Gov. Mark Dayton and legislative leaders on Friday set the parameters of a possible pre-Christmas special session to include tax cuts, a borrowing package for capital improvement projects around the state and financial assistance for many facing skyrocketing health insurance premiums next year.

Dayton met with legislators just hours after state budget officials reported a $1.4 billion budget surplus, which includes about $678 million left unspent in the last legislative session.

The tax and bonding bills are two leftover items from the last legislative session. While legislators approved the tax bill, Dayton vetoed it over a drafting error his office said would cost the state millions of dollars. The Legislature was unable to bridge disagreements over the bonding bill, which failed to pass by the midnight deadline of the session.

The health care problem is a recent one. Dayton and other legislators have been calling for financial relief to pay down expensive insurance premiums for the 125,000 who buy insurance on the individual market but make too much to qualify for federal subsidies.

Dayton and the caucus leaders appeared optimistic that they could strike a special session agreement in the coming days, but many details remain to be worked out.

"Everything moving forward is conditional on being able to resolve those details," Dayton said. House Speaker Kurt Daudt, R-Crown, said he's optimistic a deal can be struck soon. "I feel like I can see it, but we're not quite there yet."

Senate DFL leader Tom Bakk of Cook said he was pleased to see the size of the budget surplus, saying it made possible the special session negotiations.

Dayton said working groups would meet beginning Monday and conclude Wednesday. After that, political leaders will decide whether a special session will occur, likely on Dec. 20.

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