Sen. Paul Gazelka was elected by his Republican colleagues Thursday to be the new majority leader of the Minnesota Senate.

Gazelka will join House Speaker Kurt Daudt, R-Crown, and DFL Gov. Mark Dayton as key elected officials who will set a two-year state budget next year that is expected to be more than $40 billion.

Although legislators have pledged to take up spiking health insurance premiums, tax cuts and transportation projects, some amount of gridlock is likely, given the yawning gap in priorities between Dayton and GOP lawmakers.

Gazelka, a socially conservative insurance agent who lives in Nisswa, took an unlikely path to Senate leadership this week.

Senate Republicans won a sweeping victory in Tuesday’s election, flipping six seats to take a narrow 34-33 majority. But Sen. David Hann — the Eden Prairie minority leader who would be the natural choice to lead Republicans after steering them to victory — lost his re-election to Steven Cwodzinski, a retired teacher. So Republicans had to choose a new leader.

Gazelka, who was educated at Oral Roberts University in Tulsa, Okla., said he never considered caucus leadership until Hann lost. His wife told him he should go for it, Gazelka said at a news conference, surrounded by the entire GOP caucus.

Gazelka thanked Hann: “We will never forget all the work that he’s done,” he said. And he struck a conciliatory tone, saying, “You have to build bridges.”

Gazelka said the caucus was united with a “sense of direction and destiny.”

Asked if he had spoken to Dayton, he joked that the governor probably didn’t even know he was caucus leader yet.

Gazelka said he is open to Dayton’s plan to give rebates to people socked with health insurance premium increases, but he added that any rebate plan must come with fundamental changes to MNsure, the state version of the Affordable Care Act.

“Relief without reform will not get us where we need to go,” he said.

Gazelka, who introduced the 12 new Republican members, said other priorities will include tax cuts and road and bridge infrastructure.

Senate DFLers had their own caucus meeting and re-elected Sen. Tom Bakk as their leader. Bakk, DFL-Cook, led the Senate DFL in 2011-12 and became majority leader after the DFL’s electoral victory in 2012. He is a proven fundraiser and parliamentary tactician.

House DFLers named Rep. Melissa Hortman their minority leader after Rep. Paul Thissen, DFL-Minneapolis, stepped down from that post.

The House GOP will meet Friday, where it is expected to again make Daudt its leader after picking up seats in Tuesday’s election.