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By Dana Ferguson and Clay Masters, Minnesota Public Radio News

Gov. Tim Walz and legislative leaders announced a budget agreement Thursday that they’ll have to sprint to complete ahead of a coming adjournment deadline or might need extra days to ratify.

Leaders said they’d had to work across what’s likely the state’s tightest partisan split ever to reach the agreement.

Almost immediately, the blueprint was met with some support as well as strong blowback from members of the People of Color and Indigenous Caucus.

Walz and top lawmakers lauded one another as they laid out the agreement in the governor’s reception room at the Capitol, saying it was a positive sign for democracy that they were able to negotiate across party lines. During the news conference, other lawmakers stood outside the room banging on the door and yelling, “One Minnesota, right?” and “Don’t kill our neighbors.”

The anger was in response to a decision to roll back MinnesotaCare coverage for adults without legal status beginning next year. The issue had been a top priority for Republicans and one that Democrats struggled to accept.

“We had to make hard decisions in that room,” House Speaker Lisa Demuth, R-Cold Spring, said, noting people without legal status could seek insurance on the private market. “And when we looked at numbers and we looked going forward, this was a compromise that we were all able to come, come to any negotiation, no one walks out completely happy.”

House DFL Caucus Leader Melissa Hortman said it wasn’t a change that she or other Democrats supported morally. But they had to close a deal.

“We go into that eyes wide open that this will change people’s lives, in some cases, substantially for the worse, but it is a compromise, and under the compromise, we will be funding state government for the state of Minnesota,” Hortman said.

Members of the People of Color and Indigenous Caucus and other Democrats gathered outside the room, yelling out in frustration about the agreement. They met with the governor and his staff after the news conference.

Rep. Cedrick Frazier, DFL-New Hope, is one of the POCI caucus co-chairs. He said several Democrats would vote against the provision and were frustrated to see it move forward. There are roughly 20,000 people enrolled in MinnesotaCare who don’t have legal status. About 3,000 of them are under the age of 21.

“Although we protected the children, which is a very noble thing to do, those children will lose moms, dads, grandfathers, aunts, uncles, siblings,” Frazier said. “That is what we are faced here with today.”

The proposal also includes significant cuts to social service programs, the closure of one of the state’s oldest prison facilities and a small reduction to the payroll tax for a new paid family and medical leave program set to take effect next year.

Walz said everyone at the bargaining table came in with “the best interest in our state in mind.”

At the press conference he summed it up: “No one got everything they wanted.”

“Amid partisanship and division in Washington, Republicans and Democrats are proving that here in Minnesota we can still work together to get things done,” Walz said.

Details of the budget framework include:

— The biggest spending reductions are in social service programs, although that is likely to occur through curbing growth rates more than cutting existing funding levels.

— Overall, education spending is held flat in the next two year budget and planned increases for the two years after that would be curtailed. Proposed cuts to money that nonpublic schools get for transportation and supplies are off the table, which Republicans wanted.

— Unemployment insurance for hourly school workers — from bus drivers to custodians to cafeteria workers — could continue for a few more years and then might be rescinded. But that element was subject to upcoming negotiations by a conference committee.

— Transportation-related spending was also drawn down, but some of that could be offset by other pots of dedicated revenue.

— The state prison system will be reconfigured. The correctional facility in Stillwater, which is one of the largest in Minnesota, is slated for closure by the end of the decade as part of the agreement. The century-old prison houses more than a thousand inmates. Walz said it comes down to deferred maintenance.

— A paid family and medical leave program due to launch in January also got adjustments. A business tax to help pay for the time-off benefits would be slightly reduced. But the general parameters of the program were left intact.

The overall budget is expected to fall somewhere between $66 billion and $67 billion over two years. Demuth celebrated the decrease from the current $72 billion spending plan as a win.

“We are seeing the largest spending cut in state history, nearly $5 billion from biennium to biennium and that is progress,” Demuth said. “There is movement, considerable movement.”

Republican Senate Minority Leader Mark Johnson was part of the budget negotiations but didn’t sign the agreement and opted not to join the news conference about the deal. In a news release he said there are good provisions but “it falls short of acknowledging we need bipartisan support to stop the harmful progressive policies hurting small businesses and working families.”

He said his caucus hadn’t been asked to put up votes on budget bills and members were still evaluating the broader agreement.

Democratic leaders said they’d worked to keep the most of their 2023 and 2024 legislative accomplishments as they could but had to make hard choices. They said they’d sink an effort to sunset unemployment benefits for hourly school workers and prevent big changes to programs that give new sick time and leave benefits.

Lawmakers are proposing to keep about $1.8 billion in a cushion for the current budget and say their plans chipped away at the bulk of a proposed budget deficit in the next budget. Their moves in this plan reduce the future problem by about half, leaving a couple of billion dollars of shortfall to contend with two years from now unless improving economic conditions wipe away the problem.

They said that could help ease potential impacts of federal budget changes that reduce funding streams to Minnesota.

“We put together a budget that balances into the future so that Minnesotans can count on us and the work that we do for the people of Minnesota and we eliminate a little bit of the stress of the chaos that is coming their way in their daily lives,” Senate Majority Leader Erin Murphy, DFL-St. Paul, said.

Negotiators were at odds over several facets of the budget for weeks, including whether to add new taxes or fees, how to handle new benefits for workers. Walz gave up a proposal to reshape the state sales tax, although there was a slimdown of exemptions for companies behind massive data centers.

Leaders noted that it will be a hurry now to wrap up budget bills and get them across the finish line. They have a deadline Monday to adjourn but suggested that more time might be needed to finish their work, given they have just five days left.

Hortman, a veteran of these kinds of budget talks, said the timeline remains in flux. She said an on-time finish was possible but that it might take an extra day prior to next weekend to finish up.

With the close party divide at the Capitol — where there are 101 Democrats and 100 Republicans — bipartisan backing will be needed to get a deal passed and onto the desk of Walz.

“Democracy is hard, but it still works,” Walz said.