UPDATE: MN lawmakers have a budget deal — no gas tax hike, keeps health care tax at 1.8 percent

Minnesota political leaders have a budget deal that tops $48 billion for the next two years.

Gov. Tim Walz, Republican Senate Majority Leader Paul Gazelka and Democratic House Speaker Melissa Hortman announced a deal that doesn’t include an increase in gas taxes and adds cuts the second tier of the income tax by a quarter of a percent.

“Stopping the gas tax increase was one of our top priorities and I’m pleased Gov. Walz and House Democrats ultimately listened to the people of Minnesota and rejected this approach,” Gazelka said.

The pact also includes $540 million in new funding for public schools including adding 2 percent per year to the per-pupil funding formula schools use for day-to-day operations. It gets rid of a sunset of a tax on health care providers, but lowers the rate from 2 percent to 1.8 percent.

“In one of the only divided governments in the country, I am proud that we came together across party lines to put together a budget that will improve the lives of Minnesotans,” Walz said. “While compromise means everyone doesn’t get everything they want, this budget allows for meaningful investments in education, health care and community prosperity.”

The three leaders have been negotiating the details of the next state budget in secret for the last week. Monday was the last time they gave substantial details of the budget talks.

“I’m glad to we are here to say we got it done,” Galzeka said, characterizing the deal as a “draw” rather than a win. “In the end, I think we found a place in the middle.”

The legislative session must end at midnight May 20. Gov. Walz is expected to call a special session later this week in order for lawmakers and staff to complete their work.

Minnesota’s current $45.5 billion budget expires June 30 and if it is not replaced the government could shut down.

State spending is expected to grow to $47.4 billion, if lawmakers change little, because of inflation, population growth and new and expanding programs.

Democrats and Republicans have been at odds all year over whether that is enough new spending or if the state should raise taxes to pay for other priorities.

Democrats proposed increasing gas and auto sales taxes and tab fees to pay for transportation projects. They wanted higher taxes on corporations and the wealthy to boost school funding and they had hoped to keep in place a 2 percent tax on health care providers.

Republicans have opposed all of those plans and have tried to keep state spending at projected levels.

This story will be updated.


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