Lawmakers push for proposals to tackle fraud, receive new economic forecast

This is Politics Friday on NPR News. I'm Brian Baxt. One word is echoing throughout the Minnesota Capitol this year. Minnesota has a fraud problem. We're kind of at a crossroads on the fraud fight. The fraud prosecutions are in disarray. Nothing really stands out as new and a way to really fight the fraud itself. They could have taken fraud prevention measures to try and make sure that ever happened in the first place. As you well know, fraud has been talked about with the fraud committee all last year. Pick up on it? Fraud. Many proposals under consideration to close off vulnerabilities that have enabled scammers to siphon money. Tougher penalties, more oversight, and better front-end controls, they're all in the mix. One of the most prominent ideas? The creation of an office of the inspector general. Members of both parties are pushing for one, but they're not aligned in how that gets set up, what the makeup should be, and what duties would fall under its umbrella. Two legislators working through that, and a whole lot more related to combating fraud, are with us today. Republican Representative Patty Anderson is a two-term House member from Delwood. She's also a former Minnesota state auditor. Good to have you on. Thanks for having us. And DFL Representative Matt Norris is also in a second term and represents Blaine. Welcome. Good to be with you. So I want to level set here. It appears to me that this year and the lead up to it has produced the most serious conversations involving members of both parties on fraud in quite some time, maybe ever. Does it feel that way to you, Representative Anderson? Absolutely. And specifically in regards to the OIG bill, we've been meeting for over a year, bicameral, bipartisan with the Senate, to try to get something that we can all agree on, which, of course, is what the Senate passed last year, 60 to 7. And what's changed to make this so much more of a prominent and bipartisan focus? Well, I think we're all furious about the fraud that's been occurring. It's, quite frankly, unacceptable. These are taxpayer dollars that are meant to help some of the most vulnerable Minnesotans. And when that doesn't happen, we should all be outraged about it. And that's why I think you've seen the House DFL bring forward a number of proposals this year to get our hands around this issue, not just the OIG proposal, but a number of others. And we'll get into some of those. And let's talk some of the particulars as much as possible. Let's stay away from the process, the floor and committee maneuvers. Representative Norris, why does the state need this new office for investigations when there's existing entities, say the legislative order, the attorney general's office, county prosecutors, the U.S. attorney's office? That's a really fundamental question about this office, and it's actually why I've tried to bring forward some tweaks to the bill, because we do have a number of entities that are already doing investigations of fraud. And we think that there's a way to enhance that by having an office that has some independence from the other executive branch agencies. But it shouldn't just be about investigations. We also should be focusing on the front end. What can we be doing to prevent fraud from occurring in the first place? We know it is far cheaper and more effective to prevent fraud rather than trying to track down these dollars after they've already gone out the door. And so those are some of the changes that I've been pushing to add to the duties of the Office of the Inspector General. We want strong investigative powers, but we also want to focus on prevention on the front end. Representative Anderson, the why? Why is this office needed when you have a whole lot of eyes looking at a whole lot of things? It's absolutely needed. And it's a different office than, you know, let's look at the Legislative Auditor's Office. That is an audit function that does not have enforcement powers. It is a legislative function, a controlled office that goes in and does audits of state government and produces findings. and we have seen over the last, you know, seven, eight years, the findings keep getting worse and worse and worse and worse. And so a lot of these investigations have come out of the audit findings. That's a very different thing than an inspector general. The inspector general's office, statewide, if you look at other states that have this, their job is to oversee, to prosecute, to be investigating, and to be that top watchdog over state governments and state programs. We don't have that. And I think that is a big reason why we have seen such disastrous things happen here in the state of Minnesota. But if the title does sound familiar to people, it's because that there are currently inspectors general in some state agencies that are looking at problems attached to federally supported programs. How would this new office fit in with that? Absolutely. The current, some of the state agencies have their own inspector general's offices. DHS is the most prominent one. But those folks are appointed by the commissioners and governor's office. They are not independent at all. And we know from whistleblowers and just from things that we have seen that they're actually influenced by the commissioners. They're influenced by the governor's office. That's wrong. We can't have people policing themselves. We don't do that in business. We shouldn't. Banks are overseen by investigative authorities. We should not be allowing the state agencies to essentially oversee themselves, because you have then what's happened here in Minnesota, which is a disaster. Well, to this point, Representative Norris, about independence, you're hemmed in a little bit by the Constitution, because you can't set up another branch of government without changing the Constitution. So how would this person work when they still would be attached the executive branch, presumably under some level of watch by the governor. So we've tried to put in as many procedures as possible to ensure the independence of this office while still placing it in the executive branch. So first and foremost, we state very clearly in the bill that this office is supposed to be able to operate without any interference from other entities in the executive branch. Then we put forward a bipartisan commission of legislators that would recommend candidates to the governor. They would vet candidates and recommend people that they feel meet the qualifications for this office and could do the job in an independent manner. Then this person, whoever the governor selects, would need to be confirmed by a three-fifths vote in the Senate. So not just a majority vote, but a three-fifths majority in the Senate. And then we also add in protections for removal. We don't want a situation where this person is being threatened with removal for partisan or any other reason. And so to remove this individual from office, it would have to be for cause after a public hearing. It would require a vote of the Senate and the House. And I'm actually proposing to bump that up to a three-fifths vote in both the Senate and the House to provide additional insulation from partisan pressure. I want to back up for a minute. This commission you talked about that would kind of start the vetting process for candidates, who's on it and kind of what does the governor have to select within the realm of who they put forward? So there would be two DFL House members, two Republican House members, two Republican senators, and two DFL senators. And to recommend a candidate, a candidate would need at least five votes. So they would have to get a vote from at least one member on each side of the aisle in order to be recommended to the governor. Importantly, under the Constitution, the separation of powers principle, we can't force the governor to pick from a narrow list of candidates if it's going to be in the executive branch. We feel like there would be a lot of political pressure to pick one of those recommended candidates, but we can't constitutionally require the governor to pick from those recommended candidates only. This person is going to be a pretty important figure in state government. How do you feel about the structure he just laid out? Well, first of all, most of those things have already been negotiated and are in Senator Gustafson's bill. That's the bill that passed the Senate 60 to 70. Correct. And it's the bill that we support and we thought all parties were on board with. And I think were until I think the governor's office got involved late last year after it passed. They do not like, and now House Democrats don't like, the enforcement powers of this entity that was set up, again, passed by partisans 60 to 70 in the Senate. They don't like the fact that the OIG, as agreed to, essentially, and has passed, has the ability that has a law enforcement arm and has an investigative arm. They don't like that. And they want to let police themselves. And that's what the objection is. And that's what this fight has been. I want to drill down on that point you just raised. What happens if this office finds credible evidence of fraud? Where do those cases go? So under the bill that passed under Senator Gustafson's bill, if they find credible applications of fraud, they can actually do something. They can actually arrest. They can prosecute. They can still send this to other entities overall to take over the case if they want. But they actually have the ability to do something. What we saw and have seen with the internal OIGs that exist within the executive branch, what we see with the legislative auditor who is constantly sending fraud allegations, bad financial practices, information, it just disappears. Nothing happens. Representative Norris, what's the hangup with the structure she just talked about? Yeah. We think it's really important that this office have strong investigative powers as well, and it remains with those strong investigative powers under the proposal that I've brought forward. The one thing that I'm proposing that we change is avoiding unnecessary and really costly duplication by creating another small law enforcement agency within this Office of the Inspector General. The proposal that I'm bringing forward still gives this office the ability to – the same ability that district courts have to issue subpoenas. It still gives them access to all the records and the offices and physical spaces of people who do business with the government. Just the one thing that it really wouldn't be able to do is do those arrests. And we believe that the Financial Crimes Division within the Bureau of Criminal Apprehension here in Minnesota already has the tools and resources to do that effectively. They have about four dozen sworn peace officers who do that work. It's really expensive to set up a small law enforcement agency. There's a reason you don't see every township in Minnesota setting up a two- or three-person law enforcement entity. And so we believe if we're going to be good stewards of the taxpayer dollars, let's trust the brave men and women at the BCA to carry out these arrests if they're needed. But we still maintain the vast investigatory powers of this office. Do you want to respond to that? Absolutely. The fraud problem in Minnesota is not a township government. OK, so it's the fraud problem in Minnesota is huge. And if we don't solve this and stop it in the future, you know, it's a disaster for Minnesota. And there are a lot of people in the state that are going to lose services. They're going to lose things. Now, let me talk about the BCA. The BCA originally was just a they essentially do murders and those sort of things. So then the governor last year combined the deed fraud unit, insurance fraud unit in there. The Commerce Department. The Commerce Department, right. What they have to do, 75% of what they do is insurance fraud. This is completely different, completely different. So what Representative Norris is talking about is essentially taking the teeth out of an agreed bipartisan bicameral bill that already passed the Senate and it taking that teeth and that enforcement division out of the OIG It just wrong You both know this but one of the elements of public frustration is just a lack of sense as to where, when complaints or allegations are raised, where they go, what happens to them. What is the level of transparency that you'll be expecting out of this new entity? Absolutely. This entity will be the top level for your complaints. Right now, people they don't know. They might call their, I get complaints. I get them as a legislator. They may ask the DHS. They might ask their county attorney. They don't really know what to do. So we need it very clear in the state, like many, many other states, that we have a top watchdog. We have someone who has the authority, the full control to actually go after fraud. And that is this Office of Inspector General. But the transparency element, like what do they have to show the public about what they're doing. Representative Norris. The transparency element is really important, and I'm glad that's been a real area of bipartisan agreement. The different versions of the bill, both the version that passed the Senate and the version that I've been bringing forward, retains a lot of reporting requirements, reporting to the public, reporting to the legislature. In fact, this office, it serves as kind of that central clearinghouse for all of these tips so that we've got one central place where they're being funneled through. And then it goes so far as requiring the office every year to issue a public report detailing all of the different tips that it received and then explaining what happened to each of those tips. Did they investigate and find that there was a problem? Did they investigate and find that it was just a misunderstanding or was it something that was completely frivolous? But so the public and as legislators will be able to see and monitor and make sure that this office is doing the type of high-quality investigative work that we expect. Before we move on, and I know we're in early times this session, but will an Office of Inspector General Bill reach the governor this year? Representative Norris. I absolutely think it can, but it's going to require all of us to adopt a problem-solving mindset to find the consensus to get there. Representative Anderson? I absolutely think it can, too. But frankly, it's going to require the House DFL caucus to recognize that the bill that passed the Senate, bipartisan, is not going to be gutted. We're not going to allow the administration to police themselves. Okay, I want to zoom out a bit. You guys have both known and mentioned, I think, legislative author Julie Randall. She has this triangle of fraud here. And for those at home, I'm holding something up so they can see it. It has motivation, which, you know, the money is the lure, the rationalization. Other people are doing it, so why not me? And opportunity, the loose controls. These after-the-fact instances tend to get a lot of the attention from officeholders, the media, and the public alike. How do you come at the pillars, prevention especially, so that they're given some level of weight beyond just the investigations to fraud that's already happened? Representative Norr? Yeah, that's part of what I'm looking to add to this bill, sharing an identification of best practices across the entire state enterprise. One of the challenges we have is we have a lot of different state agencies. Some are really big, some are really small, and they don't all have the same program integrity, expertise, or staff that perhaps a big agency like the Department of Human Services does. So one role that this Office of the Inspector General can play is making sure that they are identifying what are the best in class practices that each agency should be implementing to make sure that we are closing any of the vulnerabilities that exist and allow people to defraud these government programs. Another thing that's going to be really important for this office to do is to facilitate data sharing across those state agencies. And this is one area where our technology is really hampering us. Some of these programs are still run on systems that run MS-DOS. And it's really hard to do the sophisticated analytic work to identify the fraud when you're doing that. I'm going to get back to that one in a second here. But Representative Anderson, we heard from Tim O'Malley, who the governor picked to kind of look at some of this thing. And he talked about this culture of compassion versus one of compliance being an issue that the people in government want to help people get the benefits. And they're maybe not doing all the paperwork or the compliance stuff, is it? Absolutely. And it's true. And I have to give Tim O'Malley credit. If we just implement everything that he put out there, this will go away. It was an excellent, excellent report. And I know that there are, we haven't seen the governor's language of his fraud bills. He did say many of these are Republican ideas. They are. This should be done bipartisan, but we should do all of the O'Malley stuff. And O'Malley said we need an independent inspector general with enforcement authority. This technology issue, and I'll let you get it in in a second, Representative Norris, but I do want to ask you, Representative Anderson, we hear about these vintage systems. And is there going to be an appetite to upgrade them this year when money's pretty tight around the capital? I mean, we do have a little bit of a surplus, but that may create problems in the future if you go too deep. Absolutely. I think so. And it's atrocious what's out there and what the counties are using. I don't think this is going to cost hundreds of millions of dollars. You've got AI writing itself now. So it's in writing programs and code. And we should have a fantastic system where everybody's working together because that will stop a lot of this too. It sounds like there's agreement that technology will be a component of whatever fraud legislation comes forward this year. I think it has to be. That's one vulnerability that needs to be shored up. And I'm really glad to see that there is the bipartisan support for it. What about old-fashioned shoe leather, getting inspectors out to sites to make sure that the people who say they're delivering the services are delivering the services? Is there going to be money to support that, more bodies in the program compliance units? I think there should be. Those site visits are really critical. And this gets at one of the challenges that has been kind of a slowly developing problem, which is the chronic underinvestment in the infrastructure and the people that help these programs run. If we're not investing in the technology that's needed, if we're not investing in making sure that we have enough people to go out and do those site visits, make sure that we're doing the basic shoe leather, the program integrity work, then we start to see these problems. And then it starts to erode the public's trust in these really critical programs. And so we want to make sure that all of these programs have the resources that they need to be run effectively and efficiently and so that the Minnesota taxpayer can trust that when they send that tax dollar to the state, that it's actually going to help people with disabilities, to help low-income families pay for child care, the things that I think most Minnesotans support and are happy to see happen with their tax dollars. Just in the couple minutes we have left, Representative Anderson, let's say some of these or maybe all of these proposals become law. How will the public know whether they're success? Because no one plans for fraud and those looking to perpetrate it are always looking to find that new crack in the system. I think so. I sit on the fraud committee and we had on Monday we had the Autism Center report that came in. And as you know, last year they said we're going to do provisional licensing for autism centers. They gave them until, I believe, May to actually do it. There are 500 autism centers. Only six have applied for a license. Only six. And in the meantime, almost 100 shut themselves down or the state shut them down. I think that Minnesotans will know that we've been dealing with the fraud when we see that autism center number go from 600 senators and $300 million a year back down to the numbers that we were at four or five years ago. Metrics for success, Representative North? I think we want to see fewer cases of these sorts of fraud. We want to see the proof from the reporting that we put into bills like the Office of the Inspector General bill, where we're seeing that tips are being followed up on, and either there's a fewer number of tips or the tips that are coming in are determined to be unfounded. That'll be an indication that we're really getting at the underlying business model of fraud that we're seeing where these for-profit businesses have realized that there's vulnerability in our public programs and are using really sophisticated schemes to target the Minnesota state government. Well, this was a great conversation. Representative Norris, thank you. Thank you. And Representative Anderson, thanks for coming in. Thanks. You're listening to the Politics Friday podcast. We'll be right back after this short break. I'm NPR News Politics reporter Dana Ferguson. The many hours I spend at the state capitol and on the campaign trail are made possible by support of Minnesota Public Radio members. Thank you for your support. This is Politics Friday on NPR News. I'm Brian Baxt. Right now, just down the street, a parade of press conferences has begun. They're all about numbers. Lots of numbers. The state's new economic forecast is out today. Finance officials are presenting, and then the governor and top lawmakers will offer their impressions about what it all means for their work. We're going to take some time dissecting the report we just got in our hands. I've called upon our in-house economics expert for that, Chris Farrell. Thanks for joining me. Well, I'm glad to be here and I'll see what I can do. Well, Chris, too many numbers on the radio can be a minefield for listeners. So just give me a couple that you think are key. Okay. So if you just take a step back, this was a good report. This is an optimistic report. And then we'll get to all the caveats to that. But the projection is much better than the one that they made several months ago, right? And the key here is the projected balance is now $3.7 billion over the next 16 months. The surplus, perhaps. The surplus, right. And that's $1.3 billion higher than back in the November estimate. So this is a good number. Going through the report, which had to do kind of quickly there, a lot of it has to do with a more optimistic picture of the United States economy or the U.S. economy. And Minnesota is one of those states that is highly influenced by what's happening with the overall economy. Yeah, I saw those growth bars and they're a little bit ticked up from each year. That's right. So that was the main factor here. Because if you think about everything that we've been through here in Minnesota with Operation Metro Surge and immigration crackdown and all the fraud, I mean, you would think this has been a difficult time. But when you're looking at the overall national economy, the projections there are, look, on the fiscal side, you got the big, beautiful bill. And so corporations are getting a lot of tax cuts. Individuals are expected to get decent tax refunds. So inflation is expected to come down. Employment will continue to grow. And so it was a more optimistic picture for the economy. All right. Any forecast involves informed guesswork. I guess economists would prefer, I might say, projections. But this forecast seems to come with more than most. What are some of these fuzzy areas that we should be watching for? Okay, so there's a lot of fuzzy areas. And the main one is what we've just been going through, Operation Metro Surge, which is winding down. And in the report, it says we don't have the data, and we won't have the data for several months. There is North Policy Action, which is a union-backed independent research institute. You know, they made a statewide estimate that, you know, it will take a hit to the economy of about $600 million. OK but that not reflected here So one is Operation Metro Surge And I think we also need to talk about the longer impact in terms of immigration and thinking about demographic Yeah say more about that Well, one of the things is when you look at Minnesota, Minnesota economy has been growing. And one of the reasons why it's been growing is because of immigration. And right now, we have a hostile environment toward immigration. One of the big open questions is, is this going to continue to be a welcoming state for immigrants? And also, we always talk a lot about the headquarters cities, the multinational corporations. Well, if you think about the multinational corporations, they have a multinational workforce. And will they, over time, decide, well, rather than bringing someone in from overseas to work out of here, we'll just keep them overseas and continue to do our work that way over Zoom? Well, the stuff that you can't put overseas, I'm thinking about the farm economy and the food manufacturing, food production economy, those are also heavily immigrant dependent. Are they worried? They are extremely worried. I'm glad you mentioned that because there's the comments from the Minnesota Council of Economic Advisors, you know, after the White House Council of Economic Advisors. Two of the areas that they highlight that is more negative in Minnesota than for the rest of the country, one is agriculture and the other is tourism. And because we're going into the tourism season. And just if you look at our neighbors to the north, for example, they're not coming down here anywhere near in the numbers they were before. So one week ago, the Supreme Court, the U.S. Supreme Court ruled on the president's tariff structure. And he was on right during this the same hour talking about how, despite what the Supreme Court said, I'm going to keep tariffs going. In fact, I'm going to jack them up on some countries. That's been something of a kind of a point of uncertainty, I guess, for businesses and others. How do those tariffs and this continuing what's going to happen with them, how does that factor into this long-term outlook? It's basically a negative for the economy. I mean, there is a positive. You're just looking at revenue where because of higher prices, because 90, 95% of the tariff gets passed on to consumer. So you're paying more when you buy something, you're paying higher sales taxes. Okay, That may give you something of a boost toward your state revenue. But then think of the offsetting. All the input costs, steel, copper, lumber, you just name it, that is affected by tariffs, those costs are going up. That affects a lot of the Minnesota businesses. That means that their profit margins are probably going to be less, and they'll be contributing less to state coffers over time. So there's nothing in this report that says that tariffs are positive. There's a lot of concern in this report about the negative impact of tariffs, the on again, off again. As you just mentioned, we now are going to have this 10%, 15% global tariff. Who knows what's going on? Well, a lot of headquartered companies in other places, the big ones that people know about, Costco, FedEx, Goodyear, have been saying we're going to seek refunds. And some of them might say that they're going to pass them down to the consumers who pay them. Have we heard that from any of the Minnesota companies yet? Yes, I understand that. I have heard, but I don't know the details that some of the Minnesota companies. I mean, look, everybody is going to be, if they've been paying, they're going to file for a refund. The notion that the government's not going to refund the money just does not make any sense. All right. The federal funding uncertainty, we saw it play out just this week. We saw some health money halted by the White House and other aid freezes that have been threatened over the last couple of months. A lot of it is tied up in court, might be for months. How does that factor into what Minnesota should budget for or figure into its calculations? You know, Minnesota has to be very conservative because there's a lot of downside risk. And that's one of the things that you just emphasize in this report, just what you're talking about. And remember, we have really only begun to see the impact of the big, beautiful bill, for example, on Medicaid. And now we have, on top of that, withholding of money that is going to be going to the state in terms of Medicaid. So, again, these are negatives that are out there. But overall, the economy is continuing to grow. I think there's a sense that this forecast probably is predicting too much of a stable economy going forward with all the uncertainties that are out there. Nevertheless, it's a reasonable forecast. But I think the downside risk because of immigration and because of just what you're saying is greater. Yeah, just on that macro look on the economy, is it steady, booming, a little bit shaky? What is it based on what you can tell from this report and others you look at? Look, the economy continues to grow, and the pace has slowed down. Jobs continue to grow, but at a much slower pace than they were before. Inflation remains stubbornly high. But you're going to get this fiscal kick at the beginning. So it's an economy that is growing with a lot of vulnerabilities in the labor market. And now as you're looking at the stock market, anybody who's been following the stock market, A lot of questions about the enormous, massive investment in artificial intelligence data infrastructure that has been going on. How durable is that? Could that change? So there's a lot of risks out there. But nonetheless, despite the risks, this economy continues to grow. You mentioned that federal tax law that passed last summer, and it included things like no tax on tips, no tax on overtime, some senior tax deductions, some car loan, car interest deductions. Republicans here want to line Minnesota's tax code up with at least some of those things. The Revenue Department says that's potentially hundreds of millions of dollars. What might that do if the state does align? We're in tax filing season, so people want to know. Yeah. I mean, my feeling is if you look at this projection, it gives you – if you want to align on the tax code with the federal tax code now, it gives you the optimism that we have the wiggle room to do that. If you don't want to do that, it also says there are other things that you want that money to go to. What this budget tells you, I think, is that there's enough optimism there that you can advocate for what you want to advocate. But in the end, there's not enough optimism there that everybody can get what they want. As I mentioned, that revenue forecast news conference has been going on now for about 10 minutes down the street at the Revenue Department building. And we've been kind of keeping half an ear on it or our producers have. And so I do want to get to some of that. I think State Minnesota Management and Budget Commissioner Aaron Campbell framed it up for us. And let's listen to a bit of that. There is good news in this forecast, but significant risks do remain. Minnesota is in a strong financial position. We now project to end fiscal years 26-27 with a surplus of $3.7 billion, which is $1.3 billion more than forecast in November. Left unspent, that surplus will carry forward into fiscal years 28 and 29. Those funds carrying forward are key to ending the planning years with a positive balance. As a result, we're currently forecasting a $377 million positive balance in FY28 and 29. The increased projected balance in both biennia is due to a slightly improved national economic outlook, which drives an increase in forecast revenues, particularly in individual income tax and corporate franchise taxes. Well, that's interesting, Chris, because in December, the state was looking at, you know, some extra money for the current budget, but a big hole in the last budget. She's saying basically things down the road have evened out a bit. That's right. But one thing I do want to – and that was driving the numbers. But then when you actually look at what they're talking about with Minnesota, for example, they don't see labor force growth in 2026 in Minnesota. That was the one thing that really sort of stood out to me because they have pretty decent – not off-the-charts labor force growth because we have a very high employment rate. But there's been steady growth. And they see actually a decline in 2026 in terms of thinking about employment growth in Minnesota. We have an aging population, too. We have an aging population. We have a national policy of hostility toward immigration. And we have a declining birth rate. And so one of the reasons why Minnesota has become so dependent on immigration is that we have this declining birth rate in an aging population. So you want people moving in here, bringing their skills, bringing their knowledge, bringing their human capital, bringing their experience. That is coming from outsiders. And one other thing that came out this week was that mortgage rates have now slid below 6% for the first time in a long time. There's a thought that it might juice the housing market. Is that a good barometer to watch for the strength of the economy? Boy, if you read this report, my reaction is, yeah, it might juice it a little bit at the margins. But the real core issue when you go through this report is because of the lack of workers, because of the immigration backlash, so construction, and the higher prices for things like materials like lumber and copper. The core issue here is a lack of supply. And this report is actually really negative about 2026 and increasing the supply by much. And so, yeah, it'll help, but it's not great. Yeah, and Commissioner Campbell, I think, just kind of got to some of these same challenges. Let's hear what she had to say. The lack of access to relevant federal data due to the federal government shutdown does have potential implications for our revenue forecast, particularly when it comes to our most volatile revenue sources. In Minnesota, we're also experiencing unprecedented threats to federal funding that we rely on. Any loss of federal funding is problematic, but particularly for entitlements, which would result in significantly increased costs to the state to provide legally required services without benefit of federal aid. The potential implications for the Minnesota budget should not be underestimated. And the structural imbalance, or the amount that spending exceeds revenues, continues to be an issue both in this biennium and the next, and that's even after the improvements to the revenue forecast. I do want to note that the significant actions taken by the governor and the legislature last spring in the enacted FY26-27 budget have helped drive a positive balance in FY28 and FY29. And while the structural imbalance was not eliminated, it is improved in part due to those budget decisions. Well, there you go, Chris. But anything else that jumped out to you in, say, the 20, 30 minutes you had to page through this long report? Well, what did strike me is deteriorating credit in terms of thinking about consumers, taking on more debt and greater default rates when you're looking at auto loans or you're looking at credit cards. And again, it kind of fits in the sense where people are really stretched. This is the risks that she's talking about. It's back up for the most time, the highest point in years. That's right. And so when she's talking about the risks, that's one of the risks that's out there that people, their budgets are stretched and they've taken on too much debt. You've seen the price of a car lately and trying to pay off those loans turns out to be too much. My check engine light came out on the way to work and I was nervous, Chris. I got my fingers crossed for you. All right. Chris Farrell, the senior economics contributor for NPR News and Marketplace. Thanks for super speed reading this and offering some astute analysis. Hey, thanks for asking me to read it. It was really interesting. It's an illuminating report. All right. And now some sounds and voices from the week in Minnesota politics. We have two empty desks sitting out there for Fletcher and Harper. We have others sitting outside. If you needed a graphic reminder of what gun violence does and ripping us apart, that is a pretty moving tribute. It's also a call to action. We here because we experienced a tragedy on August 27th that we never anticipated that we would have to experience And for many of you that are here that were not a part of that tragedy you are by extension And with that members we are going to move to House File 3433 and House File 3402 Parents in our community don't sleep all the way through the night anymore. Because when we send our children out into the world, we know that there are weapons out there capable of turning an ordinary morning into something unthinkable in seconds. Correlation is not causation. This bill is premised entirely on the false presumption that banning something makes it go away. I have been waiting six months to come here as a parent and a Minnesotan to share my story to support HF 3402 and HF 3433. What harrowing detail can I add that will change your heart? A little sick of the pretense that taking action can only possibly mean taking away firearms from law-abiding citizens. Under the trifecta 23 and 24. Before you vote, out of respect for what happened in Minnesota that day, please remember three sounds. The sound of two full minutes of gunfire echoing through a sacred space where children tried to hide. The sound of hearts breaking with grief so deep that it changes the lives of everyone around it. And the sound of us singing together, because before we walked into this room, we gathered and we sang. Carry those three sounds with you when you vote. There being 10 ayes and 10 nays, the motion does not prevail. I don't think this is necessarily a partisan issue. I think this is a human issue. And in other states where there's a different makeup in the legislature, it's very much a human issue and not a super political one. So I don't know what it will take here. Maybe it's time, but we're not going anywhere. Our grandparents need us too. Housing stability is too fragile to ever assume that we have crossed the finish line. And despite all of our efforts, there will be a single parent who is searching for a safer place to live. There will be an elder on a fixed income. There is still a student afraid. When a mother has a stable home, her children can grow. When a family has a foundation, our whole state thrives. The route to growth is the route. Because the people of Minnesota, not the government, the people of Minnesota have stepped up to donate huge amounts of money to keep their neighbors safely housed when they couldn't leave their homes to go to work safely, to move about their communities safely. That's you. That's the work that you all have done. The thing that moves people most, it's not charts on a page, it's not paid lobbyists around here. It is everyday Minnesotans coming down to the Capitol and sharing the story of how their lives have been personally impacted by an issue. So you today are doing more than anybody could. We're announcing today that we have decided to temporarily halt certain amounts of Medicaid funding that are going to the state of Minnesota. This is not a problem with the people of Minnesota. It's a problem with the leadership of Minnesota and other states who do not take Medicaid preservation seriously. Any delay in services is going to be, should be laid at the seat of Governor Walz. I believe he will take this seriously. This is in every state, and the numbers are bigger in other states because they're bigger, and they're doing nothing, and they're being very specific about this. And look, I don't know when it's sometimes somebody says that enough is enough. This is a targeted retribution against a state that the president doesn't like. The real shame in all this is this is a state that does health care as well as anybody. Health care outcomes, health care access, health care providers. We do it as well as anybody. The budget forecast, the Minnesota storylines out of the State of the Union, the gun, immigration and fraud debates at the Capitol, so much going on. It's a great time to check in with some journalists who keep tabs on Minnesota politics. Clay Masters, the host of All Things Considered and a Capitol Hanger Honor, is here. Hi, Clay. Hey. And Tori Vanute, who practices smart brevity at Axios Twin Cities. Tori, feel free to use all those extra words and sentences here. Thanks, Brian. Glad to be here. Clay, that State of the Union address, the president went on for almost two hours, but there were three or so minutes where Minnesota had kind of a prominent place that was on his mind. First, this comes from the speech about the Minnesota Somali community. What do you have to say? Yeah, I mean, this kind of piggybacks on a lot of the things that he has been saying over the last few months about the Somali community in Minnesota and Congresswoman Ilhan Omar. But he focused on members of the Somali community, he said, have pillaged an estimated $19 billion from American taxpayers in Minnesota. Number seems high. Yeah, I mean, $19 billion is widely considered an exaggeration. He called it the state a stunning example of corruption. He said they're importing these cultures through unrestricted immigration and open borders, brings problems to the U.S. He talked about bribery, corruption, lawlessness, and Congresswoman Ilhan Omar sitting in the crowd. She had some things to say. Yeah. Tell us about that back and forth. And also using the word pirates, I think, when the president used the word pirates. And after that, I think the president said something along the lines of, do you stand with the people of America or undocumented immigrants? He used the term illegal immigrants. and he said, Democrats should be ashamed for not standing and applauding at that line back. And she essentially clapped back, you should be ashamed. You killed Americans, of course, a reference to the two shootings by ICE agents. And I think this was notable for two reasons. One, House Democratic leaders in Congress had been very, very clear going into this speech. They did not want disruptions. They did not want heckling. They wanted to take the higher road. Some members just said, stay home. They stayed home. Tina Smith. Tina Smith. Yeah. Didn't want to even show up. in this circumstance. But other Democrats, including Congresswoman Omar, did kind of push back in those public ways. And of course, this is not the first time we've heard the president use derogatory language about Somali-Americans living in Minnesota. The Congresswoman is Somali-American. And she and others have argued that this puts people at risk when this sort of language is used. And I think that explains some of the emotions there. And she wasn't the only one to have a focus from Minnesota in Washington on State of the Union night. Jacob Fry was there. He did. What was he doing? And how do you frame things? He was at, so there were a number of Democratic-led kind of counter-programmings, rebuttals, not just one this year. Everyone wanted their own. And the mayor was at one called State of the Swamp, I think. Actually shared a stage with Robert De Niro was there, and then the mayor of Chicago. So the mayor gave his rebuttal. And you heard a lot of what you've heard, people here have heard, saying, you know, this ice crackdown was dangerous, hurt the city. But he also said, you know, Minnesotans essentially showed that love and hope went over fear and that they stood up for their neighbors, they stood up for their city. And he tried to make the case that Democrats and Republicans, no matter your political stripes, you should care about what happened in Minnesota, because he argued it was an example of federal overreach. Clay, you used to report in Iowa, so you saw a lot of political up-and-comers come through. I'm not saying that Jacob Fry is on that level of potential president, but he's making the most of his moment. Yeah, oh, certainly. And I mean, you see him a lot on national television programs. When I was out talking with different people who were doing ice watching on neighborhoods of Minneapolis, there was frustration from people about Mayor Fry and saying that he's just spending all his time on TV trying to raise his national profile instead of helping the people of Minneapolis. So he's definitely been getting his face out there. And worth noting, Brian, you know, he's not on the ballot this year, not running for something, but there are going to be more openings coming up, including a U.S. Senate seat next year. Potentially, yeah. Potentially, if Senator Klobuchar wins the governor's race and he could end up being on a short list with his national profile. Absolutely. So Clay, a day after the State of the Union, we hear from Vice President J.D. Vance, he announces that Minnesota would lose some federal Medicaid money, deferred, clawed back. I don't even know what term correctly applies here, but how did that land? Well, I mean, the State of the Union address, President Trump said that J.D. Vance, the vice president, was going to be, I don't remember the term that he used, but the guy to combat fraud in the United States. They have a press conference the next day with Mehmet Oz, the head of the Centers for Medicare and Medicaid Services. And they said that, what, $260 million in Medicaid funding is going to get frozen. And that's retroactive as well. So that won't come to Minnesota for this current quarter to the state. And if they don't satisfy the feds to ask for this own acceptable action plan, the governor has 60 days to respond. And it also claws back on the money from the last quarter. So the governor says this is just political retribution being continued aimed at blue states like Minnesota. Tori, we talked about it during the first segment here about fraud. Fraud seems to be the issue that everybody is talking about at the state capitol. Republicans say that you've ignored fraud too long. Democrats and Democrats are saying, do you want to talk about fraud? Do you want to do something about fraud? Is that what's shaking up? That's kind of how it's going right now. Everybody does want to do things. And there are some areas of overlap, potentially, if they can work out the details, the inspector general heard about site visits, more site visits, technology, tougher penalties, all these things. But of course, the question is, in an election year, can the two sides come together and figure out the details? Right now, we're seeing a lot of that political theater. We're seeing not just fighting over the details of these proposals and which should come first, what they should look like, all of the OIG intricacies that you just heard in the previous segment, but also pointing fingers over who's to blame over process and who's slowing the bill, who's slow walking, who's keeping it from advancing. And that's kind of typical for early in the session. And I've been around the legislature long enough to know not to count anything out, but these gun bills didn't seem to get off to a very good start. No, those also stalled specifically the assault weapons ban, the high capacity magazine bans. Those did stall in committee. There are other parts of the gun and public safety package that may be more likely to get bipartisan support funding for schools, things like that. Yeah, and you heard in the Voices segment there just a moment ago, just the testimony that came forward from the Annunciation Catholic Church and School survivors from parents. They were at that committee where it was a 10 to 10 tie on the House Committee for Public Safety. So those didn't move forward. There was an eighth grader who spoke at a press conference with Governor Walz and other Democrats earlier in the day who described how she was shot in the head during that. And it was quite the thing that when you think about last summer when we were talking every day about will there be a special session to advance any kind of gun proposals were finally where there could have been something that was done and it's just seeming to stall out. Tori, one thing no one seems to be talking about anymore is sports betting. It seems to be kind of a dead issue. Always been a tough plane to land because of the kind of odd bipartisan opposition and support for that one. But there's some shifting ground there, too. So societal attitudes, concerns about addiction and gambling debt have made this an even tougher issue. And now we have these prediction markets, which are kind of making the debate moot, right? Because anybody right now can bet on sports and any number of other things on these prediction markets. The federal government says, hands off regulating these. We'll see what happens at the legislature. Well, thank you both. I hope you might be back next week because we're sending Dana Ferguson out to Washington to track Governor Tim Walz and Attorney General Keith Ellison before this U.S. House Committee. I'm guessing there's going to be plenty of fireworks there. Lots of fireworks. Glad to be here. Our time is up for today. We spoke with two state lawmakers focused on fraud legislation, Representatives Patty Anderson and Matt Norris. And we got some quick analysis on a new budget forecast from NPR's senior economics contributor, Chris Farrell. You just heard from Torrey Van Udavaxios and Clay Masters for our political roundtable. Hear those conversations again on the Politics Friday podcast. This show was produced by Matt Alvarez, our technical director, Derek Ramirez. as Emily Reese took care of our newscasts. I do want to note that Peter Cox, Dana Ferguson, Nicole Kai, and Kate Kelly gathered all that sound you heard in the voices. Great stuff. We'll be back next week. Until then, stay safe and have a great weekend.