Working group finds agreement on workforce budget bill

An agreement on the workforce, labor and economic development budget bill would reduce General Fund expenditures while preserving many grant programs championed in the Senate bill.

A working group approved an agreement Thursday night that would meet a target of cutting General Fund spending by $28 million for the 2026-27 biennium. The agreement is based on the regular session’s omnibus workforce budget bill, HF2440/SF1832*, sponsored by Rep. Dave Pinto (DFL-St. Paul) and Senate President Bobby Joe Champion (DFL-Mpls).

However, it would appropriate $83.49 million from the Workforce Development Fund, ensuring continued support for programs like Vocational Rehabilitation, Pathways to Prosperity, and Youth-at-Work and those run by nonprofit organizations.

Workforce, economic development budget

The agreement would provide the Department of Employment and Economic Development with a net increase of $53.55 million from all funds.

The deal would provide $6.05 million for Explore Minnesota, which includes $5 million to help host the World Junior Hockey Championship, set to take place in Minnesota next winter. There is also $671,000 to aid in hosting the Special Olympics USA Games in 2026.

Among the changes would be a funding increase for the Drive for Five program, which prepares workers in high-wage, high-demand fields. Allocations for the Job Creation Fund and Redevelopment Grant Program would be reduced or eliminated.

The agreement includes $50.85 million in direct appropriations from the Workforce Development Fund for grant programs, along with multiple nonprofit organizations offering training and workforce support. Almost all would be one-time appropriations of $1.5 million or less.

A Task Force on Workforce Development System Reform would be established to evaluate how Minnesota sets goals and measures outcomes. A preliminary report would be due the Legislature by Feb. 15, 2026, with a final report submitted Jan. 15, 2027.

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Labor and Industry Department

The Labor and Industry Department would see a $2 million increase, supporting its operating budget and teacher apprenticeship programs.

The bill would also raise contractor inspection fees – a measure department leaders argue is critical to preventing delays in construction projects.

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Policy

Among the policy provisions is one that would reduce the top rate for premiums on paid family and medical leave from 1.2% of taxable wages to 1.1%.

Other provisions would:

• specify that an employer must provide a 30-minute meal break for anyone working six hours instead of the current eight hours. There is no longer a $1,000 penalty as proposed by the Senate;
• increase the penalty for deliberately misreporting facts regarding unemployment insurance;
• extend benefits for workers impacted by Iron Range mine closures;
• establish a uniform report card for organizations getting grants and allow the Department of Employment and Economic Development to halt funds going to noncompliant groups;
• remove individuals from those eligible for cannabis industry training grants; and
• mandate a report on the number of misclassified workers and the revenue impact of lost payroll taxes.

One unresolved issue concerns noncompete clauses. While Minnesota banned them in 2024, the House bill would allow restrictions for certain higher-income employees.

The conference committee rejected provisions in HF1768, sponsored by Republican Floor Leader Harry Niska (R-Ramsey), which would allow noncompete clauses for more employees than the bill passed by the House. It would permit noncompete agreements for anyone earning more than $500,000 or workers managing confidential information earning more than $120,000.

An amendment unsuccessfully offered by Sen. Jennifer McEwen (DFL-Duluth) would restrict noncompete clauses to research and development employees making at least $300,000.