Tax Expenditure Review Commission adopts LBO's 2024 annual report; LBO cites $48.8 billion in foregone revenue

The Tax Expenditure Review Commission voted to adopt the Legislative Budget Office's draft 2024 annual report at its Dec. 4 meeting.

Representative Abbach moved to adopt the draft report "as presented to the commission for consideration on December 4th, 2024 by the Legislative Budget Office, subject to technical and conforming changes adopted by the chair and vice chair received by December 9th, 2024," and the recorder conducted a roll-call vote. The motion carried: eight 'I' votes, one excused. The recorder read the roll: Senator Rest, Representative Agabaj, Representative Davids, Senator Droscowski, Representative Joy, Senator Klene, Commissioner Markwart, and Senator Weber cast 'I' votes; Representative Elkins was recorded as excused.

Christy Schradel, deputy director of the Legislative Budget Office, told the commission the draft annual report fulfills the requirement in Minnesota Statutes chapter 3.8855, subdivision 7 to publish an annual summary of the commission's work and includes appendices that record meeting summaries, formal actions, and revisions to proposed tax-expenditure objectives. She said the report documents the commission's 2024 activity, including adoption of 45 tax-expenditure objective statements.

Jordan Peoples, a program evaluator with the LBO, highlighted key numbers from the related Department of Revenue tax-expenditure budget and the LBO's summaries: the Department estimated approximately $48.8 billion in foregone revenue across 327 tax expenditures for the 2024–25 biennium. Peoples described the distribution of provisions (108 individual income tax provisions, 92 general sales and use tax provisions, 34 corporate franchise provisions, and 12 property tax provisions) and noted that 301 of the 327 provisions had estimated foregone revenues under $150 million.

Schradel said the LBO will begin presenting detailed tax-expenditure evaluation reports to the commission in calendar year 2025; each evaluation will follow the nine-component framework the LBO described to the commission and will build on work with the Department of Revenue's tax research division. She thanked nonpartisan legislative and auditor offices for technical assistance in developing evaluation processes.

Commission discussion after the presentations focused on proposed statutory technical changes in draft bill SC 1679-2 (changing required language from "purpose" to "objective," allowing a commissioner to designate a voting representative, adjusting reporting dates, and repealer language). Members asked whether removing statutory "purpose" language might leave legislative intent unclear; sponsors said they would consider amending the draft before committee hearings.

Next steps: the commission adopted the LBO draft report (subject to technical conforming edits) and LBO staff will begin scheduled evaluations in 2025. The LBO and Department staff will provide updated estimates and methodological support when commissioners request evaluations.