The tied Minnesota House passed its education budget bill on Friday night after a debate over preserving unemployment benefits for hourly school workers derailed progress on the biggest chunk of state general fund spending earlier this month.

Democratic-Farmer-Labor and Republican House lawmakers late last month reached a compromise on spending that would have eliminated unemployment benefits for employees like bus drivers, cafeteria workers and paraprofessionals in 2028.

But the House DFL pulled back amid pressure from labor groups and the DFL’s progressive wing. Now it appears that the push to kill that benefit will die off when the education bill goes to conference committee with the Senate version, which preserves the benefit.

DFLers expanded the unemployment benefit when they controlled state government in 2023, arguing it was unfair to exclude some school staff from unemployment insurance. However, some school districts said the mandate to continue offering it will strain their budgets when state funding dries up.

The House passed its education finance bill 93-41. It was the product of hard-earned compromise, said Rep. Cheryl Youakim, DFL-Hopkins, who co-chairs the House Education Finance Committee with Rep. Ron Kresha, R-Little Falls.

“While this is not the bill I would have written myself or what Chair Kresha would have written alone, it reflects a compromise that a dynamic of a tight House requires for us to fund our schools,” she said.

Education spending to remain level

Now that there’s a broader budget agreement between DFL Gov. Tim Walz, the Senate DFL majority and the 67-67 tied House, it appears House Republicans have agreed to drop the rollback proposal. Under the deal, the state will have a two-year budget around $66 billion to $67 billion. It aims to control spending growth in social services and education.

The education budget makes up around one-third of the current $71 billion two-year state budget. Under the deal, education spending will remain level for the next two years other than the required inflation-tied increases.

The House’s proposal still includes the rollback of unemployment insurance, but when they hammer out differences with the Senate’s education bill, they’ll remove that piece, House DFL Leader Melissa Hortman said Thursday.

House and Senate pre-K-12 education spending proposals have differences. For instance, the House calls for a $40 million increase in spending in 2026-27 to help cover new reading instruction training, whereas the Senate currently keeps it level.

Under the budget deal, state leaders plan to cut spending by $420 million in 2028-29 to help address a looming multibillion state deficit in those years. But spending will remain level in the budget for 2026-27.

In addition to the education budget, House members also passed a separate bill to provide the hourly school worker unemployment benefit with $100 million to operate over the next two years. About $77 million in funding would come from money originally meant for the Minneapolis-Duluth Northern Lights Express passenger rail project. The rest would come from state special education aid.

Representatives also passed an education policy bill with an amendment to allow school districts to start classes before Labor Day in 2026 and 2027 when the holiday falls later than usual.

Flash points

Unemployment insurance for hourly workers is not a significant portion of the state’s multibillion-dollar education budget. The 2023 bill provided around $135 million to cover the program for four years, though the state has already burned through most of that money.

Despite it not being a huge portion of the budget, it emerged as a flash point in negotiations on one of the biggest pieces of state spending. Controversy is now shifting to a proposal to cut state-funded health insurance benefits for adults in the country illegally and to shut down the Stillwater state prison.

The insurance issue sparked Thursday protests by DFLers outside the governor’s office and may pose a threat to efforts to finalize the budget. The regular session ends Monday, and lawmakers have to pass a two-year budget by the end of June 30 or the state government shuts down.

In the last decade, there has been a special session every time control of government is split between the parties. Legislative leaders agree it’s likely they’ll have to return to the Capitol this year to finish the budget.