Minnesota leaders strike budget deal, start gearing up for special session

After more than a week of secret negotiations, legislative leaders said they were on the verge of a deal early Monday. The Legislature is set to close out its 2021 legislative session the same day.

Minnesota Gov. Tim Walz, at the podium, addressed reporters in St. Paul after he and legislative leaders, at right, crafted a budget framework in the final hours of the legislative session. (Dana Ferguson / Forum News Service)

ST. PAUL — With just hours to go in the legislative session, Minnesota leaders on Monday, May 17, announced that they'd reached a compromise on a $52 billion state budget framework.

The agreement came after more than a week of secret budget talks between Gov. Tim Walz, House Speaker Melissa Hortman, D-Brooklyn Park, and Senate Majority Leader Paul Gazelka, R-East Gull Lake, and it kickstarted final debates around how much Minnesota will spend on schools, roads and bridges, public safety and other areas of state government.

With 13 hours left in the regular legislative session, the leaders said they would call a special session in June to allow lawmakers to pass budget bills and a plan to erase $440 million in income taxes on Paycheck Protection Program loans and waive the first $10,200 Minnesotans pulled down in unemployment insurance funds.

They'll also have to hash out deals on a police reform package, possible changes to the state's peacetime emergency and a proposed rule governing vehicle emissions.

"We have reached an agreement on target numbers. There’s work to be done as there should be in the Legislature," Walz said. "We'll button this thing up and we'll get Minnesota on the path to recovery."


But some of the details remained murky as lawmakers prepared for overtime work. Legislative leaders said they'd left policy discussions out because they ran out of time. And now it will fall to legislative committees to reach deals of their own.

"That's the role of the conference committees as they work together, we're hoping to find some solutions there but we did not address every policy issue at this point," Gazelka said. "The work is not done, it just began. And now we have clear guidance on where to go."


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The agreements didn't come in time to exempt taxpayers from paying out state income taxes for federal business loans or unemployment insurance but the leaders said they'd agreed to waive those costs with help from a $2.8 billion federal aid payment set to come to Minnesota. State budget officials said they were still working to determine whether those set to benefit from tax relief would have to refile taxes or wait for an automatic return from the state.
The two legislative leaders and the governor lauded the agreement as a success and a display of legislative leaders' ability to work across party lines despite disagreements. They'd reached a compromise despite starting talks with a $1 billion split between Democrats and Republicans and substantially different policy priorities. They also got a late update from the federal government about constraints for spending $2.8 billion set to come to Minnesota from the American Rescue Plan Act that shifted their talks last week.

“It’s difficult to work together when we’re so divided, but at the same time I feel like we’ve found a place that we can all say is fine,” Gazelka said.

Democrats said they saw a boost to education funding as a win along with additional supports for COVID-19 recovery and mental health. In exchange, they gave up a proposed tax hike on top income earners during negotiations. Republicans, meanwhile, said they viewed as a success their push to prevent a tax increase and the inclusion of full tax conformity.

"I think this is an agreement that serves all of us," Hortman said. "It really is a win-win-win budget."

Meanwhile, lawmakers who weren't involved in the budget negotiations bemoaned the deal and said lawmakers were set to leave St. Paul after an unsuccessful and inefficient legislative session.


"We have failed miserably here and the deal, as I understand, we get nothing for it. The Republicans get nothing for it," Rep. Greg Davids, R-Preston, said. "This has been such a failure of a session, not one budget bill will be signed into law by midnight tonight, not one."

Senate Minority Leader Susan Kent, D-Woodbury, said conference committees could've worked to pass more policy before the Legislature adjourned, freeing up more time in the upcoming special session for budget talks. Both chambers approved three conference committee reports Monday before closing out the session hours before the clock was set to run out on the 2021 session.

"Not enough got accomplished is sort of my takeaway, I really do believe that the Senate conferees had a chance to get more work done," Kent said. "We could've done more."

The Legislature needs to pass a budget by June 30 or risk a state government shutdown.

Follow Dana Ferguson on Twitter @bydanaferguson , call 651-290-0707 or email

Dana Ferguson is a Minnesota Capitol Correspondent for Forum News Service. Ferguson has covered state government and political stories since she joined the news service in 2018, reporting on the state's response to the COVID-19 pandemic, the divided Statehouse and the 2020 election.
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