Walz, top lawmakers strike preliminary deal on taxes, new spending

ST. PAUL, Minn. (FOX 9) - Gov. Tim Walz and top lawmakers have struck a preliminary deal that carves up Minnesota's budget surplus into tax breaks, new classroom spending, and public safety.

The agreement calls for $4 billion in new spending, $4 billion in tax cuts, and leaves $4.2 billion on the budgetary bottom line in case the economy worsens. But it includes no final agreements and leaves every detail for lawmakers to sort out with one week left in the 2022 session, raising the possibility that lawmakers won't meet those expectations.

Public schools would get $1 billion of the new spending over the next three years, according to a signed one-page agreement reached over the weekend and released Monday morning. Another $1 billion will go into health and human services, while $450 million heads to public safety. Separately, the deal calls for a $1.4 billion public infrastructure bill.

"You're going to get some tax relief. You're going to get a bipartisan commitment around public safety. You're going to get education funding," Walz said at a news conference with Senate Majority Leader Jeremy Miller and House Majority Leader Ryan Winkler. "This is good."

Lawmakers now must race to fill in the gaps in the broad framework. Conference committees stopped meeting Friday as Republicans held their two-day endorsing convention in Rochester. Democrats are scheduled to hold their own convention starting this Friday, also in Rochester.

The framework calls for $1.6 billion in tax breaks over the next year and $2.4 billion in two years after that. But there's no final agreement about how much will go to income tax cuts, a top Senate Republican priority, or Walz's proposed rebate checks of $500 per adult.

Miller said the Senate would keep pushing for income tax cuts, while Walz said his rebate checks remain alive in negotiations.

"There have been no final decisions on really anything at this point, otherwise we’d have the bills done and on the governor’s desk already," said Miller, R-Winona, as he urged conference committee chairs to reach final agreements. "There’s a lot of work to be done this week." 

But a Monday morning dispute in the K-12 conference committee underscored the challenges ahead. The House and Senate chairman disagreed over the pace of exchanging offers after being given their $1 billion spending target.

"Leadership has indicated we have two days to resolve this, and delay is not on the table," said House Education Chairman Jim Davnie, DFL-Minneapolis.

Senate Education Chairman Roger Chamberlain, R-Lino Lakes, implored Davnie to release his offer first.

"I'm done speaking. We are done," Chamberlain said, and the meeting ended.

Still, the broad outline of an education deal is coming together. Miller said he thought the House and Senate would find "common ground" on closing a funding gap for special education services. The special education issue has been a major point of division: the House's initial bill included $422 million next year to deal with the gap, while the Senate's bill included nothing.

Meanwhile, the $1.4 billion bonding bill under discussion would pay Minnesota's required share of all projects included in the federal infrastructure law over the next five years, Walz said.

Attention is increasingly shifting to the election. On Saturday, Republicans endorsed physician and former state Sen. Scott Jensen for governor. Walz will get his own party's endorsement this weekend. He faces no DFL challenger.

Inflation and the economy are top issues on voters' minds. Walz has pitched his rebate checks to help Minnesotans with high costs, while Senate Republicans say permanent income tax cuts would be more beneficial in the long run.