Budget talks break off between Gov. Tim Walz, legislative leaders

Closed-door budget talks between DFL Gov. Tim Walz and legislative leaders stretched into Thursday with no word of a deal, raising anxieties across the State Capitol as lawmakers confronted the possibility of a special session after Monday's deadline to adjourn.

The silence surrounding the talks — a stark contrast to the acrimonious finger-pointing of the previous week — raised hopes for progress but also lent an air of uncertainty.

Negotiations broke off late Thursday evening, as Senate Republicans began work on a temporary spending measure to fund state government at basic levels in case the stalemate continues past June 30, triggering a government shutdown.

"We are at somewhat of an impasse," said Sen. Julie Rosen, R-Vernon Center, before her Senate Finance Committee approved the stopgap measure Thursday evening. Rosen and other Republicans argued that the move was prudent to protect state workers and agencies in the event that a deal cannot be reached.

DFL senators criticized the measure as a premature tack to relieve pressure on lawmakers to agree on a state budget.

Even as news broke that talks were over for the night — an ominous sign — the governor's office still clung to the hope of being able to strike a deal.

"Governor Walz is continuing to meet with both Republicans and Democrats in the state Legislature to find a compromise that improves the lives of all Minnesotans," said Teddy Tschann, the governor's press secretary.

GOP Senate Majority Leader Paul Gazelka tweeted: "Still hoping to negotiate a deal for MN budget. We can do it."

The two sides staked out dramatically different public positions going into the end-of-session talks, and a lot of work is required to close the gap. Walz and GOP negotiators working to finalize a two-year state budget that is expected to top $45 billion sought to exude an aura of confidence, even as both sides remained publicly tight-lipped.

"Let's get it done," Walz said as he headed into an afternoon round of negotiations. "I got a haircut for the occasion, so this is it."

Asked if a deal was at hand, Gazelka uttered a terse, "I hope so."

DFL House Speaker Melissa Hortman pronounced herself "ready to rock 'n' roll."

In fact, the two sides remain far apart, at least in terms of the public positions they staked out going into the end-of-session talks. Walz and his DFL allies who control the House want more money for schools, health care and transportation. Gazelka and the Senate's Republican majority have held firm against any tax increases, including an extension of the current 2% tax on health care providers and a proposed 20-cent-a-gallon gas tax hike.

As the talks have dragged on, blowing a series of procedural deadlines for meeting Monday's constitutional adjournment date, activists representing an array of causes descended on the Capitol with signs and brightly color-coordinated shirts, each group hoping their issue would be included in the budget deals brewing behind closed doors.

There were diabetics struggling with insulin costs, felons who want their voting rights restored and people supporting driver's licenses for immigrants who are in the U.S. illegally.

This phase of negotiations — often referred to around the Capitol as the "cone of silence" — created a vacuum quickly filled by rumors and frustration. One lobbyist recounted how a lawmaker said in the morning that a deal was imminent. He had heard it was all over Twitter, despite not having a Twitter account.

Others said the need for a special session to finish the work is growing by the minute. But those meeting behind closed doors gave little away.

New legislators bemoaned the opaque process and pointed fingers at the other side of the aisle.

"This process is so foreign to me that I am flabbergasted that we can't find a way to do it better," said Sen. Scott Jensen, a first-term Republican from Chaska. While he hoped to be further along in negotiations, Jensen said that Gazelka "continues to press on."

Walz, Gazelka and Hortman originally set a May 6 deadline to agree on the overall budget and how much should be spent in broad categories such as education, health care, roads and agriculture. Legislative conference committees are waiting for those numbers before they can finalize their plans for each area of the state budget.

The Revisor's Office, which processes bills and prepares conference committee reports, had previously told House and Senate leaders that they should aim to come up with a spending levels by noon Wednesday. Legislative staff said that after that deadline it becomes harder, but not impossible, for the office to complete their work in time for the May 20 adjournment date.

The early deadlines were created so "the public had a full view" of negotiations, said Rep. Jamie Long, D-Minneapolis.

"It didn't feel like the Senate was willing to be partners in that process and they wanted to do things the same old way, which was waiting until the last minute," he said.

Long, another first-term legislator, is still pressing for one of his priorities: $2 million in funding for 2020 census preparations, which the Senate says is off the table in conference discussions. "There's no good reason for us not to do it," he said.

The DFL House majority included an array of policy measures in their budget bills, from paid family leave to gun control. Their Republican counterparts in the Senate focused more narrowly on opposing tax increases and have fewer policy items in the mix.

Walz's proposed extension of a 2% tax on medical providers has been a key sticking point in negotiations, with Senate Republicans demanding that it sunset at the end of the year, as current law provides. Democrats argue that the $700 million the tax generates annually is essential to supporting health care for low-income Minnesotans.

"Today in that building … health care for a million people is on the line," House Majority Leader Ryan Winkler, D-Golden Valley, told the crowd of supporters. This year's health care fight is the provider tax, he said, and next year it will be the governor's "OneCare" plan to allow more people to buy into public insurance.

Before he took the microphone, Winkler was asked how House Democrats are tempering the expectations of their many freshman caucus members, who took office calling for progressive change.

From the very beginning, he said, they likened the passage of the policy-laden budget bills to "opening Christmas presents without knowing which gifts you had to return."

Staff writers Judy Keen, Torey Van Oot, Stephen Montemayor and J. Patrick Coolican contributed to this report.