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Legislative Update

Dear Friends and Neighbors,

I cannot believe that it's already March! As we continue our work at the Capitol in St. Paul, we remain focused on making meaningful differences for Minnesotans. The main way we can do that is by addressing the fraud and fighting for permanent tax relief. We introduced legislation to accomplish both of those things this week, which I will outline below. Thank you for reading!

DHS: The Intersection of a Lack of Accountability and Widespread Fraud

This week in the House Human Services Committee, I expressed my frustration directly to DHS Commissioner Shireen Gandhi about the ongoing fraud that has plagued the Department of Human Services for years. Commissioner Gandhi has spent more than a decade at DHS, including roles in compliance, as temporary commissioner, and now as commissioner. During that time, fraud and mismanagement that have cost taxpayers billions of dollars have continued. It is deeply concerning that someone who has been in a position to address these problems for so long has instead continued to be promoted while the issues persist. To me, this reflects a troubling culture of complacency within DHS under the Walz administration. Minnesotans deserve real accountability, transparency, and decisive action to put an end to the ongoing abuse of public funds.

Fraud Isn't Free Act: Taxpayers Deserve Better

As we all know, fraud in state government is not a victimless crime. Every dollar that is stolen from a public program is a dollar taken directly from Minnesota taxpayers. It is money that hardworking families paid to the state with the expectation that it would be used responsibly for schools, public safety, and services for those truly in need. When fraud occurs, taxpayers are the ones who ultimately pay the price through higher taxes, reduced services, or both. That is why the 'Fraud Isn’t Free' Act is so important.

The 'Fraud Isn’t Free' Act establishes clear, immediate consequences when fraud is uncovered within a state agency. Agencies would be required to submit a corrective action plan to legislative leaders, suspend further enrollment in the affected program, and remove the leadership responsible. Those dismissed would be prohibited from state employment for five years. These provisions send a clear message that oversight failures will not be ignored or excused.

The bill also ensures that agencies face financial consequences when fraud occurs. Agency budgets would be reduced by 10 percent, and agency head salaries would be cut by 25 percent until fraud is referred to law enforcement, responsible staff are terminated, and at least a portion of the stolen funds is recovered. These measures create real incentives to prevent fraud before it happens and to act swiftly when warning signs appear.

Finally, the legislation strengthens transparency and long-term accountability by requiring Minnesota Management and Budget to include the estimated cost of fraud in future budget forecasts. It also removes the sunset on the state’s authority to withhold payments when fraud is suspected, ensuring the state can act quickly to stop losses before they grow.

Taxpayers deserve a government that treats their money with the same care they use in managing their own household budgets. The 'Fraud Isn’t Free' Act makes it clear that when public dollars are mishandled, there are real consequences, and that protecting taxpayers will always be a priority.

February Budget Forecast: We Must Reduce Spending and Taxes

On Friday, Minnesota Management and Budget (MMB) released its February budget forecast, giving an updated view of the state’s finances. The report compares projected revenue and spending and measures whether our current budget path is sustainable. It shows a larger than expected surplus in the short term, but it also projects a significant deficit in the coming years if spending continues at its current level. While the increased surplus is a good sign that we made progress last session, there is work to be done in more than one way.

A surplus means the state is collecting more money than it needs right now. That money came from workers, families, and businesses who are already stretched by rising costs. When government over collects and builds ongoing spending around temporary revenue spikes, taxpayers either lose out on relief or face higher taxes later to cover the gap.

The projected deficit confirms that spending has grown too fast. If nothing changes, today’s surplus will be replaced by a budget shortfall that forces difficult choices. Mismanaged growth leads to instability and puts pressure on future tax increases.

The solution is straightforward. Provide permanent tax relief while slowing the growth in spending. If families have to live within their means, state government should too.

Addressing Property Taxes: Task Force

With everything we've seen about the massive amount of fraud and the immense size of the state budget, it is clear that taxpayers in Minnesota desperately need a break. I believe that providing property tax relief this session is absolutely paramount, and we are taking the beginning steps towards that goal. This week, Rep. Greg Davids introduced HF3396 to create a task force that would examine why local property taxes continue to increase. The task force would review the main cost drivers behind these increases and recommend ways to improve transparency in local government budgeting. If we want to lower property taxes, we first need a clear understanding of what is causing them to rise.

Property taxes are a direct hit to homeowners, farmers, renters, and small businesses. They are not optional and they do not adjust based on income. For many families, steady increases make it harder to afford their homes. For small businesses, higher property taxes raise operating costs and limit growth. These increases add up quickly and put real pressure on local communities.

Cities and counties are dealing with rising costs, including public safety, infrastructure, and employee benefits. They have also been required to carry out new state mandates that were not fully funded under the DFL trifecta. When the state shifts responsibilities without covering the full cost, local governments often rely on property taxes to make up the difference.

HF3396 would require a detailed review of these factors and produce recommendations for lawmakers. The goal is to identify what is driving property tax growth and determine what changes at the state or local level could reduce that pressure. This is a practical first step toward giving taxpayers relief and ensuring local budgets are transparent and sustainable.

Shoutouts

Shoutout to these three Park Rapids band students on their selection to be in the MBDA statewide honor band. Congratulations for all your hard work!

10th Grader Austin Miller, on bass clarinet
9th Grader Ryan Cook, on clarinet
8th grader Georgia Knutson, on trumpet

Please Reach Out

You can reach my office at Rep.Krista.Knudsen@house.mn.gov or by phone at 651-296-9918. Follow me on Facebook for more frequent updates.

2424 Centennial Office Building          658 Cedar St.
Saint Paul, MN 55155 rep.krista.knudsen@house.mn.gov 651.296.9918