Gov. Tim Walz, legislative leaders reach $17.9 billion spending agreement

Democratic Gov. Tim Walz and legislative leaders announced Tuesday they have agreed to a spending framework that would increase the state's budget by nearly $17.9 billion over the next two years, seemingly using up all of Minnesota's surplus.

The budget agreement reached by Walz, House Speaker Melissa Hortman and Senate Majority Leader Kari Dziedzic is notable not only for its size but for coming just halfway into the legislative session. In past years, the governor and legislative leaders typically didn't agree on spending targets until nearly the end of the session.

"Government can work together for the people. We can reach compromises," Walz said during a Tuesday news conference, touting the benefits of Democratic control of state government. "We can get our work done on time, and we can deliver a budget that Minnesotans can be proud of."

The nearly $17.9 billion increase would represent a more than 30% increase to the state's current $52 billion two-year budget.

State public schools would see the biggest funding increase under the DFL agreement, getting $2.2 billion more over the next two years. The budget also includes $3 billion for tax relief, $2.3 billion for an all-cash infrastructure bill that can be passed without GOP support, $1 billion for housing and nearly $670 million for a proposed statewide paid family and medical leave program.

Hortman called the education investment "historic." The agreement includes a $650 million state funding increase for higher education and $300 million for early childhood education.

"This is the largest increase in early education, K-12 and higher education that I can recall in my time serving in the Legislature over the past nearly 20 years," Hortman said, adding that future annual state funding increases for K-12 education would be linked to the rate of inflation.

The DFL House speaker said the tax relief money could include "nice-sized" direct rebate checks for Minnesotans as well as a change to the state's tax on Social Security. Walz has called for $1,000 rebate checks for individuals earning less than $75,000 annually and $2,000 checks for couples making less than $150,000.

Hortman said the Legislature will take action on the Social Security tax, but didn't say whether lawmakers will fully or partially eliminate it.

Hortman said child tax credits, property tax cuts and public safety funding for local governments will also likely be included in the budget.

Republicans quickly labeled the DFL plan as a "spending spree."

"Instead of listening to Minnesotans and proposing a responsible budget with meaningful tax relief, Democrats are going on a spending spree. Brace yourself for the tax hikes — they will be necessary to pay for this partisan wish list," House Minority Leader Lisa Demuth, R-Cold Spring, said in a statement.

Senate Minority Leader Mark Johnson, R-East Grand Forks, criticized the budget framework for offering "a paltry amount of tax relief" while paying for an "enormous expansion of state government."

Walz previously proposed $8 billion in tax relief in his two-year budget plan released in January. He acknowledged Tuesday that the new budget agreement provides less money for that purpose, saying "that's what compromise looks like" with other priorities competing for funding.

Senate President Bobby Joe Champion, DFL-Minneapolis, said the proposed budget framework is balanced and reflects Minnesotans' values.

Hortman added that the budget wouldn't require any money to be pulled from the state's reserves.

Walz, Hortman and Champion were in agreement that they won't let Senate Republicans derail their priorities.

GOP senators rejected a $1.5 billion borrowing bill for infrastructure projects last week, saying they wouldn't agree to it without action on tax cuts. Bonding bills require a supermajority to pass, and Democrats who control the Senate by a narrow 34-33 margin needed seven Republicans to join them in voting for the measure.

Now, Walz and DFL leaders said they're prepared to pass a cash infrastructure bill that can be approved on a party-line vote.

"There is not going to be hostage-taking," Walz said. "We will pass it one way or another and those projects will get done."