MN Legislature passes $66B budget, cuts undocumented immigrant insurance

Minnesota lawmakers on Monday approved a bill ending state-funded health insurance coverage for adult immigrants in the U.S. illegally, a key component of a hard-earned budget deal between legislative leaders and Gov. Tim Walz.

In a one-day special legislative session that wrapped early Tuesday morning, the Legislature passed a $66 billion two-year state budget they failed to pass before the regular session ended last month. Walz will now have to sign it into law.

Large parts of the state government — such as the Department of Education and the Department of Human Services — were at risk of shutting down at the end of the month if they didn’t approve new spending by then. Those areas and health account for two-thirds of general fund spending.

The House and Senate had to approve a dozen or so remaining budget bills, including funding for areas such as higher education, health, energy, environment and commerce.

They also approved a tax package, a standalone bill making changes to data center tax incentives and a $700 million borrowing bill for projects like roads and wastewater treatment plants.

Public safety, corrections and veterans affairs were already funded by bills the Legislature passed on time during the regular session.

The state budget for the next two years will be about $5 billion lower than the last budget of more than $70 billion. The reduction is in part explained by the expiration of one-time spending when the state had a historic $18 billion surplus two years ago.

Special education transportation aid is one of the biggest areas for cuts. State leaders that they’d have to curb spending this year to address shortfalls looming later this decade.

As of this spring, Minnesota had a projected surplus of $456 million for the next two years, but it’s expected to turn into a deficit of nearly $6 billion in 2028-2029.

State spending has steadily grown, though it has seen bigger jumps in recent years. The two-year budget for 2021 was $52 billion.

Immigrant health care

As part of a budget deal state leaders reached last month, DFL leadership agreed to Republican demands to end MinnesotaCare coverage for adult immigrants without legal status. Coverage will end after 2025, though children will still be eligible. The benefit just kicked in this year, and more than 20,000 in total have enrolled.

Many DFLers opposed the change, and when their legislative leaders first announced it, some Senate and House progressives protested outside the governor’s office.

With approval in both the Democratic-Farmer-Labor Majority Senate and a House tied between the DFL and Republicans, the immigrant health care measure now heads to the governor’s desk to be signed into law. It will end MinnesotaCare coverage for around 17,000 people.

Republican supporters say ending coverage will save the state money, as enrollment in the program is three times higher than originally expected, but DFL opponents decried the bill as cruel, as it will end insurance coverage for people who need cancer treatment or dialysis, for example.

DFL leadership also called the move cruel, but said they had to compromise with Republicans or risk a government shut down.

“This is not about money, this is about demonizing and othering a group of people who are doing some of the hardest and most essential work in their society,” said House DFL Floor Leader Jamie Long, a Minneapolis representative who authored the 2023 bill creating the benefit. “This bill is cruel, it is inhumane, it will cost real human Minnesotan lives.”

House GOP Leader Harry Niska pointed out that Democrat-run California and Illinois are also considering similar phase-outs, and that Minnesota should send a message that “taxpayer-funded benefits are not a reward for breaking federal immigration laws.”

“The government is not the church, it is not a charity … We are stewards, and existing law is poor stewardship, and that’s what we’re here to fix,” said Niska, a representative from Ramsey. “The question before us is simple. Will we continue down a path of fiscal recklessness or will we act now to protect Minnesota taxpayers?”

Republicans have estimated that with higher-than-expected enrollment, the state could end up spending three times the original $200 million DFLers appropriated for coverage in 2023. As of April, MinnesotaCare had spent around $3.9 million on claims since coverage started at the beginning of the year.

After hours of debate, the measure passed the House 68-65 with just one DFL vote — House DFL Leader Melissa Hortman, who said she’d honor her word on the budget deal. Not all lawmakers cast votes on the measure.

Senate Majority Leader Erin Murphy also made good on her pledge to support the bill and was joined by Sen. Grant Hauschild, DFL-Hermantown, Sen. Rob Kupec, DFL-Moorhead, and Sen. Ann Rest, DFL-New Hope.

The bill passed 37-30 in the Senate, where the DFL has a one-seat majority.

“It’s not what I would ever choose to do of my own volition,” Murphy said after the Senate adjourned early Tuesday morning. “But we needed to balance the budget, and we needed to fund the government, and it was the price that the Republicans sought in order to get that done.”

Walz has said the budget agreement was a tough compromise and that he’d sign the bill. If he vetoed the bill, it would negate one of the major budget bills. Republicans managed to get DFLers to agree to tie the activation of health spending to ending insurance coverage for those in the U.S. illegally.

Day-long special session

Progress on bills comprising most state spending continued at a steady clip Monday. The House passed its final bills before 11 p.m. and the Senate finished its work and adjourned just before 2 a.m. Tuesday.

Most of the state government only had funding through the end of June after the Legislature failed to pass the majority of the bills that form the roughly $66 billion state budget by the end of the regular legislative session on May 19.

Walz called a special session for lawmakers to finish their work. State leaders finalized the details in a series of mostly closed meetings over the last few weeks.

Senate Minority Leader Mark Johnson, who did not sign off on the overall budget targets with other legislative leaders, said the state deserved “much better” than the largely private negotations that resulted in the budget.

“We are here today, not because we agree with this budget,” he told reporters Monday afternoon. “Minnesotans — they deserve a whole day of debate. They deserve to look at the bills and see what’s in them. And we haven’t seen that much over this last couple of weeks.”

Johnson said the state needs to do more to cut spending, as there will still be a shortfall of around $3 billion later this decade.

The Senate and House went into session at 10 a.m. Monday. DFL and Republican legislative leaders and the governor signed an agreement to finish up the special session by 7 a.m. Tuesday, and late Monday, it appeared they were on course by then.

Leaders said passing all the budget bills within that time frame will prevent tens of thousands of state employees from getting layoff notices warning of a partial government shutdown when the current two-year budget expires June 30.

Tax, transportation bills

GOP lawmakers expressed reservations about the tax and transportation bills. DFLers are skeptical of provisions extending tax exemptions for data centers. All eventually passed.

The tax bill includes an increase to the sales tax on legal cannabis. Republican leadership had initially said they wouldn’t support any new taxes, and some members stuck to that pledge. The tax bill passed the House 93-39, but didn’t have any GOP support in the Senate.

There were also questions about whether a proposal to shift $93 million in sales tax revenue from metro counties to the Metropolitan Council would survive a floor vote. The final transportation bill language did not include that piece, however, removing another hurdle for that spending package.

Past state budgets

Here’s a list of past two-year state budgets:

• 2023  — $72 billion

• 2021 — $52 billion

• 2019 — $48 billion

• 2017 — $46 billion

• 2015 — $41.5 billion

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