Lawmakers race the clock to strike budget deal

Axios

07-05-2025

It's crunch time at the State Capitol, as Gov. Tim Walz and legislative leaders toil away at budget talks in hopes of striking a deal without a summer special session.
The big picture: With 12 days to go until the May 19 adjournment deadline, lawmakers at the narrowly divided Capitol are at odds over both how much to spend (and tax) and whether to revise or repeal policies passed during the DFL trifecta.
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.