Gov. Mark Dayton and House Speaker Kurt Daudt agreed Monday on a two-year education spending target, resolving the most significant issue of an impasse between the DFL governor and House Republican leadership.
The deal should pave the way for a final accord in the coming days and ratification in a special legislative session as early as Thursday or Friday, averting a shutdown of several state departments and agencies at the end of this month.
"I have no intention to see this go to a June 30 showdown and a possible shutdown. I'm not going to subject people to that," Dayton said, referring to the 30-day layoff notices the state issued to 9,400 employees on Monday.
Daudt, R-Crown, navigating his first session as speaker, expressed confidence a final agreement could be reached imminently: "I would say we're almost there."
The tentative deal, which will include a 2 percent increase on the per-pupil school funding formula in each of the next two years, will require further negotiation over how exactly to spend the additional $525 million, as will contested provisions in jobs and energy and environment bills.
Both sides could claim some victories Monday.
Compromise means "You agree to things you don't agree with," said Dayton, who gave up his signature priority of universal prekindergarten, but said he succeeded in pushing the GOP to boost education spending $368 million above their original budget, while coming down from his own original offer by only $169 million. The total E-12 education budget is about $17 billion.
When all education spending is counted, House Republicans would wind up raising the total E-12 budget by more than 8 percent compared to the previous two years. But they also will have succeeded in preserving a portion of the state's projected budget surplus, and could have as much as $875 million available in the 2016 legislative session for tax cuts and transportation. That figure could grow — or shrink — once the state releases its year-end economic and budget forecast.
Despite Monday's breakthrough, negotiators still have differences to work through in two major spending bills Dayton vetoed last month. In a jobs and energy bill, Dayton sought more money for the Department of Commerce and Department of Employment and Economic Development and a number of other agencies.
The environment bill the governor vetoed included nine separate provisions he objected to, saying they would threaten state government's ability to protect air, land and especially water.
Dayton said Monday he assented to a provision that would wipe out the Minnesota Pollution Control Agency Citizens' Board, lay people appointed by the governor and confirmed by the Senate who have final say on the permitting of controversial projects, a board that has been in place since the late 1960s. He said the decision was a trade-off that allowed him to win changes to other provisions that he said would, if enacted, be especially damaging to the agency and its regulatory effectiveness. Environmental groups have strongly opposed the board's elimination.
On Saturday more than half of the Senate DFL caucus signed a letter to Dayton applauding his veto of the environment bill and urging him to hold firm on a number of the regulatory issues in dispute.
Another of the governor's signature proposals during the session, buffers to protect state waterways from pollution, survived the talks and will be included in a new environment measure, Dayton said.

Auditor changes a problem
One potential hangup in a final agreement are changes to state auditor's duties.
Among the bills Dayton signed at the end of the legislative session was one that included a measure allowing counties to hire private auditing firms rather than pay the office of elected State Auditor Rebecca Otto. Dayton said at the time he wanted that changed in a special legislative session. He reiterated that demand Monday, saying the privatization would remove public oversight of local government spending and "eviscerate" the office he held in the early 1990s.
Finally, any deal would need the assent of not just Dayton and Daudt and the House Republican caucus, but the three other legislative leaders, as well.
Senate Majority Leader Tom Bakk, DFL-Cook, released a statement Monday praising Dayton's decision to accept the additional education money while preventing a shutdown.
Legislative leaders also plan on passing a measure to authorize spending on Legacy programs for the arts and environment. They also would pass a bonding bill of roughly $100 million. That requires supermajorities and therefore the support of the minority DFL caucus in the House and Republican minority in the Senate.
Shutdown prep goes on
Though the prospect of a partial government shutdown has greatly diminished, some state workers are still preparing.
Eric Pascal, 41, who processes licenses for recreational vehicles like ATVs and snowmobiles at the Department of Natural Resources, said a furlough would be very difficult for his family. Pascal's wife also works for a state agency that would be affected by a shutdown, potentially hitting their family budget twice as hard.
"Sometimes you feel like a pawn in people's political wrangling," said Pascal, who lives in Lake Elmo with his wife and three children.
Dayton has said that despite losing in this round, he intends to continue fighting for universal prekindergarten in future sessions, noting that it took him two years to push through an income tax increase on the state's wealthy.
He appeared ready to use his defeat on prekindergarten and even bigger education budget as a way to attack the GOP opposition in advance of the 2016 election, though he won't be on that ballot and has said he's not running in 2018.
"A surplus is mounting, and they won't come up another $25 million to invest in kids education? I think it's appalling," Dayton said.