ST. PAUL, Minn. (Minnesota Reformer) – Minnesota taxpayers are on the hook for $109 million in recently settled class action lawsuits after a 2023 U.S. Supreme Court case that found state law regarding property forfeiture was unconstitutional.
The U.S. Supreme Court last year ruled 9-0 in Tyler v. Hennepin County that the county violated a woman’s constitutional rights when it sold her forfeited property for more than she owed in taxes and pocketed the difference, or the surplus.
After the ruling, two class action lawsuits were filed against the state on behalf of Minnesotans who lost their properties to tax forfeiture and the counties keep the surpluses.
The hefty budget item raises a question: Why is the state paying for the counties’ illegal takings?
Liz Kramer, Minnesota’s solicitor general, said the counties kept the funds, but they were acting in accordance with state statute and the properties were taken in the name of the state of Minnesota.
Because of that involvement in the forfeitures, the Legislature is poised to pay the $109 million settlement amount.
On Friday, Democratic-Farmer-Labor leaders released a budget agreement detailing how much lawmakers will spend this year over and above last year’s two-year $72 billion budget. Gov. Tim Walz, House Speaker Melissa Hortman, DFL-Brooklyn Park, and Senate Majority Leader Erin Murphy, DFL-St. Paul, announced a $477 million agreement, which included the settlement. But it explained nothing about it, even though it takes up nearly 23% of the spending agreement.
“This is a responsible, thoughtful agreement that maintains a balanced budget while funding our state’s most urgent needs for critical infrastructure, public safety, and emergency services,” Walz said in a statement.
Last week, Walz also released his own budget proposal; it did not include the settlement.
Kramer said the Office of the Attorney General has been in “a lot of regular communication” with leaders about the need to pay for the settlement. The state and the plaintiffs’ lawyers in the class action suits came to an agreement of the settlement’s basic terms on Feb. 28, Kramer said.
The parties agreed to a settlement that includes properties affected by the tax forfeiture practice going back seven years, which covers about 6,000 Minnesota properties, Kramer said.
The $109 million will go into a fund, and Kramer said the Legislature should allocate the funds as soon as possible so the state saves money on interest.
Although the Supreme Court struck down the current forfeiture law, the Legislature hasn’t passed a new one yet, leaving many properties in legal limbo. Once the Legislature passes a new tax forfeiture law, counties will begin to sell the properties they’ve seized in the past few years and give the surplus to the state, which will be about $26 million back into the state’s general fund.
As part of the settlement, most property owners who file a claim will be entitled to about 90% of the value of their property’s surplus, or the difference between what they owned in taxes and the price at which the county sold it, Kramer said.
DFL lawmakers are carrying bills this session related to the settlement. Sen. Grant Hauschild, DFL-Hermantown, is chief author of the bill (SF4936) to create the account in which to deposit the $109 million settlement. Rep. Sandra Feist, DFL-New Brighton, is carrying a bill (HF4822/SF4985) to change the state’s tax forfeiture statutes in an attempt to make them constitutional in light of the Supreme Court decision.
Rep. Aisha Gomez, DFL-Minneapolis, who is also chair of the House Taxes Committee, told the Reformer that the Legislature must fulfill its obligations by approving money for the settlement given the state’s role in crafting the law that’s since been struck down by the court.
“Definitely not an election year winner or something that anyone was really excited to spend so much money on, but I’ve thought that we should at least help very significantly all along, and there wasn’t much dissension about that” among other DFL lawmakers, she said.
Kramer said the settlement was an example of “good government at work.”
“If this magically — I’m knocking on wood here — gets through the Legislature … it feels like a miracle,” Kramer said. “It’s a lot of money at stake and it just takes so many people to be willing to put the public interest ahead of what might be their own personal interests, and so we’re really lucky that all these different parties and entities are willing to do that.”
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