priority

The longest and most contentious debate during Special Session was over a standalone bill to prevent undocumented adults from benefiting from MinnesotaCare—the state, premium-supported, healthcare program that covers lower income working Minnesotans. This was a top priority for House Republicans who made their necessary votes on an overall state budget contingent on the change. Along with the hospital association, faith leaders, and others, MFU supported undocumented inclusion in MinnesotaCare, citing the fact that people are working in our communities, paying taxes, and need affordable healthcare. Not having healthcare can also result in more costs to the state and hospitals when symptoms worsen and people visit the emergency room for care.

Healthcare changes

The broader healthcare package passed during special session was a mixed bag when it came to MFU healthcare priorities. The bill repealed existing state authority to pursue the federal waiver necessary to implement a ‘public option’ that would allow farmers and others who are not income eligible to ‘buy-in’ to MinnesotaCare. While the Trump administration was unlikely to approve such a waiver, MFU advocated for protecting that authority to ensure future flexibility. In addition, an increase to Medicaid reimbursement rates for rural Emergency Medical Services (EMS) that was included in the Senate’s budget, was not included in the final package.

That said, MFU did play a role in delivering significant victories for rural independent pharmacies. This includes a $4.50 additional per prescription dispensing fee to small chain and independent pharmacies located in medically underserved areas that will expire at the end of 2026. The dispensing fee will be for prescriptions filled under Medicaid and is seen as temporary lifeline for community pharmacies that have been struggling to stay afloat because of low reimbursement rates from large vertically integrated pharmacy benefit managers (PBMs).

That targeted dispensing fee is a bridge to a more structural reform included in the bill that would implement a “single-PBM” model for administering pharmacy benefits under Medicaid. Currently Minnesota contracts with a variety of health insurers to administer Medicaid benefits and those insurers have PBMs to handle prescription drug coverage. Beginning in 2027, Minnesota will move to a master contract with one PBM that will be required to provide fair reimbursement to community pharmacies and will save the state money by eliminating spread pricing (difference between what a pharmacy is paid and what the state is charged for the same prescription), decreasing administrative costs from having multiple PBMs, and instituting a new drug pricing benchmark that will result in decreased payments on specialty drugs to specialty pharmacies that are disproportionately owned by PBMs.

In addition to these changes for community pharmacies, the bill also includes new requirements on health systems to report their usage of hospital facility fees, which are fees charged for using a clinic or provider affiliated with a health system or hospital. These fees are meant to cover overhead expenses, but are charged even in outpatient settings at clinics not located on a hospital campus. These fees increase costs and can create incentives for large health systems to acquire independent clinics and medical providers.

Next session

The next regular session is set to start on Feb. 17, 2026. That said, Gov. Tim Walz and others were quick to warn that lawmakers would need to return to St. Paul if the trifecta in Washington succeeds in cutting Medicaid, SNAP, and other programs that make up a significant portion the state budget. As always, this is just a snapshot of MFU’s work at the legislature. If you have questions, thoughts, or concerns, reach out at stu@mfu.org or (320) 232-3047 (C).