Minnesota leaders reach impasse in special session negotiations

Negotiations over a special session of the Legislature have "reached an impasse," said Minnesota Gov. Tim Walz, leaving billions of dollars from the state's surplus unspent.

The DFL governor and top leaders in Minnesota's divided Legislature have been meeting for weeks since the regular session ended in May, trying to finalize a deal to pump billions into tax cuts and new spending over the next three years while also leaving billions on the bottom line. But in a meeting Thursday, Senate Republicans said they don't plan to bring any more offers to the table, Walz said.

"This one is deeply disappointing because it feels like we were negotiating with ourselves over the last few weeks," Walz said in a news conference alongside DFL House Speaker Melissa Hortman.

Republican Senate Majority Leader Jeremy Miller said Democrats weren't willing to pass a $4 billion tax cut proposal without "billions more in spending."

"Simply put, Governor Walz and the House Democrats have different spending priorities than Minnesotans," Miller said in a statement. "After four months of session and four more weeks of discussions, the differences could not be resolved."

Before the session ended, lawmakers agreed to spend $500 million on checks for front-line workers while pumping $2.7 billion into a state unemployment insurance trust fund to stave off tax increases on businesses. They also passed smaller funding packages for veterans, mental health and farmers.

But leaders ran out of time during before the May 23 deadline to adjourn the regular session to finalize the details on a broad deal to cut $4 billion in taxes while spending another $4 billion on classrooms, new public safety initiatives and health care. They also agreed to a $1.4 billion package of construction projects in a bonding bill, typically passed in non-budget years, but didn't finalize the bill.

All sides left the door open to a possible special session to complete the work, but Democrats accused Republicans of being unwilling to compromise during closed-door negotiations.

"Senator Miller made it clear today that he only intended the agreement that he signed to be good until midnight on the last day of the regular session," Hortman said. "He does not consider himself bound by the agreement that he signed."

In key budget areas such as health and human services and public safety, Miller said the two sides still remained "many millions" apart.

The blame game over failure to use the surplus to cut taxes and boost spending will shift to the fall campaign. Walz and all 201 legislators are on the ballot. The governor said he proposed sending $4 billion to taxpayers immediately.

"The message is: Republicans know better how to spend this, they'll wait until next May and make a decision on what to do with this," he said. "I've never seen anything like this. Think about Minnesota Republicans walking away from the largest tax cuts since 1858."

The surplus will remain on the bottom line until legislators return to the Capitol in January. Walz said he's open to restarting the conversation about a special session with the Legislature, but he was not optimistic that would happen.