New law funds economic development, jobs programs

State spending on jobs, economic development, labor and industry will total about $460 million during the 2026-27 biennium. The law authorizing these appropriations also makes scores of accompanying policy changes, including reexamining grant processes, beefing up some labor law enforcement and realigning inspection fee structures.

Rep. Dave Pinto (DFL-St. Paul) and Senate President Bobby Joe Champion (DFL-Mpls) sponsor the law that takes effect July 1, 2025, unless otherwise noted.

2025 Special Session: SSHF15/SSSF17*/CH6

DEED spending

The law provides $356.62 million to the Department of Employment and Economic Development from the General Fund and Workforce Development Fund.

Appropriations include:

• $95 million for business and community development and $92.34 million for workforce development services, much of it distributed through grants of $500,000 to $1.5 million to community organizations;

• $88.4 million for vocational rehabilitation services, including $17.33 million annually for extended employment services for people with severe disabilities;

• $41.44 million previously earmarked for the Paid Family and Medical Leave program to fund benefits until premium payments are collected;

• $16.85 million to provide services for the blind; and

• $4.5 million to the Minnesota Trade Office.

Among other appropriations are:

• $41.46 million for Explore Minnesota, including $5 million for costs related to the World Junior Hockey Championships, $825,000 for Explore Minnesota Film, and $671,000 for a grant to the 2026 Special Olympics USA Games;

• $3 million to provide lead service line replacement grants; and

• $1.32 million to the Department of Children, Youth, and Families for child care subsidies and scholarships.

Labor and Industry

Of the Department of Labor and Industry’s $109 million appropriation, about $69.43 million comes from the Workers’ Compensation Fund to operate the workplace insurance program. The budget includes $35 million for claims, $18.11 million for general support and $15.68 million to address workplace safety.

Other labor department funding includes $23 million provided by the Workforce Development Fund and $16.4 million from the General Fund.

About $18 million is appropriated to enforce labor standards such as prevailing wage enforcement and wage theft prevention. There is an additional $350,000 per year for enforcement, education and training related to employee misclassification.

Additionally, $13.84 million from the Workforce Development Fund is provided for apprenticeship programs and $1 million will address mental health and suicide prevention for people in the construction industry.

DEED policy

Premiums for Paid Family and Medical Leave can be no more than 1.1% of taxable wages instead of a maximum rate of 1.2%. Premiums will be collected starting Jan. 1, 2026, at a rate of 0.88%. (Art. 4, Sec. 27)

Approximately 640 workers impacted by temporary closures of Iron Range mines are eligible for an additional 26 weeks of unemployment benefits. This is retroactive to March 15, 2025.

A Task Force on Workforce Development System Reform is established with a preliminary report due the Legislature by Feb. 15, 2026, and a final report by Jan. 15, 2027. Its purpose is to examine current workforce development programs, their funding streams, metrics and to propose improvements to practices, programs, funding and laws related to state workforce development efforts. This took effect June 15, 2025.

The law clarifies and makes modest changes to earned sick and safe time policies, such as allowing employers to request documentation such as a doctor’s note for employees taking two or more days of earned time off – instead of after three days. (Art. 4, Secs. 27, 35, 37; Art. 5, Secs. 10-13)

Grant adjustments, other DEED policy

Plants and plant-based products will be considered agricultural processing projects eligible for Greater Minnesota Business Infrastructure Grants.

The maximum CanStartup loan to a cannabis business will increase from $50,000 to $75,000, and $150,000 to $200,000 if matched by new private investment. Loans may not be used to refinance debt.

An Office of Public Service will be established to promote, expand, create and strengthen career pathways aligned with public service opportunities.

Partnership and Pathways workforce development grants to educational institutions may be up to $500,000 instead of the current $400,000, and schools can charge up to 30% over costs.

Organizations providing mentorship and preemployment services, such as resume writing, can receive grants under the Youth At Work program.

Membership of the governor’s Workforce Development Board will be reduced.

Individuals are no longer eligible for CanTrain grants, which provide training for organizations entering the cannabis industry.

Grant recipients will have a uniform report card for its outcome reporting, and DEED may withhold disbursements to recipients who haven’t submitted the required information.

Explore Minnesota’s mission and programs will be described in law to better match its actual practices, including having its director oversee Explore Minnesota Film.

The penalty for intentional misrepresentation regarding unemployment benefits will be 100% of the overpayment or underpayment for infractions on or after Oct. 1, 2025.

The minimum loan for the community wealth program will decrease from $50,000 to $10,000.

Eligibility for Promise Grants will expand to businesses with less than $1.5 million in revenue (formerly capped at $1 million) with a 20-year loan term instead of 10 years. Funds may now be used for equipment purchases. Partner organizations may not use repaid funds for speculative loans or investments in rental real estate. The provision took effect June 15, 2025.

The small business growth acceleration program is now called "Made in Minnesota." (Art. 4, Secs. 1-2, 6, 8-9, 11, 14, 16-17, 19-23, 26, 29, 32-34, 38).

Labor and Industry policy

Effective Jan. 1, 2026, workers will be allowed a minimum 15-minute rest break for every four hours worked. It should be longer if more time is needed to access a restroom. An unpaid meal break of at least 30 minutes must be allowed for six-hour shifts. Employees are owed double-time for any violations.

The Department of Labor and Industry may seek injunctions in its efforts to enforce labor laws.

By Jan. 15, 2027, and every six years thereafter, the state will produce a report examining how misclassifying employees as independent contractors affects workers, employers and tax revenue.

The law will modify many construction licensing and inspection fees and procedures including:

• providing a $10 virtual fee for chairlifts in private residences;

• increasing elevator operating permits from $100 to $145; and

• making graduated fee structures for prefabricated buildings plan reviews and for plumbing inspections. (Art. 5, Secs. 1-4, 6, 9, 15-33)

HF1058* / SF0563 / CH6