Minnesota lawmakers hit sticking points in budget talks with weeks left in session

Minnesota lawmakers returning to work Monday are behind on crafting spending plans for K-12 education and the state’s health system.

Lawmakers adjourned earlier this month for a week-long Easter and Passover break after most committees took action on portions of the state budget. But education and health committees in the House missed a key deadline as they worked to find bipartisan agreement in the two largest sections of the state budget.

With divisions between the GOP and DFL and members of the House and Senate, they face an uphill road to finish by the May 19 end of session.

The tie between Republican and Democratic lawmakers in the House “makes everything harder, slower, more time consuming,” said Rep. Robert Bierman, DFL-Apple Valley, who co-chairs the House Health Finance and Policy Committee.

The evenly split House and DFL-controlled Senate are racing to assemble their respective budget bills so they can begin hashing out differences. Lawmakers are expected to pass a budget for the next two fiscal years of about $66 billion with more than 70% of the funds going toward health and human services and education spending.

House Speaker Lisa Demuth, R-Cold Spring, and House DFL Leader Melissa Hortman said earlier this month that legislators are working together in good faith to push budget bills forward.

It’s a stark contrast from the start of this year’s session, when a power-sharing dispute between Democrats and Republicans stalled House business for three weeks.

“We are pleased by the partnership between Democrats and Republicans in the House so far,” said Hortman, DFL-Brooklyn Park.

Demuth said the education and health committee co-chairs are working hard to wrap up spending bills. Those two budget areas could be the biggest sticking points in negotiations moving forward.

The House committee chairs are negotiating to determine how to cut a combined $225 million over the next four years from their portion of the budget. The DFL-controlled Senate has proposed cutting some funds while increasing fees on health plans to improve payments to mental health providers.

The Senate approach is a nonstarter for Rep. Jeff Backer, R-Browns Valley, who co-chairs the House health finance committee with Bierman.

“Our caucus is not interested in raising fees, taxes, revenues ... whatever you want to put the name on it,” he said.

Backer said he hopes to improve the state’s health care system and is concerned about hospitals across greater Minnesota that are operating in a deficit. He’d like the committee to cut health care for undocumented immigrants in Minnesota, which took effect in January.

A fiscal note prepared for a GOP-led effort to revoke health care for undocumented immigrants said it would save the state $74.6 million in the next two years and $121.7 million in the two years after that.

But DFL health co-chair Bierman said when people can’t access regular health care, they wind up in overburdened emergency rooms where providers are obligated to treat people regardless of whether they have insurance. He said treatment for undocumented immigrants costs the state either way.

Hospitals, physicians, nurses, immigration groups and the Minnesota Catholic Conference opposed removing coverage for undocumented immigrants in a committee hearing earlier this session.

Bierman said the only things that will make it through the tied House are areas where the GOP and DFL can find agreement, which takes “a lot of time and energy.” But he said he’s confident they will figure it out.

“There’s a reason they call this the season of disappointment in most legislatures because you never get everything you want,” he said. “You have to negotiate, and you have to compromise.“

In the Senate, lawmakers are looking to a provider tax to raise additional funds for the health budget to avoid some program cuts. Sen. Melissa Wiklund, DFL-Bloomington, chairs the Senate health committee and said the chamber may have more work to do on the health budget depending on what deal Senate and House leaders strike as they work to come up with a joint framework. Since the House committee hasn’t released a budget, she said it’s difficult to know what representatives’ priorities will be.

GOP Sen. Paul Utke, of Park Rapids, said he didn’t believe the Senate health bill met the goals of reducing health care costs and making it more accessible to Minnesotans. He serves as the ranking Republican on the committee.

“We went into this thinking we needed to figure out how to reduce costs in health care and make it more available,” Utke said. “To me, in the end, we did just the opposite.”

Walz and Senate Democrats have proposed trimming more than $680 million over the next four years. The House is taking a starkly different stance, calling for a $40 million education funding increase in the next two-year budget and no net change in the following cycle.

Rep. Cheryl Youakim, a Hopkins Democrat who co-chairs the House Education Finance Committee, said the $40 million funding increase will go toward supporting Minnesota’s READ Act, which requires teachers to learn new ways to teach reading with a greater emphasis on phonics.

GOP Rep. Ron Kresha, of Little Falls, who co-chairs the Education Finance Committee with Youakim, said that “maintaining the schools’ funding and the flexibility to get them through some difficult budget years ahead is important.”

School districts are worried about the cost of new state mandates, Kresha said, such as sick and safe time, paid family and medical leave, and unemployment insurance for hourly school workers during the summer.

Youakim said she’s not on board with the Senate plan to cut nearly $700 million in the 2028-2029 fiscal cycle.

The Senate plan largely achieves those savings by temporarily delinking education spending increases from the rate of inflation in the 2028-2029 biennium.

“We had to do that, otherwise we would have had to cut hundreds and hundreds of millions of dollars from the education budget,” said Sen. Mary Kunesh, DFL-New Brighton, chair of the Senate Education Finance Committee.

Democrats agreed to tie future school funding increases to the rate of inflation in 2023. Kunesh said the pause on inflationary increases would only be for the 2028-2029 cycle.

Kunesh said the Senate education bill fully funds the summer unemployment insurance for hourly school workers: “I’m really pretty proud of what we did with what we have to work with.”

Legislators also are hoping to pass a bonding bill to fund infrastructure projects across the state after not passing one last year.

Senate Democrats are pushing for a public works borrowing bill of up to $1.3 billion, while the House’s spending framework calls for a $700 million bill.

After a recent meeting between Gov. Tim Walz and legislative leaders, Senate Majority Leader Erin Murphy was optimistic about the prospect of passing a bonding bill this year.

“There does appear to be a real desire to move on a bonding bill this year,” said Murphy, DFL-St. Paul.

The Legislature has until its May 19 adjournment to get its work done. Legislative leaders said earlier this month they are on track for a timely finish — at least for now.

“The state of Minnesota, they don’t need to be putting more money into a special session,” said Senate Minority Leader Mark Johnson, R-East Grand Forks. “Let’s get this done now.”