Budget talks hit a rough patch Friday after House Republicans offered education policy changes in a last-minute move that Gov. Mark Dayton called a "nonstarter" with Minnesota DFLers.

As negotiations on key budget bills continued this week, Dayton said that House GOP leadership insisted Friday morning that two policies be part of an education deal: a repeal of state law that requires least senior teachers are laid off first during staff reductions and a restriction that high school athletes use only restrooms or changing rooms that conform to the sex "identified at birth by a person's anatomy."

The so-called "Student Privacy Act" would effectively reverse a recent change by the Minnesota State High School League opening up girls' sports to transgender high school athletes. It was part of Republicans' first offer Friday but dropped in a second proposal put forth around 2:30 p.m. 

"We had what I would characterize as a disappointing day," Dayton told reporters Friday after budget talks ended. He added: "We went backwards this morning."

In addition to the policy changes Dayton opposes, he said the amount of new spending GOP leaders proposed is still insufficient. He said he wants a minimum of $550 million in new spending on education, about $150 million more than the education budget he vetoed last week.

"I'm around all weekend but I said I'm not coming back in the room for less than $150 (million)... with a clean bill on the rest of it," Dayton said.

He also said he would drop his insistence on universal preschool, for which he sought $100 million to phase in half-day programming intended to reach an estimated 47,000 students. In exchange, he wants more money for school readiness programs currently operated by public schools.

Republicans put forth two offers Friday. The second, issued in the afternoon, included $125 million in new spending. House Speaker Kurt Daudt, R-Crown, spoke with reporters just moments before Dayton's remarks. He didn't offer many details but said his caucus would prioritize the additional dollars on the basic school funding formula.

The second offer would provide an additional $63 million on the basic school funding formula, enough for yearly increases of 2 percent. It also included an additional $43 million for early-learning programs, divided evenly between scholarships and school readiness provided to public schools.

Republicans, however, included the policy provisions Dayton and other Minnesota DFLers have opposed. The changes to seniority-guided layoffs for teachers drew strong criticism from Dayton.

"They want to destroy the teachers union, and that's what it's about. It's about breaking a longstanding principle that the people who have worked all their lives and careers have a certain level of protection," he said.

House Education Finance Chair Jenifer Loon, R-Eden Prairie, rejected the accusations by Dayton that her caucus wants to take aim at Education Minnesota, the statewide union representing about 70,000 educators.

"This is not about being anti-union," Loon said in an interview. "If the governor is going to insist on an amount of money [that goes above the GOP position], making sure we get good reform is a top priority."

Loon also said that their latest offer would repeal the state default of the teacher layoff process more commonly known as "last in, first out" and leave it up to districts to negotiate their own layoff procedures. There would be no requirement to base layoff decisions on teacher evaluations, as previously approved legislation in the House would do.

Legislators will be returning to St. Paul in the coming weeks for a special session to address three vetoed budget bills that provide funding for education, jobs and environmental protection. Dayton and Daudt must come to agreements on the vetoed bills before the governor calls lawmakers back to pass the spending measures.

The governor and legislators are working to meet a June 30 deadline to fund the nearly two dozen agencies affected by the budget impasse or risk another partial government shutdown.

Layoff notices to about 9,400 state employees will go out Monday in anticipation of a possible shutdown.