Health care for immigrants, prison closure, fixing a deficit: Takeaways from Minnesota budget deal

Minnesota would revoke health care for adult undocumented immigrants but allow children to remain covered under a budget deal top lawmakers announced Thursday.

Gov. Tim Walz and leaders of the Minnesota House and Senate emerged from two weeks of closed door negotiations with a topline deal that also cuts $283 million from the state budget over the next two years and makes progress on the state’s looming deficit.

The deal still needs approval from legislators. The GOP and DFL are tied in the Minnesota House. Democrats hold a one-seat advantage in the Senate.

“No one got everything they wanted,” Walz said of the deal in a press conference.

Here are six takeaways from the budget deal.

Whether to continue allowing undocumented immigrants to enroll in MinnesotaCare was a major sticking point in budget negotiations this session. Republicans decried the policy, saying the state’s health insurance program shouldn’t cover people in Minnesota unlawfully. The program, which started in January, has cost the state more than lawmakers expected, though not as much as Republicans claimed in their efforts to repeal it.

Lawmakers struck a deal to allow undocumented children to remain enrolled but end the program for adults.

“Those that are here illegally -- they can still join the private market, so it’s not that healthcare is being denied in any way,” Republican House Speaker Lisa Demuth said.

Walz and Democratic legislative leaders appeared dejected about the compromise.

House Democratic Leader Melissa Hortman of Brooklyn Park said undocumented immigrants pay taxes, contribute to the state’s economy and are deserving of care. She said MinnesotaCare has provided life-saving cancer treatment and diabetes care. That will end Dec. 31.

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

The Minnesota House will vote on ending unemployment insurance for hourly school workers in 2028, but it’s unlikely to survive conference committee where Hortman said Democrats won’t support the revocation.

In 2023, Minnesota lawmakers voted to give unemployment payments over the summers to bus drivers and other workers who don’t get paid during school breaks.

The state has subsidized the program, but doesn’t plan to do so forever. Republicans have sought to repeal the program over concerns about burdening school districts with the mandate.

Minnesota will close its second-largest correctional facility.

The 111-year-old Stillwater prison will shutter by 2029 and require the relocation of about 1,200 inmates currently housed there.

Walz said there have been “constant issues around the inability to provide safety.”

“The decision was made that we have the capacity inside the existing system to be able to house those incarcerated individuals, to do so in a safer manner and to be able to get the operating costs that make that go forward,” he said.

In such a closely divided Legislature, striking a budget deal meant difficult — or even painful — concessions by both political parties.

Walz said he was “incredibly proud” of the work he and legislative leaders did on the budget.

“Two hundred and one legislators, separated by a single vote,” Walz said. “I don’t know for certain on this, but I’m pretty sure — unless there was a tie somewhere else — this has never happened in American history.”

But legislative leaders may struggle to wrangle support from the deal from their caucuses.

Progressive DFLers, outraged by the decision on undocumented residents, pounded on the door of the reception area within the governor’s office during the news conference, chanting, “don’t kill immigrants” and “open the door.” Security personnel held the doors closed as protestors tried to enter the press conference.

Senate Majority Leader Erin Murphy, DFL-St. Paul, said she was not surprised by the demonstration as it’s a “visceral and painful issue” for her caucus. She emphasized that undocumented immigrants are people.

“They’re human beings. They are Minnesotans,” Murphy said. “They work in our communities. They work with us and alongside us. They go to church with us. They are our neighbors. We have made a decision and a compromise that suggests that they are other, and that is something that people are going to object to.”

Absent from the news conference was Senate Minority Leader Mark Johnson, R-East Grand Forks, who said later that he was not asked to sign off on the deal. He said there were good parts of the proposal but there’s more work to do.

 “We’ll keep working and looking at that, but I think it is, again, a compromise where both sides aren’t particularly happy,” Johnson said. 

One of the key sticking points legislative leaders and the governor had to work through was whether and how to balance the budget in the next biennium. State budget officials earlier this year projected a $6 billion deficit for 2028 and 2029.

The deal announced Thursday erases much of that deficit, but doesn’t eliminate it completely.

They agreed to a suite of cuts, mostly to human services and K-12 education, and some small revenue raisers, that combine to reduce the 2028-29 deficit by $1.8 billion.

Ahne Minge, the state budget director, said forecasts now suggest legislators will face just a $290 million deficit when they tackle the 2028-29 budget again in the 2027 legislative session, “a far cry from where we were.”

But the relatively small $290 million figure leaves out the projected impacts of inflation, which could push costs up and require deeper cuts.

Legislative leaders said earlier this week that a special session will likely be necessary to wrap up work. Now that they’ve agreed to a budget framework, Hortman said if a special session is still necessary it won’t be longer than a day.

She cited the 2019 legislative session, which required a quick one-day addendum, as precedent.

“You’ve seen this movie before and you know how it ends,” she said.

Walz called the deal lawmakers struck a “solid budget that is fiscally responsible.”

“It brought together a divided legislature...against a backdrop of total chaos in D.C.,” Walz said, “and they still got it done.”