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People who attempt to rip off state dollars aimed at helping children or people with disabilities would face stiffer penalties, under a multi-pronged proposal that Gov. Tim Walz rolled out on Friday ahead of a legislative session where the issue is sure to be a focus.

“Minnesotans rightly have no tolerance for misuse of taxpayer dollars. This plan directs every single state agency to work together to better prevent, detect, investigate and punish fraud,” Walz said in announcing the proposal.

Republicans greeted the framework with skepticism. It was “too little too late” in the words of Senate Minority Leader Mark Johnson of East Grand Forks. But he and other GOP leaders said they’d work with Democrats to fashion bipartisan legislation and press them to make good on promises to fight fraud.   

In his second term as governor, Walz took some immediate action on his own, 

 to create a centralized unit within the Bureau of Criminal Apprehension to investigate suspected fraud. Investigators from the Department of Commerce will be transferred to set up the new unit.

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“By combining state law enforcement resources, we will improve our ability to root out and prosecute these crimes with consistency, transparency and efficiency,” BCA superintendent Drew Evans said.

The executive order will also grant state agencies more authority to block payments set to go out to those suspected, charged or convicted of fraud or financial crimes.

Walz asked lawmakers to support a plan to boost penalties for those behind the fraud or service providers guilty of taking kickbacks seeks steeper fines and prison sentences, which the governor’s office described as 20 percent more than existing laws. Penalties now vary depending on an offender’s record and the extent of the crime. His proposal calls for a new “theft of public funds” offense.

He’s also asking to add nine members to the Medicaid fraud unit under the Attorney General’s office.

The slate of proposals follows a series of prosecutions, audits and other investigations that have uncovered tens of millions of dollars in misused grants, ineligible recipients or other problems involving state and federal dollars.

The issue is a top priority of Republicans heading into the 2025 session. And with the Walz plan, it could be a point of bipartisan agreement — or partisan fractures — as lawmakers resume on Jan. 14 under split control at the Capitol.

Republican House Leader Lisa Demuth, who is in line to be speaker when the session convenes, said her party will push to go much further given the scope of fraud uncovered so far.

“Creating a fraud bureau overseen by the same administration that allowed over a billion dollars in fraud means today’s executive action is nothing but smoke and mirrors," Demuth, R-Cold Spring, said in a news release issued just as Walz began speaking. “We need real change to crack down on fraud, and that starts with a process that is truly independent of the leadership that allowed fraud to run rampant over the last five years.”

In an interview, Demuth said she’s glad that leaders of both parties are now on record seeking stepped-up fraud prevention measures.

“Ending fraud is not partisan,” she said. “Ending fraud should be bipartisan.”

Walz asked lawmakers to advance a proposal to bring in additional artificial intelligence tools to place tighter controls on state spending. Minnesota IT Services would set up a pilot program to detect and flag payment anomalies for Medicaid providers through the Department of Human Services.

Walz said there’s a natural tension between expediency in delivering money to groups and individuals who rely on the social safety net and doing exhaustive checks of whether it’s going to the proper place.

“I think there’s a tendency to again err on the side of we want to help. We want to get this money out. You heard people especially during COVID-19, ‘Get the money out. Get the money out. Get the money out,’” Walz said. “Anytime you do that, you open up the opportunity for fraud to be there. So I think it's probably a culture of generosity. I think it's a culture of being a little too trusting on this.”

He said combining AI with standard investigatory work could slam the door on theft sooner.

Walz said the full package would cost about $39 million in the next two years, which will be part of his forthcoming budget proposal.

In recent weeks, lawmakers from both parties have unveiled their ideas for rooting out improper spending. Democratic lawmakers have prioritized the creation of a new watchdog over state government spending: the Office of the Inspector General.

Meanwhile, Republicans have said the Walz Administration has been slow to act to contain misspending in programs that take in state and federal money. They said he needs to follow more of the recommendations from the state Office of the Legislative Auditor when it comes to eliminating problem spending.

Democrats added additional safeguards in 2023 that require grant applicants to submit more information to unlock money. The policies also give officials extra power to hold dollars back if grant recipients fail to follow the rules. Lawmakers also 

directed a state agency to write a roadmap

 and training tools to help government grant managers spot problems sooner.

Dana Ferguson

Author

Gov. Tim Walz rolled out a proposal and signed an executive order to step up efforts to combat fraud in government programs. Some of it would require legislative action.

Tougher penalties, AI technology at center of Gov. Tim Walz plan to combat fraud

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