The state's top political leaders continued private negotiations Thursday over tens of billions of dollars in state spending, finally showing progress by cutting a deal on higher education spending, but not bridging enough major outstanding disagreements to rule out the growing likelihood of a special legislative session.

After several days of talks, Gov. Mark Dayton and leaders of the Senate DFL and House GOP struck deals on several slices of state spending Thursday. They decided that the public higher education system would get a spending increase over the next two years of $166 million to just over $3 billion total. Sen. Majority Leader Tom Bakk, DFL-Cook, said that probably would not be enough to extend the current tuition freeze at public colleges and universities.

The higher education agreement leaves room for $30 million to the University of Minnesota Medical School, designed to elevate its national reputation. Negotiators also struck a deal to appropriate just over $2 billion for the state courts system and public safety programs — an increase of $111 million over two years.

Dayton backed off an earlier threat to veto a high-profile bill to ban the State Lottery from offering lottery games online and selling instant-play tickets at gas station pumps. The Senate had approved it by a wide bipartisan vote earlier and the House followed suit on Thursday. Dayton vetoed a similar bill last year, but Dayton this year will allow it to become law without his signature, said Matt Swenson, his spokesman.

"The governor will defer to the overwhelming support of the Legislature," Swenson said. Lawmakers had been angered that lottery officials did not clear the new types of sales with the Legislature in the first place.

While Dayton avoided that legislative standoff, budget talks dragged on in the face of still-wide differences between DFLers and Republicans. Between them, the budget categories resolved Thursday comprise only a fraction of total state spending. The biggest portions of the budget remain in dispute: K-12 public schools, health and human services, transportation and a GOP push to cut taxes $2 billion, a little more than the size of the state's projected budget surplus.

"I think it's fair to say it's been slow moving," said Rep. Jim Knoblach, R-St. Cloud, one of the lead negotiators for Republicans. "Certainly we've made some progress, but there remains progress to be made."

Many lawmakers did little to hide their irritation that sweeping decisions about billions of dollars in taxpayer money were being made in private by a small group of legislators and executive branch officials.

"It just seems that in the last few years, more and more of this goes on in private, and then there's a public event to announce the deal," said Sen. Sandy Pappas, DFL-St. Paul. Pappas, a member of the Legislature for 30 years who is Senate president but largely uninvolved in final budget talks, said the practice "really cheats people out of being part of the process."

On-time finish 'very tricky'

While Dayton and House Speaker Kurt Daudt, R-Crown, avoided questions from reporters, Bakk provided some new information about the talks as negotiators broke for dinner Thursday. He said the focus has been on the budget bills required to keep state government operating, and that decisions about tax cuts and funding for major transportation projects would most likely have to be kicked to a special session.

Bakk also said that the spending deal on higher education would likely mean a roughly equal split in new funds for the state's two higher education systems, the University of Minnesota and Minnesota State Colleges and Universities (MnSCU). The initial House Republican higher education budget had tilted much more toward MnSCU.

But the $3 billion higher education budget most likely won't be enough to head off tuition increases, Bakk said. Given the amount they were able to agree on, he said, "There's just not enough money."

With a deadline of midnight on Monday to adjourn the regular session, the sheer logistics of drafting and approving about a half-dozen still unresolved budget bills — many of them hundreds of pages long — made a number of veteran lawmakers skeptical of avoiding a special session. Such extra innings in the legislative process have increasingly become a feature of divided government in Minnesota, which voters once again delivered last fall when they returned Republicans to power in the House.

"I think it's going to be very tricky" to finish on time, Pappas said. Once a full budget deal is struck, and new bills reflecting it are assembled in House-Senate conference committees, employees in the revisor's office then comb through those bills word by word to make sure that no mistakes make their way into law. The health and human services budget bill alone runs in excess of 400 pages.

"There's going to be a special session," said Sen. Julie Rosen, R-Fairmont, a conclusion she said she reached after consulting staff in the revisor's office about the work left to do and the time available to do it.

Negotiators adjourned at about 9 p.m. Thursday. The mandated adjournment for the regular session is Monday at midnight.

Staff writers Ricardo Lopez and Abby Simons contributed. Patrick Condon • 651-925-5049 J. Patrick Coolican • 651-925-5042