Gov. Walz, Democrats and advocates celebrate $72 billion budget

Along with DFL legislative leaders and his commissioners, Gov. Tim Walz threw a bill-signing party Wednesday on the Capitol steps in front of hundreds of supporters, with a pep band at his side and a drone camera overhead recording the occasion.

"Time and time again they said, 'It's not hard to vote your conscience,'" Walz said as he turned back to look at the lawmakers lining the steps behind him.

He boasted about the accomplishments in the nearly $72 billion budget, calling a new child tax credit a globe-leading effort to reduce childhood poverty. Referring to the $17.5 billion surplus, he said, "We're going to put it behind our teachers so we can educate our children."

Minnesota will lead on clean energy and "every single person" will make their own decisions about reproductive rights, he said.

Had the November election tilted to Republicans, Walz said, things would be different with right-to-work legislation, abortion bans at six weeks and looser gun laws. "But guess what? Elections have consequences," he said.

House Speaker Melissa Hortman, DFL-Brooklyn Park, called it "the best budget in 50 years."

Republicans weren't part of the celebration and have argued for months they've been left out of the legislative process, noting many of the major bills passed with only DFL support. In coming months, GOP leaders plan to tour the state, faulting the DFL for increasing the size of the state budget by more than a third and not following through on bigger rebate checks to taxpayers.

"It's going to be much more expensive to live in Minnesota after these bills actually are enacted," Senate Minority Leader Mark Johnson, R-East Grand Forks, said in an interview Tuesday. "What we saw was just unchecked power, an agenda that's going through that was activist-driven, government-driven. And now we're going to have to live with this for many, many years to come."

In her comments, Senate Majority Leader Kari Dziedzic praised the work of her party, saying the DFL expanded freedoms, defended democracy and provided a "lunch box tax cut" that "will keep money in the pockets of Minnesotans every week and ensure that students do not go hungry."

Here are some major changes and new spending in the state's next two-year budget:

Education

The education budget boosts funding for state schools by $2.2 billion over the next two years. It ties future school funding increases to the rate of inflation (capped at 3%) and provides more than $300 million per year to partly cover school districts' special education costs. It also allocates more than $60 million a year to fund a new mandate requiring districts to pay unemployment insurance to hourly school-year workers between academic terms.

Higher education

Lawmakers' higher education budget creates a free college tuition program for Minnesota students whose families make less than $80,000 annually. It's a last-dollar scholarship program, meaning it would cover any tuition costs for those students that are left over after state and federal grants and institutional scholarships have been applied. Minnesota will spend about $117 million in fiscal year 2025 to get the program started and then $49.5 million annually afterwards. The higher education budget also includes money for a tuition freeze at the Minnesota State system of colleges and universities for the next two school years, as well as a funding boost for the University of Minnesota.

Health care

Democrats agreed to spend $1.35 billion more over the next two years for human services programs, including nursing homes and residential facilities. The budget spends $100 million to help ailing nursing facilities with a low-interest loan program. Republicans and Democrats also agreed to send an additional $300 million in direct aid to nursing homes in a separate bill. The two-year budget spends an additional $1.78 billion in a broader health finance bill that will increase reimbursement rates, expand medical benefits, dental and child-care benefits and remove barriers to abortion access, among other changes.

Taxes

The $3 billion tax law includes one-time rebates of $260 a person under a certain income level, a targeted tax cut on Social Security, a boost in aid and public safety funding for local governments and relief for renters and homeowners. It also raises $1 billion in new revenue over the next two years from wealthier Minnesotans and some corporations with profits overseas. The centerpiece of the law, according to Democrats, is a $1,750 child tax credit for low-income families, which the state estimates could cut childhood poverty rates by a third.

Transportation

The Democrats' budget raises more than $1 billion in new funding over the next two years for transportation projects across the state by indexing the gas tax to inflation, creating a 50-cent fee on deliveries over $100, boosting the metro-area sales tax by 0.75% and increasing motor vehicle sales tax and car tab fees. Lawmakers also agreed to spend an additional $1.3 billion on other projects, including $195 million to support a passenger rail line between the Twin Cities and Duluth, $50 million for an extension of the Metro Transit Blue Line and $25 million to overhaul Rice Street near the Capitol in St. Paul.

Infrastructure

A $2.6 billion infrastructure deal was one of the last agreements reached this session. The state will borrow roughly $1.5 billion to fund infrastructure projects, including fixing roads, bridges and wastewater systems. The University of Minnesota and Minnesota State systems will receive money to maintain their buildings and other infrastructure. Lawmakers also agreed to about $1.1 billion in cash, which includes money for nonprofits and local government projects across the state.

Environment

A $2 billion environmental budget, with $1 billion in new spending, will touch homes, forests, farm fields, peatlands and grassfields. It imposes a broad ban on PFAS, the so-called forever chemicals, by 2032. The law aims to safeguard air and water. Trees will be planted and crumbling outdoor infrastructure such as fish hatcheries and boat ramps will be revamped. It includes $100 million for cities seeking grants to deal with climate change.

State government

The new budget enacted by Democrats will increase spending on state government by more than $400 million. The budget will send more money to local governments to help them run state elections, create a new commission to redesign the state seal and flag, boost salaries recommended for state constitutional officers and add Minnesota to a national compact in support of using the popular vote system in presidential elections.

Jobs, labor and the economy

Minnesota is devoting dollars to competitive grant programs for workforce development and putting more money toward improving child care access and affordability. Workers would also be able to earn up to 48 hours of paid sick or safe time a year under a new requirement. Legislators' work on jobs and economic development focused in part on tackling inequities. They put $125 million toward supporting areas that had been damaged by civil unrest or have been struggling due to other challenges, including structural racism or population loss. State leaders also boosted Minnesota's tourism spending.

Housing

The state is spending a record amount of money — $1 billion — to address Minnesota's housing needs. The dollars will go to a range of programs, from helping first-generation homebuyers afford down payments to preserving affordable housing. Lawmakers are also putting money toward providing rent vouchers, saying the long wait times to receive a federal Section 8 voucher are unacceptable. A controversial provision in the housing budget will increase the metro sales tax by 0.25% to support housing assistance.

Public safety

The governor already signed a $3.5 billion public safety budget with $880 million in new funding and new gun control restrictions. The law includes the Minnesota Rehabilitation and Reinvestment Act, allowing prison inmates the possibility of cutting time off their sentences through education, training or treatment. It established the Clemency Review Commission and no longer requires Board of Pardons decisions to be unanimous.