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Deal reached, but overtime session still needed at Capitol

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Minnesota Gov. Tim Walz (center), joined by Republican Senate Majority Leader Paul Gazelka and Democratic House Speaker Melissa Hortman, announces a state budget deal at the Capitol on Sunday. Brian Bakst | MPR News

The Minnesota Legislature won’t finish work on the state’s new two-year budget by Monday's midnight deadline to end the regular session. That means overtime for lawmakers. But Sunday night, first-term Democratic Gov. Tim Walz stood with the top Senate Republican and House DFLer to announce agreement on a budget plan.

After more than a week of negotiating in secret, Walz,  Republican Senate Majority Leader Paul Gazelka and DFL House Speaker Melissa Hortman emerged with a four-page framework initialed by all three.

“We’re here to announce an agreement has been reached on a two-year budget for Minnesota," Walz said. "I’m going to clap. I’m going to clap.”

Walz was in a celebratory mood, and like the others, was quick to compliment his fellow negotiators.

“Instead of dysfunction and shutdowns and yelling, we have compromise agreements and as we said coming out, we’re still friends.”

The sides all seized on their own areas of victory.

The Democrats touted a big boost in aid to schools — consecutive 2 percent increases to the per-student allowance — and preservation of a tax that pays for health programs for those in need.

There will also be new spending on affordable housing and for broadband expansion projects.

Gazelka was the main Republican at the bargaining table. He cheered the first income tax cut in about two decades, no gas tax increase and a pledge by the others to find future savings in health and welfare costs.

“Both sides when you have divided government want to win. Both sides don’t want to lose. And sometimes instead of win or lose it’s a draw. And that’s what we had here today. It’s a draw,” he said.

House Speaker Hortman said getting the blueprint done was a big lift.

“Minnesotans expect a government that works. They expect leaders that will work literally around the clock to make sure the state stays working for them. And I am really proud that we three were able to achieve this really strong and fair budget agreement and to do it on time.”

The three leaders also defended their closed-door negotiations, even though earlier in the year they had pledged to pursue a more open process.

Walz said the deal depended on frank, private discussions.

“We’re still struggling [with the process]. Democracy is in action. You see that it doesn’t work in D.C. Most places can’t get it done. We did something here that in 2019 is a big deal. Divided government with vastly different visions and vastly different budgets that came together in a manner that is respectful.”

Several details are still to come because House-Senate conference committees are tasked with filling in the blanks. And it will take a special session to actually pass the budget. That could start on Thursday, Hortman said, although how long it takes is somewhat out of her control.

Republican House Minority Leader Kurt Daudt is sour on the deal.

“I will be very nice to say this is not a good product for Minnesotans.”

In particular, Daudt has problems with keeping what’s known as the health care provider tax. It was due to expire after this year under a prior budget agreement. Now it’ll stay, although the rate charged on medical procedures will drop from 2 percent to 1.8 percent.

Daudt was not sure what to make of the quarter percent, phased-in cut to the second income tax bracket because there are potential offsets elsewhere. Without support from his caucus to expedite the bills, a multiday special session will be needed.

“I would guess probably five days at the minimum would be as quick we could get out of here." Daudt said. "But we’ll see if they’re interested in engaging us in some conversation.”

In the Senate, DFL Minority Leader Tom Bakk said before the framework was announced that his caucus isn’t interested in delay tactics.

“I don’t see us throwing a lot of sand in the gears. It’s something the governor has agreed to with the Republicans in the Senate. I’m not telling you people are going to vote for the deal. And the governor has not asked me to put up any votes for what he negotiates. The agreement is likely to be pretty fragile. And I don’t want to be responsible for doing something that actually tears it apart and it falls down either.”

Bakk did express concern about a provision to dip into the state’s reserves to the tune of $490 million after the coming two-year budget period.

Walz said it’s a step he doesn’t take lightly but he’s comfortable with the stability of the economy.

The governor also acknowledged that he’s leaving some big priorities behind. He didn’t get the 20-cent increase to the gas tax for transportation projects. His OneCare public option for health insurance was set aside.

“We know there is more to be done. But I’ll have to tell you, there a lot of listening that went on and true compromise. I think Minnesota again rose to an occasion of where we want it to be. There’s a lot to like in here. There’s a lot of compromise to be made. But I think the people of Minnesota will be served well.”

What was supposed to be the last day for the Legislature will still be busy. The House and Senate conference committees face an evening deadline Monday to wrap up their work.