After more than a week of back-and-forth negotiations — and on the same day nearly 9,500 layoff notices went out to state employees — Minnesota’s political leaders found a way to break an impasse that threatened to shut down parts of state government. 

On Monday, House Republicans and DFL Gov. Mark Dayton agreed to spend $525 million more on education over the next two years. That’s about $125 million more than the Legislature initially allocated in its education budget, which Dayton vetoed, but less than the $150 million Dayton insisted on in the 2015 session’s final days. The agreement takes leaders back to where they were in the final hours of the 2015 legislative session, when that $25 million difference was the sticking point in trying to work out an 11th-hour solution. 

The $25 million at issue is a tiny fraction of the state’s nearly $42 billion budget, but it’s enough to clear a path toward a special session to deal with outstanding budget bills, which may happen late this week or early next week, leaders said.

That would be weeks in advance of July 1, the start of the next fiscal year and the day those layoff notices would turn into actual layoffs.

Both Dayton and House Speaker Kurt Daudt expressed frustration by the lack of progress made in negotiations last week, and switched from negotiating in private at the governor’s residence to trading offers via dueling press conferences Monday. The pressure on the two leaders intensified as the state mailed off layoff notices to workers in more than a dozen state agencies, which is required one month in advance by state law. Earlier Monday, Myron Frans, the state’s chief finance commissioner, also briefed reporters about plans for heading into a “partial shutdown” if no agreement could be reached. 

“Frankly, I’m tired of chasing my tail for the last two weeks. We want this to be finished,” Daudt said Monday afternoon. “We think that folks who get layoff notices today ought to have some certainty.”

When asked if the standoff was over, Dayton said he and Republicans are “standing off on a diminishing number of details.”

“I have no intention to see this go to a June 30th showdown and possible shutdown,” he said. “I’m just not going to subject people to that.”

Still some disagreements

So what does the potential deal look like? Well, not every detail is settled in the education budget yet, and Dayton also vetoed a jobs package and an agriculture and environment bill after a messy conclusion to the 2015 session. But leaders say they’re close on a deal to close up those proposals as well. Here’s where the major outstanding issues stand: 

• As part of the tentative agreement, Dayton abandoned his “number one priority,” a plan for universal preschool education. In return, Republicans agreed to drop two controversial proposals thrown into negotiations late last week, one to change teacher layoffs in the state and another to undo a Minnesota State High School League policy that allows transgender athletes to play on the team of their choice. But there’s still some disagreement about what programs should get more funding. One thing is certain: Dayton and Daudt have agreed to put $63 million of the new education money into the per-pupil spending formula, or a 2 percent increase in the formula each of the next two years.

• Dayton conceded on a legislative proposal to eliminate the nearly 50-year-old Minnesota Pollution Control Agency Citizens Board, but a deal to create buffers around waterways passed by the Legislature will be preserved in the final agriculture and environmental budget.

• A $100 million bonding bill failed to pass off the House floor on the last night of session, and Dayton said there’s still some disagreement on the details of a final construction package. He plans to leave negotiations on the bonding bill, which requires a supermajority to pass in both chambers, up to legislators. 

• A provision changing the way the state auditor’s office works is causing some problems. Dayton is upset about a provision passed in a state government bill that would allow county governments to seek private firms to do annual audits, instead of the state auditor’s office. Republicans and Senate Democrats strongly support the provision, which they say will save local governments money and give them more flexibility, but Dayton has echoed current State Auditor Rebecca Otto in saying that private firms won’t be as transparent and accountable as the state office. “I won’t agree to it,” said Dayton, a former state auditor himself.
  
  

Dayton not giving up on universal preschool

Other than working out those final differences, legislative leaders and Dayton still have a few final steps they need to take. All four caucus leaders and the governor must sign off on a deal on when to hold the special session and exactly what will be addressed. Dayton said he wants the special session’s parameters to be “crystal clear” before he signs any agreement.

A final deal shouldn’t be too difficult to reach: DFL Senate Majority Leader Tom Bakk and DFL House Minority Leader Paul Thissen praised the governor Monday for bringing negotiations to a close.

“While I am disappointed House Republicans are unwilling to invest the additional funding we know our schools need, I agree with the governor that shutting down state government is not the responsible way to resolve these negotiations,” Bakk, who has left negotiations up to Dayton and Daudt, said in a statement. “Throughout this process we have kept the state workers and their families in our minds, and are unwilling to gamble with their future by forcing Minnesota to endure yet another state shutdown.”

But lawmakers have left much to settle next year. Initially, Daudt and Bakk agreed to leave $1 billion of a nearly $2 billion budget surplus on the bottom line after they hit an impasse over a package of tax credits and cuts and a proposal to raise gas taxes to pay for transportation projects. That number will shrink to $875 million with new education spending, but it could also grow even more by next session as state revenues continue to come in higher than projections.

And Dayton doesn’t plan to give up on his plan to pass universal preschool in the state, his “number one priority” this session.

“It took me four years to get taxes on the wealthiest 2 percent, and I’m not going to step back from this,” Dayton said. “I’m going to make sure next session or the session after that, whether I’m out of office, that we have this enacted for the benefit of all 4 year olds.”