Gov. Tim Walz says he’ll propose anti-fraud measures, reflects on VP bid

Back to the nitty gritty of governing after a national campaign, Gov. Tim Walz urged lawmakers Thursday to avoid a “retreat” to political corners and promised to put forward a package of anti-fraud measures he hopes both parties can rally around.

In his first interview with MPR News since his run for vice president, Walz also pressed for patience on the marijuana market rollout and said while his time on the presidential stage has ended, his outspokenness on major issues won’t stop. He said he remains in touch with some of the people he encountered across the country, from those who are well known to those who are fighting through everyday problems. 

Walz had limited interaction with Minnesota media during his three-month bid for the nation’s second-highest office that ended in defeat.

On the issue of misuse of state funds, he said his administration has taken steps to root out unlawful spending but would put forward additional changes in 2025. Among them would be tougher penalties for those who attempt to fleece funds intended to serve children and people with disabilities.

“This is not a victimless crime, and it is one that I consider to be incredibly harmful,” Walz said. “I would just like the tools to be able to maybe shut them down earlier, or to be able to detect it a bit sooner.”

The comment came hours after FBI agents raided a pair of centers in Minneapolis and St. Cloud that serves people with autism as part of a Medicaid fraud investigation. 

Republicans and Democrats at the Capitol have both called for renewed efforts to weed out improper use of state government dollars. Walz said he would like to empower agencies to more quickly cut off grants to suspected fraudsters — a pause that he said could be easily lifted if everything checks out.

Republican House Leader Lisa Demuth, R-Cold Spring, said GOP lawmakers had been sounding the alarm” on the issue for years. She said Republicans would work with Walz to clean up fraud in the state. Senate Minority Leader Mark Johnson, R-East Grand Forks, agreed, saying, “After $1 billion of fraud, the governor is finally paying attention. Senate Republicans have bills from previous years that should have bipartisan support and he can start there.”

Reminiscing on VP bid

Walz said he’s also settling back into his role in St. Paul following a whirlwind campaign that took him around the country. Walz was tapped to run by Vice President Kamala Harris after making a name for himself on a series of televised interviews criticizing Republicans’ policy priorities as “weird.” He had also built up clout among Democrats across the country in his role as chair of the Democratic Governors Association.

He said he’s feeling back in the swing of things at the Capitol.

“To still have the privilege of being governor of Minnesota was, if you will, kind of a nice consolation,” Walz said.

Reflecting on his run, Walz said that while policies that Democrats were talking about — from paid leave to guaranteed cost-free access to school meals — were resonating, inflation and immigration turned out to be driving issues for voters that his party didn’t do well enough connecting with voters on.

“Sometimes the other team plays better than you, and sometimes you don’t play to where you should be,” Walz said. “And I think this is more complex than that, but not altogether untrue.”

He said his party has its work cut out for it as it works to rebound. Even as Democrats embrace policies popular with working-class voters, Walz said there is distrust of the party brand in some corners.

“We’re gonna have to figure out how to make that case clearer and broader,” he said of the issues where he believes Democrats are more in line with the wishes of those voters. 

Walz declined to offer an endorsement in the contest to pick a new Democratic National Committee chair even though his longtime home state chair and friend Ken Martin is in the running. He praised Martin but left it there. “I’m staying out of that one,” Walz said.

Changes at Capitol

After a loss to Republican President-elect Donald Trump and Vice President-elect JD Vance, Walz returns to a new power dynamic in St. Paul. Democrats held a one-seat advantage in the Senate but stand poised to share custody of the Minnesota House on a 67-67 split.

The governor said he thinks there is common ground to be found on health care, government efficiency and guardrails around technology such as artificial intelligence. He said he hopes that Republicans will be willing to strike a deal on a construction projects plan, which failed to pass in 2024. But he said he won’t agree to link it to other, unrelated topics.

“I’m actually thinking this could be a productive session, if we don’t retreat to our particular corners,” Walz said.

He said he was already holding phone calls with co-chairs of House committees who will have to find ways to muscle bills through the split-control chamber. He pointed back to 2019, when lawmakers in divided government were able to pass a budget and approve changes addressing problems with the state’s driver licensing system.

“If democracy is going to work, you’re going to have to compromise,” Walz stressed. “And so I’m very hopeful.”

Lawmakers have to pass a two-year budget before July or risk a state government shutdown. State budget officials last week said that while Minnesota has a projected $616 million surplus for the next budget, assuming ongoing spending remains on track with current levels, a deficit looms over the two years that follow.

Republican leaders have said the state should assess areas where the state could pare back existing spending to stave off a shortfall down the road. Meanwhile, DFL leaders said the state remained in a strong financial position, and has a full rainy day fund should the state see a downturn down the road.

Walz said lawmakers would have to make hard choices during the 2025 legislative session about areas of state government that could be cut or held constant to offset the growing price tag for special education and care for people with disabilities. He said those were areas that he would not look to pare back.

“I think that over the horizon, there are going to be some hard discussions, but I think both Democrats and Republicans agree, especially with those groups of people, folks who need disability services and our children with special needs, we want to deliver that,” Walz said. 

Slow cannabis rollout

The Office of Cannabis Management on Wednesday announced that the state’s timeline for rolling out its budding cannabis industry would be delayed, following a set of legal challenges over license preapprovals. 

A pair of lotteries for applicants — first social equity applicants, then a broader general pool – are set to take place this May or June. That means that the first recreational cannabis businesses not associated with tribes could be on hold for longer. The retail launch could come almost two years after it became legal for adults 21 and older to use, possess or home grow small amounts of cannabis in Minnesota.

Walz said he advised his cannabis office to grudgingly put the court challenge to rest by moving beyond an early licensing process. He said he expects the market to develop before long.

“The bottom line is that sometime early this spring or summer will issue those licenses, folks will be growing for retail sales, you’ll start to see some of these dispensaries open up, and then from there it’ll just be the market will work,” he said. “The industry will mature.”

To people who might be growing impatient with the pace of the rollout, Walz said it takes time to get it right.

“So we passed this thing in 2023, the goal was to have these things up and running sometime late this year or early next year,” he said. “We’re pretty close to on-time to do that.”