SF 4266
Introduction - 94th Legislature (2025 - 2026)
Posted on 03/10/2026 09:41 a.m.
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A bill for an act
relating to state finance; establishing the federal funding protection trust fund;
providing for conditional receipt and remittance of federal funds; requiring a report;
proposing coding for new law in Minnesota Statutes, chapter 16A.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
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[16A.5311] MINNESOTA FEDERAL FUNDING PROTECTION TRUST
FUND.
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new text begin Subdivision 1. new text end
new text begin Purpose and findings. new text end
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(a) The legislature finds that:
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(1) federal funds support critical programs for the health, safety, and welfare of
Minnesotans;
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(2) Minnesota relies on predictable, timely, and nondiscriminatory distribution of federal
funds appropriated by Congress;
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(3) suspension, delay, or conditional withholding of federal funds for political or
nonstatutory reasons creates fiscal instability and undermines cooperative federalism; and
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(4) Minnesota has a compelling interest in protecting residents, local governments,
nonprofit providers, and state agencies from disruptions.
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(b) The purpose of this section is to establish a state trust fund mechanism to receive,
hold, and manage federal funds and federal pass-through funds in a manner that protects
state programs while preserving compliance with federal law.
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new text begin Subd. 2. new text end
new text begin Establishment of the trust fund. new text end
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The Minnesota federal funding protection
trust fund is established in the state treasury. The trust fund is a special revenue fund and
is not part of the general fund. Money in the trust fund is held in trust and may be expended
only as provided in this section.
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new text begin Subd. 3. new text end
new text begin Sources of funds. new text end
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The trust fund consists of:
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(1) federal funds awarded, granted, or otherwise made available to the state of Minnesota
or its agencies;
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(2) federal pass-through funds intended for political subdivisions, nonprofit organizations,
or service providers within Minnesota;
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(3) interest earnings on amounts held in the trust fund; and
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(4) any other money authorized by law to be credited to the fund.
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new text begin Subd. 4. new text end
new text begin Conditional holding authority. new text end
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(a) Notwithstanding any other law, the
commissioner of management and budget, in consultation with the attorney general and the
governor, may temporarily hold federal funds in the trust fund if the governor determines
that:
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(1) federal funds have been suspended, delayed, reduced, or conditioned in a manner
not expressly authorized by federal statute or regulation; or
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(2) federal actions create a material risk of interruption to essential state services.
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(b) Funds held under this subdivision remain dedicated to the original federal purpose
and may not be repurposed, transferred, or spent for any other use.
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new text begin Subd. 5. new text end
new text begin Release and remittance of funds. new text end
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(a) Federal funds held in the trust fund must
be released and distributed when the governor certifies in writing that:
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(1) the federal government has restored or confirmed the availability of funds consistent
with federal law; or
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(2) continued holding of the funds would place the state or recipients at risk of
noncompliance with federal requirements.
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(b) Certification under this subdivision must be transmitted to the chairs and ranking
minority members of the legislative committees with jurisdiction over state government
finance and the affected program areas.
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new text begin Subd. 6. new text end
new text begin Taxpayer and recipient protections. new text end
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(a) Nothing in this section authorizes
the state to:
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(1) collect federal taxes on behalf of the United States;
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(2) interfere with individual or business tax obligations to the federal government; or
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(3) assume liability for federal penalties, interest, or enforcement actions.
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(b) This section must be administered to ensure that individual taxpayers, service
recipients, and program beneficiaries experience no disruption in eligibility, benefits, or
services to the maximum extent permitted by law.
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new text begin Subd. 7. new text end
new text begin Reporting and oversight. new text end
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(a) The commissioner of management and budget
must submit a quarterly report to the legislature that includes the:
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(1) amount of federal funds held in the trust fund;
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(2) programs and agencies affected;
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(3) legal or administrative basis for holding the funds; and
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(4) communications received from federal agencies related to the funds. The report must
be published on the department's website.
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(b) The legislative auditor must conduct a review of the trust fund within two years of
enactment and report findings to the chairs and ranking minority members of the legislative
committees with jurisdiction over state budget and finance.
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new text begin Subd. 8. new text end
new text begin Severability. new text end
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If any provision of this section is held invalid, the invalidity does
not affect other provisions or applications of this section that can be given effect without
the invalid provision.
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Sec. 2. new text begin EFFECTIVE DATE.
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This act is effective the day following final enactment.
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