Lawmakers race the clock to strike budget deal

Threat level: If they can't figure it out by June 30, they'll trigger a state government shutdown.

Zoom out: In addition to crafting a balanced budget for the next two years, legislators are grappling with how to rein in spending to address a projected $6 billion deficit down the road.

State of play: This year's unusual political dynamics — with a rare tie in the House and Democrats holding a one-vote majority in the Senate — may complicate the task.

• The power-sharing dispute that led to a three-week delay in the House getting to work didn't help.

Friction points: Here are five sticking points Capitol insiders are monitoring:

📈 Social services spending: Gov. Tim Walz says he's proposed "well over a billion dollars" in cuts that Republicans won't agree to, though some key Democrats, including Senate Human Services Chair John Hoffman (DFL-Champlin), are also balking at his push to curb spending on the state's disability waiver program.

• Context: Increased demand and costs have made the waivers, which help seniors and disabled people get needed services while living at home, one of the fastest-growing areas of state spending.

💰 Taxes: Republicans, who say they want cuts in other areas that don't impact seniors, take issue with tax increases proposed by Walz, including a pitch to expand the sales tax to legal and financial services while cutting the overall sales tax rate.

• The intrigue: Semantics can make a difference. One key House GOP chair acknowledged to MPR News last week that new fees could ultimately be on the table.

⚕️ Benefits for undocumented immigrants: Republicans argue a new law allowing undocumented immigrants to sign up taxpayer-funded health insurance should be cut, given the state's budget constraints.

• By the numbers: About 20,000 undocumented Minnesotans had enrolled as of late April, filing $3.9 million in paid claims, the Department of Human Services told committee chairs this week. That's about $966,000 over expectations for that period, though state officials have cautioned it's too early to make overall projections for the program's costs.
• The other side: Democrats, hospitals — who must treat ER patients regardless of their immigration and insurance status — and the Minnesota Catholic Conference want the law to stay.

📚 School worker unemployment: House education chairs struck a bipartisan deal to repeal a new law extending summer unemployment to bus drivers, paraprofessionals and other hourly school workers in September 2028, in response to school districts' cost concerns.

• Yes, but: Other members of the House DFL caucus are vehemently opposed to eliminating the mandate and say it won't get the votes to pass.
• Follow the money: Democrats have also proposed earmarks tens of millions of dollars to help districts cover the cost for two more years.

🤰👵 Paid Family and Medical Leave: Republicans, business groups and some Democrats want to make changes to the upcoming payroll tax-funded program providing up to 20 weeks of partial pay a year for Minnesota workers who take time off to care for themselves or a loved one.

• What we're watching: Whether the Walz administration and other backers of the law believe the new system is actually on target to launch Jan. 1 as planned, which could play a role in whether the Legislature tweaks the program or postpones its start.

Between the lines: There are accounting tricks, gimmicks and funding shifts lawmakers can pull out of their back pockets to help balance the budget once they resolve the big-picture sticking points around spending and policy.

The bottom line: While leaders always say they want to finish on time, they often go into overtime in late May or June to get the job done.

• But even if they pass a budget by June 30, they could be back later this year to fill holes created by proposed federal spending cuts.