Minnesota lawmakers on Monday approved a bill to end 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.

Lawmakers returned to the Capitol for a special legislative session to complete a $66 billion two-year state budget they failed to pass before the regular session ended last month. They were close to finishing the budget late Monday night.

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

As of late Monday night, the House and Senate had approved most of the dozen or so remaining budget bills, including funding for areas such as higher education, health, energy, environment and commerce. Public safety, corrections and veterans affairs were already funded by bills the Legislature passed on time during the regular session.

The K-12 education budget and a taxes bill had passed the House, though they awaited action from the Senate. Also awaiting final legislative action was a standalone bill making changes to data-center tax incentives and a $700 million borrowing bill for projects like roads and wastewater treatment plants known as a bonding bill.

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.

This year, lawmakers also aim to trim spending in areas like special education aid. 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 2028-29.

Leaders agreed the state will have to cut spending.

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.

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, though she 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.

Walz would have a tough time vetoing it. Republicans managed to get DFLers to agree to tie the activation of health care spending to ending coverage for those in the U.S. illegally.

Special session progress

Progress on bills comprising most state spending continued at a steady clip Monday.

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.

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 to do that.

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 have expressed reservations about the tax and transportation bills. DFLers also are skeptical of provisions extending tax exemptions for data centers. Transportation passed in both chambers, and the data center bill awaited action by the Senate late Monday after passage in the House.

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

There also were questions about whether a proposal to shift $93 million in sales tax revenue from metro counties to the Metropolitan Council would survive 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