Walz, lawmakers strike budget deal in session's final days

With five days to go in the 2025 session, three of four legislative leaders announced a budget agreement Thursday that would sunset unemployment insurance for hourly school employees and eliminate MinnesotaCare eligibility for adult undocumented immigrants.

The agreement also calls for closing the Stillwater prison in 2029 and a repeal of a tax credit for data centers.

It would also balance the budget for the 2026-27 biennium and erase 90% of the deficit projected for the 2028-29 biennium, Gov. Tim Walz said at a press conference.

[MORE: Global budget targets]

Legislative leaders and Walz noted that none of them got everything they wanted in the budget agreement. They came to an agreement because, even though they have ideological differences, they have respect for the democratic process and each other, Walz said.

 “We are as evenly divided as any state in the history of our country has been and here we stand with a deal,” Walz said.

People didn’t think they’d be able to get the work done with 101 DFL legislators and 100 Republican legislators, but they’ve proven that it can be done, said House Speaker Lisa Demuth (R-Cold Spring).

“The global targets that we have come up with today demonstrate that in this division in the Legislature, so closely divided, that we have agreed to do what is best for Minnesotans and actually making some hard decisions, but doing overall what is best,” Demuth said.

Speaker Emerita Melissa Hortman (DFL-Brooklyn Park) said there were compromises on a number of issues. The work of Rep. Zack Stephenson (DFL-Coon Rapids) and Rep. Paul Torkelson (R-Hanska), co-chairs of the House Ways and Means Committee, helped the House be a united body in the budget negotiations, Hortman said.

“While this agreement doesn’t include everything we would have liked, we worked together to find a compromise. As DFLers, we do not take these changes lightly. But this is a budget that funds Minnesota’s state government for the next two years,” Hortman said.

“The hard work and compromise that went into reaching a budget deal represents the best of us as Minnesotans. Our budget framework invests in shared goals like education, health care and family budgets, and prioritizes children, workers and vulnerable communities. We will balance the state budget for the next two years,” Senate Majority Leader Erin Murphy (DFL-St. Paul) said in a joint statement.

Senate Minority Leader Mark Johnson (R-East Grand Forks) did not sign the agreement, nor was he at the press conference.

He said in a statement, “While the final deal includes some needed reforms, it falls short of acknowledging we need bipartisan support to stop the harmful progressive policies hurting small businesses and working families. We still have a lot of work before the end of the session and Senate Republicans will continue to fight for the needs of Minnesotan families, businesses, and communities until the very end.”

The global budget targets will allow conference committees to work out how appropriations are to be spent.

The Legislature must finish its work by 11:59 p.m. Monday.

Hortman expressed some optimism because the Legislature is currently one day ahead of the 2019 legislative session, when the divided Legislature needed a one-day special session to pass the budget. She hopes lawmakers will be able to wrap up the session either by Monday or with a one-day special session before Memorial Day weekend.

Budget compromises

The length of the budget negotiations was due to hard issues, Walz said.

A sticking point was whether to eliminate undocumented immigrants’ eligibility for MinnesotaCare, the state’s health insurance program for low-income residents. Eligibility for undocumented immigrants began Jan. 1, 2025, but under the agreement, it will end Dec. 31, 2025, for adults but continue for children.

The budget is both a fiscal and moral document and a compromise was needed to reach a budget deal, Walz said. Demuth said they recognized, as part of the compromise, that care should continue for children and adults can still receive health insurance in the private market. Hortman said that undocumented immigrants are Minnesotans who pay taxes, contribute to the economy and deserve health care.

Protesters gather outside the governor’s reception room May 15. Inside was a press conference where Gov. Tim Walz and some legislative leaders announced bipartisan biennial budget targets. (Photo by Andrew VonBank)

“We go into that eyes wide open that this will change people’s lives, in some cases substantially, for the worse, but it is a compromise,” Hortman said.

However, the People of Color and Indigenous Caucus and other DFL legislators weren’t on board with the MinnesotaCare compromise. They gathered outside Walz and legislative leaders’ press conference, pounding on the door and chanting, “Don’t kill our neighbors” and “Don’t kill immigrants.” Walz said the angry DFL legislators outside the door shows “we have a lot of work to do.”

In a press conference less than two hours later, Rep. Cedrick Frazier (DFL-New Hope) said there are attacks on immigrants across the United States and they are at the Capitol to protect the most vulnerable people in the state. The budget deal will harm people when they lose access to health insurance that covers cancer treatment and dialysis at the end of 2025, said Frazier, co-chair of the People of Color and Indigenous Caucus.

“Although we protected the children, which is very noble thing to do, those children will lose moms, dads, grandfathers, aunts, uncles, siblings,” Frazier said.

Frazier said some legislators aren’t ready to accept the budget compromise.

Unemployment insurance for hourly school employees during the summers will sunset in four years, per the agreement.

That provision has held up the House’s omnibus education budget bill, which was tabled on the House Floor a couple weeks ago. Hortman indicated the House is expected to pass the education budget bill Friday with the provision, but it will be removed from the bill by a conference committee.