Gov. Mark Dayton and Republican lawmakers cut a last-minute deal on $46 billion in state spending and tax cuts with just about an hour to spare Monday night, not fast enough to head off a brief special session that started immediately at midnight, but foreclosing the threat of a partial government shutdown this summer.

“We have a deal. We reached across the table and shook hands,” Senate Majority Leader Paul Gazelka, R-Nisswa, told reporters just minutes after it was struck. “This is how politics should work.”

Dayton, a DFLer, and House Speaker Kurt Daudt joined Gazelka at the news conference just outside the governor’s office. “I think we have tentatively reached a deal,” Daudt said.

The speaker said Republicans agreed to retreat on one of their most high-profile policy priorities, a measure to block Minnesota cities from setting their own minimum wages and workplace standards. That would have blocked sick-leave plans from the cities of Minneapolis and St. Paul. Republicans plan to send Dayton the bill separately, not attached to any larger budget measures, and Dayton said he would veto it.

“We’ve got a framework. We still have details to work out,” Dayton said.

Only the governor can call a special session, and Dayton said he would do so for 12:01 a.m. Tuesday, a minute after the constitutional deadline for adjournment of the regular session. Dayton said the plan was for the special session to end at 7 a.m. on Wednesday, at which point lawmakers could head home for the year.

Rep. Kurt Daudt, speaker of the House, announced that an agreement had been reached between the leadership and the Governor, rear, to convene a special session at 12:01 a.m. Tuesday to take on the outstanding budget bills and the tax bill. With Daudt were Rep. Joyce Peppin, House Majority Leader, left, Governor Mark Dayton, Senator Paul Gazelka, Senate Majority Leader, and Senator Tom Bakk, Senate Minority Leader, from left.

Gazelka briefly described a few details of the agreement, while noting some details remain to be finalized. Republicans secured $1 billion of the state’s $1.65 billion budget surplus for two key priorities: $660 million in tax cuts, and $300 million in new spending on transportation. Dayton and lawmakers also agreed to a $990 million bonding bill for public works projects all over the state.

Even minutes before the announcement from Dayton and the legislative leaders, it was not clear whether a deal would be pending. The House and Senate convened the special session just after midnight, then broke for the night shortly with plans to return later in the day Tuesday and likely work through the night.

Finalizing a two-year, roughly $46 billion budget for state government was the principal business of the session that started on Jan. 3.

Ahead of the overall deal, lawmakers on Sunday and Monday approved five of the 10 budget bills needed to finish their work. Combined, those measures include two years of funding for public safety and the courts, environmental protection, natural resources, jobs and economic development, agriculture and higher education. But the bulk of the budget was unresolved until that final agreement: Nearly 70 percent of the state’s general fund is dedicated to public schools and health and human services.

Republicans, back in control of the Legislature and Dayton had a forecast $1.65 billion surplus to help with their budget-setting process. They also had diverging priorities. Dayton wanted most of the new money to go to education, health and human services programs, while Republicans sought to dedicate it to tax cuts and transportation funding.

A raft of policy disputes complicated already complex negotiations. Dayton and lawmakers remained at odds up until the very end on such issues as whether cities can set their own minimum wage and other labor policies, the fate of the state’s health insurance exchange, the composition of the Metropolitan Council, and a handful of other disputes, as well.

On Monday and in the days leading up to it, the press and the public, activists and lobbyists, and even most lawmakers were left in the dark. The secrecy and last-minute nature of the talks are an annual St. Paul ritual that leave many lawmakers frustrated.

“In this body, leaders make an intentional decision about a leadership style that holds everything to the last minute, because they believe it gives them more leverage in the power struggle,” said Rep. Alice Hausman, DFL-St. Paul, who had been trying to resurrect a multimillion package of statewide public works projects before the end of session. “So on the last day, we sit with disaster, virtually every major bill unpassed. … It’s not working and it’s hurting the state of Minnesota.”

Some surprises

The private negotiations meant surprises for some lawmakers on the other side of the door. Rep. Nick Zerwas, R-Elk River, was the author of a bill to increase penalties for demonstrators who block major roads, which had been included in the public safety budget bill. He said he found out at 1 a.m. Monday that the provision had been axed.

“Some sort of politics happened,” Zerwas said. Republican leaders ditched his proposal, he said, in exchange for Dayton’s acceptance of a more clearly delineated restriction on driver’s licenses for illegal immigrants.

The public safety bill did include an order that the state Department of Corrections undertake a feasibility study on the closed, privately owned prison at Appleton, assessing the cost of buying and upgrading or leasing it if necessary to house more prisoners. The prison has been a flash point in debates about incarceration rates and the use of private prisons to house Minnesota offenders. It did not include any changes to controversial solitary confinement procedures at state prisons, despite an effort by lawmakers to get Minnesota more in line with most other states.

DFLers also lost on some priorities, including an internet privacy measure that the Senate passed overwhelmingly in March, but which Republicans struck for good on Monday. They also were unable to block Republicans from inserting a provision into the jobs and economic development budget bill that, if Dayton signs it, will block Minneapolis from implementing a ban on plastic grocery bags that is supposed to take effect on June 1.

“We are in round two of the shove-it-down-your-throat” phase of the session, House Minority Leader Melissa Hortman, DFL-Brooklyn Park, said during the squabble over the bag ban.

But the last-minute deal, though it didn’t head off a special session, was a win for both Dayton and the Republican majorities. Six years ago, the last time Dayton worked with a full Republican majority, a budget stalemate led to a three-week partial government shutdown. This year, the regular session ended with Gazelka lavishing praise on the DFL governor. The most recent addition to Republican leadership at the Capitol, Gazelka called Dayton “very straightforward, a man of his word, a very tough negotiator, and I would say a friend.”