Minnesota Budget Proposal Raises Concerns Among Senior Care Advocates

Proposal could have implications for long-term care providers

Minnesota Governor Tim Walz’s budget proposal is raising concern among senior care providers and advocates. Proponents say the budget proposal announced late last week aims to close tax loopholes, cut sales taxes and curb spending growth on the biggest drivers of escalating costs. But senior care and assisted living providers are concerned as the proposal would reduce reimbursement rates while increasing fees for assisted living providers, creating critical funding issues for care providers.

Minnesota budget deficit looms

At issue is a projected budget deficit on the horizon, as Minnesota is spending more than it is bringing in. At the current rate, the state is projected to have a multi-billion-dollar deficit by mid-2027. Lawmakers say increasing costs in programs for older adults and children with special needs are the biggest drivers of the issue, as Minnesota, like all of the U.S., faces an aging population and increased use of disability services. Budget uncertainty also looms as sweeping economic policies and funding cuts proposed by the incoming administration are likely to have an impact at the state level, as the federal government currently covers more than half of the cost of the Medicaid program in Minnesota known as Medical Assistance. Add inflationary pressures to the mix, and the economic picture for the state becomes even more clouded.

The proposed budget includes a decrease in the general sales tax rate in anticipation of increased tariffs proposed by the incoming administration. The cut amounts to a decrease of 7.5 cents per $100. In addition, wealth services offered by banks, lawyers and investors, previously exempt from sales tax, would be responsible for sales taxes under the proposed budget.

Proposed budget implications for senior care

Industry insiders fear the implications of the budget proposal on the senior care industry could further burden a sector that is already wrestling with myriad complex challenges. The majority of the cost savings in the budget proposal come from reducing the projected growth in services for older adults and people with disabilities.

Minnesota automatically increases reimbursement rates for Medicaid providers based on inflation but the governor’s proposed budget would cap the automatic increases at 2%. That is slightly lower than the projected inflation rate of 2.3% projected by the Federal Reserve.

Funding cuts or limits to senior care would come at a time when the industry is already facing growing demand as baby boomers seek housing solutions for their golden years. That so-called silver tsunami already has developers scrambling to build to meet demand, with a massive senior housing shortfall projected. Issues related to inflation, as well as proposed tariffs, could further challenge the senior care industry in Minnesota, though the extent of these issues can be difficult to project. Walz’s proposed budget would provide $3 million more over two years for nursing homes to improve health and safety oversight. This would be financed in part by a $50 per-resident licensing fee increase.

Opponents of the budget proposal in the senior care advocacy realm have encouraged senior care industry stakeholders to contact their legislators and voice their support for continued investment in long-term care to ensure seniors and caregivers are not placed in a critical economic situation.

Divided House and Senate to take on budgetary issues

Minnesota lawmakers negotiate a two-year budget to fund the state government in odd-numbered years. Bipartisan support for the budget proposal will be necessary for it to pass, a tall order when both chambers of the legislature are split nearly down the middle between Democrats and Republicans, with Republicans having the slight majority, 67-66, in the Minnesota House of Representatives.

A special election at the end of January in House District 40B could shift the chamber to an even split or widen the Republican majority, while a special election in the State Senate for a vacancy in Senate District 30 should determine who obtains a majority in that chamber, currently tied at 33-33. If lawmakers can’t pass a two-year budget by June 30 and secure the governor’s signature by July 1, some or all of the state government could shut down.