Minnesota leaders strike budget deal just days ahead of deadline

The big picture: The roughly $66 billion two-year budget package, reached after over a week of marathon negotiations, includes policy concessions from both sides and cuts that officials said will make major progress toward resolving a projected budget deficit down the road.

State of play: Lawmakers now face the challenge of finalizing the details and getting a deal full of difficult compromises through the tied house and DFL-majority Senate with just days until the session ends.

• Initial reactions suggested it won't be smooth.

Friction point: Signs of trouble emerged before the leaders could finish outlining the deal, as progressive Democrats and activists furious over an agreement to roll back state-funded health care for adult undocumented immigrants protested outside the news conference.

• Hours later, over two dozen DFL members pledged to vote no on a crucial human services funding bill unless the coverage is restored.

The intrigue: Any dissent from Senate Democrats would mean GOP votes will be needed for bills to clear that chamber, given the DFL's one-vote edge.

• Senate GOP Leader Mark Johnson, who did not sign the agreement despite being at the negotiating table, said his caucus is still reviewing the proposals.

Threat level: The adjournment deadline is Monday, though lawmakers have already signaled that a short special session is likely sometime next week.

• If this deal falls apart, the threat of a July 1 shutdown without an adopted budget looms.

Zoom in: Here is where leaders landed on key sticking points:

⚕️ MinnesotaCare for undocumented immigrants: Adults without legal status would no longer be eligible for MinnesotaCare, the state-funded health insurance program for low-income residents, starting in 2026.

• Children — who make up about a quarter of the roughly 20,000 enrollees so far — would remain covered under the deal.

📚 Hourly school workers: Bus drivers, cafeteria workers and other hourly school workers would continue to get unemployment benefits during the summer break.

• The state would help school districts cover the cost for two more years.

👩‍🍼Paid family leave: A new law guaranteeing paid time off for Minnesotans who need to care for themselves or a loved one would remain intact and on track to launch in January.

• But the maximum payroll tax rate allowed to fund the benefit would be cut from 1.2% to 1.1%

🏫 Private school funding: Walz's proposal to cut state aid to non-public schools for the first time in decades failed to make the agreement.

💵 Sales taxes: Walz also said his pitch to reduce the state sales tax rate, while adding lawyers and financial advisers to the services subjected to the sales tax, was "compromised out."

🚔 Stillwater Prison: The state's second largest correctional facility would close by 2029, saving the state $40 million annually. Inmates and correctional officers would be transferred to other facilities.

🏗️ Bonding: Talks aimed at reaching a bipartisan capital investment package that would rely on borrowing to fund infrastructure and other projects are ongoing.

What's next: Conference committees involving members from both chambers will hammer out the details of sweeping spending and policy bills ahead of final floor votes.

What to watch: An eventual bonding bill, which requires three-fifths support for passage, could be crucial for cobbling together a bipartisan coalition to pass the budget bills through both chambers.

Editor's note: This developing story has been updated with additional details and reactions.