Top Minnesota lawmakers and Gov. Tim Walz reached a budget deal with just a handful of days left in the legislative session, but there are signs it could face a bumpy ride as the Monday deadline to pass bills closes in.
Democratic-Farmer-Labor and Republican lawmakers have already objected to key compromises that allowed the deal to materialize, including ending state-funded health benefits for adults in the U.S. without legal immigration status.
Margins are extremely tight in both the Senate and House, and a handful of defections on various bills that form the budget would stall progress. The DFL has a one-seat majority in the Senate, and the House is tied 67-67 between the parties.
The DFL’s progressive wing has already signaled it won’t support ending MinnesotaCare benefits for immigrants, protesting outside the governor’s reception room at the Capitol Thursday as he and legislative leaders briefed reporters on the deal. A proposal to close the 111-year-old state prison in Stillwater is meeting pushback as well.
Opposition to aspects of deal
As a group of legislators and clergy held a news conference and prayer vigil against the health care cuts outside the House chambers Friday, members of the state’s public employee unions briefed reporters on why they oppose closing the Stillwater prison, which employs more than 500 people.
“The proposed stated budget agreement that includes the closure of Stillwater Correctional Facility is not only shortsighted, it’s downright dangerous, disruptive and deeply disrespectful to the workers that keep the community safe and the inmates safe,” said Bart Andersen, executive director of the American Federation of State, County, & Municipal Employees Council 5.
AFSCME and MAPE — the Minnesota Association of Professional Employees — aren’t the only ones opposed to the closure, either.
Two Republican members of the Senate Judiciary Committee on Friday afternoon voiced concerns about how quickly the proposal came together and called for more scrutiny.
“This is a shortsighted and alarming development — there were no committee hearings and no bill language on the issue, and I am very concerned that this proposal lacks the thorough vetting necessary for such a large change,” Sen. Warren Limmer, R-Maple Grove, said in a statement.
Sen. Michael Kreun, R-Blaine, called the proposal “soft on crime” and said he had concerns about the public safety implications of closing the state’s second-largest prison in the next four years and sending its 1,100 inmates to other facilities.
While the state Department of Corrections had warned for years of deteriorating conditions and growing maintenance costs at the aging Stillwater prison, the proposal still caught many by surprise. Backers say it’ll save the state $40 million a year.
Reality of a future revenue shortfall
The state will have to find savings somewhere by the end of the decade as it faces a $6 billion deficit in the 2028-2029 fiscal year.
Walz, Senate Majority Leader Erin Murphy, DFL-St. Paul, House Speaker Lisa Demuth, R-Cold Spring, and House Leader Melissa Hortman, DFL-Brooklyn Park, said hard-earned compromises in their deal will put the state on the route to confronting that reality.
For the most part, their “global” budget deal aims to address a structural imbalance — state budget talk for the government spending more than it raises — by controlling growth in spending on areas like education and human services spending.
State leaders agreed — as with any compromise — no one came away perfectly happy. DFLers said their GOP colleagues wouldn’t budge on the MinnesotaCare issue, and that they weren’t happy with the move. Children in the U.S. illegally will still be eligible for benefits, however.
“No one got everything they wanted,” Walz told reporters Thursday. ”There were very difficult conversations about issues that were very dear to each of these caucuses.”
MinnesotaCare benefits
Republicans say higher-than-expected enrollment in the new MinnesotaCare benefits could cost the state down the road. More than 17,000 people had enrolled in the program since it opened late last year.
DFL-controlled state government budgeted about $200 million for the program when they created it in 2023, but Republicans say it could cost the state as much as $600 million by the end of the decade and make Minnesota draw more benefit-seekers.
DFLers, state officials and other supporters dispute that projection and say cutting off benefits will interrupt lifesaving cancer treatments and dialysis.
Taxes, other elements of budget deal
It also makes a few adjustments to taxes. Walz’s proposed reduction of the overall state sales tax rate and the creation of a new tax on services like accounting and legal advice did not make it to the final deal.
Minnesota’s paid family and medical leave program, created by DFLers in 2023 and set to begin in 2026, remains in place. Though Republicans got DFLers to agree to a small reduction in the payroll tax that will fund the program.
A plan to sunset unemployment insurance for hourly school workers, another DFL-created benefit from 2023, likely will go away as the Senate and House work on their pre K-12 education budgets, Hortman said. Proposed cuts to state aid for private schools are also off the table, something Republicans wanted.
There will be a small increase to the sales tax on cannabis. The deal also calls for the repeal of a data center electricity tax exemption, though there will be an exemption for research and development for those companies as well.
A proposed first-in-the-nation social media tax appears not to have made it into the deal.
Lawmakers expected to work through weekend
Many questions about the form cuts will take are still in the air. Lawmakers are expected to work through the weekend to craft final budget bills that will conform to the overall targets.
The final day to pass any bills is Monday, and if they don’t finish their work by then, they’ll have to return for a special session to enact a two-year budget by the end of the fiscal year on June 30.
If they don’t pass a budget, the state government will shut down on July 1, interrupting many services.
DFL and Republican leaders expect that if they do return for a special session, it’ll be a short one that’ll likely happen soon after the regular session closes.
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