Controversial measures stricken from the bill include provisions requiring a 15 percent workforce reduction by 2015 and a salary freeze.
The bill, however, still cuts budgets for the Senate and House as well as for the governor and other state constitutional offices by 5 percent.
It also saves money by changing many of the ways government works, according to Sen. Mike Parry, R-Waseca. "It's filled with innovation and reform," he said.
Republican legislators achieved their main goal for the session by passing a tax bill that helps erase a projected $5 billion budget deficit without increasing state taxes. But they did so at a high price.
To provide the additional revenue Dayton demanded, they agreed to borrow up to $640 million by selling tobacco bonds that would be repaid from payments the state gets as part of a 1998 court settlement with tobacco companies. DFLers criticized the GOP for piling future debt on the state.
The tax bill extends for two more years cuts in local government aid that were passed in 2010 to erase a previous budget deficit. That means cities will receive $203 million less in state aid over the next two years than they would have had the cuts been restored.
But House Republicans dropped their proposal to phase out state aid to Minneapolis, St. Paul and Duluth over the next three years. Instead, those cities will be treated like other municipalities.
Republicans also backed off proposed sharp reductions in property tax relief for renters, and they provided an additional $30 million for homeowner tax relief.
Nonetheless, DFLers warned that cuts in state aid to local governments would result in $376 million in property tax increases over the next two years.
The bill orders the state revenue commissioner to negotiate a new income tax reciprocity agreement with Wisconsin so taxpayers who live in one state and work in the other could once again file a single state income tax return.