Minnesota's divided Legislature returned to work on Monday, showing early signs of progress on the state's $52 billion budget by striking a deal to phase out the state's eviction moratorium.

Yet top leaders say sticking points remain between the two parties on issues such as police reform and education funding. Still, both sides were adamant they will finish their work in special session before July 1, avoiding a state government shutdown.

"We're ready to roll up our sleeves and get the job done," said Senate Majority Leader Paul Gazelka, R-East Gull Lake. "I think that's important for Minnesota. The fact is if we did not get the job done by July 1, the ramifications are too serious for Minnesota."

Gazelka cited a 2017 Minnesota Supreme Court ruling that the courts would not step in on state funding disagreements. That means failure to pass a budget could mean no funding for state prisons or long-term care. Parts of Minnesota government shut down in 2005 and 2011 until lawmakers struck a deal.

The special session was automatically called Monday to coincide with Gov. Tim Walz extending the emergency powers he's used to respond to the pandemic.

Walz said he still needs the powers to continue the state's vaccine rollout, redeploy government employees to help with pandemic response and ensure federal supplemental nutrition benefits for the state.

"It is very clear now that we are in the final stages and most of the executive orders will unwind," Walz told the Minnesota Executive Council, which approved the extension Monday morning. "Today is simply re-upping the state of emergency so the status quo of the work we do continues."

Lead negotiators struck a deal Monday to help unwind a lingering executive order from Walz to ban evictions during the pandemic. The House and Senate agreement replaces his order with an 105-day off-ramp that requires landlords to send a notice to renters 15 days before eviction. Renters with an outstanding claim for rent help cannot be evicted under the deal before June 1, 2022.

"This agreement allows us to move forward on this issue and craft a budget aimed at addressing Minnesota's housing crisis in all its forms," said Rep. Alice Hausman, DFL-St. Paul, chairwoman of the House Housing Finance and Policy Committee.

But the parties remain divided over whether Walz needs to continue to tap emergency powers. Republicans in the House brought a resolution to immediately end the peacetime emergency, arguing the state has mostly returned to normal and the emergency is over.

"The governor, the executive branch has power and is severely abusing it," said Rep. Eric Lucero, R-Dayton. "We need to bring it to an end."

It was the 21st time House Republicans have tried to end the powers over the past 15 months. Democrats in control of the chamber blocked the move, defending Walz's response to the pandemic.

The powers aren't the only lingering impasse between the parties. House Democrats are pushing for roughly a dozen measures to change the way police do their job, following the killing of George Floyd last May and Daunte Wright in April, shot by a Brooklyn Center officer during a traffic stop.

"We have a fundamental mistrust right now between law enforcement and community, and this breakdown has been going on for a long time," said House Speaker Melissa Hortman, DFL-Brooklyn Park. "What we need to do a better job of is making sure that we have resources to prevent violence before it occurs and to not have officers with lethal force responding to incidents that don't require lethal force."

Hortman said passing some policing measures will be Democrats' "number one" priority in the special session and she expects it to be the hardest piece of the negotiations to finalize.

Leaders are also debating funding schools in the state's education budget and policy provisions in the state government finance bill. They haven't yet settled how to spend $150 million in a state jobs and economy budget bill to help businesses hit by the pandemic and civil unrest last summer after Floyd's killing. Both sides are hopeful they can also pass funding for a package of construction projects in a bonding bill.

The special session could stretch on as long as a couple of weeks, since even after details are ironed out, it will take days to process all of the budget bills.

Monday was a return to a version of normalcy in the Legislature, after nearly two sessions of remote work to slow the spread of the virus. Lawmakers shared hugs and chatted in groups around one another's desks. They also encountered throngs of citizens chanting and yelling outside their chambers as a visibly ramped-up Capitol Security presence stood guard.

Gazelka acknowledged that having senators and staff in person made work and communication flow more smoothly. He also welcomed the protesters — even those who criticized him Monday for not coming down hard enough on Walz's emergency powers.

"[I'm] almost not used to it because it's been over a year," Gazelka said. "But it's nice because it says we're back to normal and that's really good."

Briana Bierschbach • 651-925-5042

Stephen Montemayor • 651-925-5048