Budget breakthrough? What Gov. Walz and the Legislature did and didn’t accomplish

At least it started out OK.

Gov. Tim Walz on Thursday assembled a press conference with state legislative leaders to announce agreed-upon spending targets for the state budget. 

The Legislature is supposed to pass a balanced budget funding the Minnesota government over the next two years before it adjourns May 19. It is exceedingly unlikely they will do this, though Speaker Emerita Melissa Hortman (DFL-34B, Brooklyn Park) asserted at the press conference that lawmakers may just need a day-long special session to complete the budget. 

Walz declared to a packed and rapt audience of reporters that “it never happened in American history” where one had a legislature so closely divided (the Senate is 34 DFL, 33 Republicans; the House is split 67-67 between the parties) that was nonetheless able to reach a budget compromise. 

It is especially impressive, the governor said, “at a time of chaos and dysfunction at the federal level.” 

“I think the country would be appreciative of this, because it can still work. Democracy is hard, but it can still work.”

And then chaos and dysfunction happened. 

People began to pound the doors of the governor’s locked reception room, chanting Walz “sold out” and “failed immigrants” on a budget compromise to stop letting undocumented immigrants access MinnesotaCare, a state-operated subsidized health care program. 

Many of the protesters were not incensed private citizens, but rather the very DFL lawmakers who hold a razor-thin majority in the Senate. 

Amid the din of demonstrators, lawmakers and Walz administration officials answered questions in a way that suggested a lot still needs to be done.

Here is what we know about the progress in crafting a state budget. 

What exactly did the governor announce Thursday?

The lingua franca of the Minnesota budget process is “targets” and “forecasts.”

Walz, Hortman, Speaker Lisa Demuth (R-13A, Cold Spring) and Senate Majority Leader Erin Murphy (DFL-64, St. Paul) laid out targets Thursday about the size of each spending bill and the overall amount the Minnesota government will spend over the next two (and four) years.

Walz and the legislators announced that they will spend $283 million less in fiscal years 2026 and 2027 than what was laid out in the Minnesota Management and Budget’s (MMB) February forecast. 

That puts total spending at $67.5 billion over the next two years. 

A forecast is just that, predicting what the state might do using past years as a guide. It also anticipates revenues Minnesota will bring in by looking at factors like tariff uncertainty and possible Federal Reserve actions. 

This cut over the next two years includes $270 million less compared to the February forecast in the Department of Human Services (DHS), which operates Minnesota’s Medicaid program. 

There are modest cuts elsewhere compared to the forecast, like $30 million less for jobs and economic development programs. 

The big and painful cuts come in fiscal years 2028 and 2029.

At that point, the state plans to reduce K-12 spending by $420 million compared to forecast, and wipe out $820 million from DHS. Overall, Walz and lawmakers target $1.8 billion in cuts during these two years. 

Some cuts are being agreed on now because MMB predicts Minnesota will move from a surplus to a nearly $6 billion budget deficit by fiscal year 2028.

“I’m pleased to say that we came up with a budget that was fiscally responsible,” Walz said, adding, (as he did in the State of the State speech) “this agreement will ensure Minnesota continues to be the best place in the country to raise a child.”

Wait, so all that was announced was these budget spending targets?

Yes and no.

In snippets of their press conference remarks, one can glean what specific issues Walz and legislative leaders reached compromises on. 

One such topic is health care for undocumented immigrants. 

Minnesota started a program Jan. 1 to allow undocumented immigrants to enroll in MinnesotaCare, a program that partly subsidizes health care for Minnesotans who live below 200% of the federal poverty level. 

As of April 24, the program has cost the state $3.9 million. But Republicans say costs will spiral and imperil Minnesota’s ability to get Medicaid money from Washington. 

In response, MinnesotaCare will only be accessed by undocumented children with adults booted off, Demuth explained. 

Tipped off about this deal, the legislative People of Color and Indigenous caucus made up entirely of DFLers attempted to storm the press conference. They later held a press conference of their own, saying they will not sign off on a spending bill with MinnesotaCare cuts for undocumented immigrants. 

Asked about the cut, Walz said, “I don’t agree with it but I agree with the compromise of it.” 

Murphy, who previously said she would hold the line on MinnesotaCare for all undocumented immigrants, told reporters, “We learn as children the skill and value of compromise.”

I’m confused. Is limiting subsidized health care for undocumented immigrants to just children a settled issue or not?

It is settled unless all DFLers vote as a block to stop a spending bill with that language. Murphy and Hortman would need to change their current stance, which is unlikely this late in the budget-writing process. 

What other hot-button issues are lawmakers agreeing on?

As diligent followers of the state budget process might remember, the bill funding K-12 schools is stuck in the House over whether to extend a program that gives hourly school workers – like teacher’s aides and food service workers – unemployment benefits when school’s out in the summer. 

Hortman explained that the House plans to pass an education spending bill as soon as tomorrow. The chamber will then introduce separate legislation that has the unemployment insurance program sunset in four years. 

Also on the education front, Demuth said, “We have made great strides in protecting the funding for non-public education,” a sign that cuts to private school students’ aid and transportation is likely off the table. 

A subject that has received far less attention (until today) is that the state will close the Stillwater Correctional Facility by 2029, as part of the budget deal. The Star Tribune reported the decision will affect 550 state employees and 1,172 inmates, and save the state $40 million. 

What is NOT included in the budget agreement?

Well, the bills still have to be written working from these targets.

That means negotiating what to cut, or in some cases add, to spending bills that can run hundreds of pages long. 

One glaring area is Medicaid costs, including giving recipients long-term care at their homes.

Walz has consistently highlighted the escalating costs of long-term care waivers. During his State of the State speech, the governor implied that long-term care could soon make up 1/8 of the budget. 

Yet there are no specific Medicaid cuts laid out in the targets, according to Ahna Minge, the state budget director. 

That will leave it to House and Senate Human Services Committee leaders to reconcile two very different bills when it comes to Medicaid cuts. Already, committee leaders have treated finding Medicaid cuts as a quite unsavory, if necessary, part of their jobs. 

“This is not something we can say we’re proud of,” said Mohamud Noor (DFL-60B, Minneapolis) earlier this month of the budget bill that passed through the House Human Services Committee he co-chairs. “But we’re getting there.”

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Editor’s note: This story was written by Matthew Blake for MinnPost.com. MinnPost reporter Shadi Bushra contributed to the report.

This article first appeared on MinnPost and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.

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