Shortly after 5 p.m. yesterday, after three hours of closed-door meetings, leaders of the Republican legislature accepted Gov. Mark Dayton's offer to equally utilize school payment shifts and funds derived from tobacco bonds to close the final $1.4 billion gap in the state's budget and begin the process of bringing state government back online.

The final agreement represented significant concessions and disappointment on both sides. Gov. Dayton abandoned his signature campaign issue of raising income taxes on wealthy Minnesotans, while Republicans agreed to surrender all policy provisions from their budget proposal and not bring them up separately during the special session. Among those items are a 15% reduction in the state workforce and restrictions on stem cell research. In addition, Republican leadership agreed to hold a vote on a $500 million bonding bill for construction projects to help spur the economy. Republicans had previously opposed a bonding bill of any size.

At the end of the day, this deficit was closed through a formula that is becoming familiar in Minnesota: cost shifting and borrowing money, in essence "kicking the can down the road" and potentially setting the state up for another deficit problem over the next few years.

Looking ahead, with a global budget target of $35.5 billion having been established, committee chairs will begin working with state agency commissioners and staff to retool and reconstitute the various funding bills. Both sides have expressed a desire to end the shutdown as soon as possible, and it is expected that legislators and staff will work behind closed doors through the weekend to prepare the bills in the hope of being called into a special session by Gov. Dayton early next week. Given the bitter pill both sides have to swallow with this deal, House and Senate leadership will also be working around the clock to ensure they have the votes to successfully pass those bills.

It is important to note that despite all the recent media coverage, new revenue from expanded gambling and a new stadium for the Minnesota Vikings were not part of the final discussions or agreement. However, Senate Minority Leader Tom Bakk (DFL-Cook) this morning said he would ask Gov. Dayton to establish a task force charged with crafting a bipartisan stadium proposal that could be acted upon in a separate special session this fall.

While the shutdown appears to be coming to a close, the political aftershocks are still being analyzed. Some Democrats feel Gov. Dayton caved in to Republicans by abandoning his call for new revenue, and many Republicans are upset over the final budget far exceeding their target of $34 billion. Both sides have expressed concern over the large amount of borrowing used to plug the deficit. In the coming days, expect the DFL to portray Dayton's decision as one made out of necessity given the recalcitrance of the legislature. At the same time, Republicans will likely point to their success beating back tax increases and the Governor's acceptance of their June 30 offer. .