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Gov. Mark Dayton on Thursday signed the bill to bring Minnesota driver’s licenses in line with upgraded federal security standards, finally ensuring that Minnesotans won’t have to use passports to get through airport security.

The Minnesota House voted 120-11 on Wednesday to bring the state into compliance with the federal Real ID law; the Senate followed suit later in the evening with a 57-8 vote. It will allow Minnesota to follow the other 49 U.S. states in moving to upgrade their licensing systems.

“We really are last in the country, and today’s vote on the House floor and the expected vote on the Senate floor this evening and the governor’s signature will get us in line so we are no longer an outlier on this issue,” said Rep. Dennis Smith, R-Maple Grove, the author of the Real ID bill.

Even as that long-standing dispute finally moved toward resolution at the State Capitol, Dayton and Republican legislative leaders remained unable to come to terms on a two-year state spending plan.

The DFL governor and GOP lawmakers traded budget offers throughout the day, as next Monday’s deadline to finish their work loomed.

Late in the day, Dayton aired a new offer he characterized as “Meet Half Way,” in which most of the state’s $1.65 billion projected surplus would be divided in half: $682 million for the GOP priorities of tax cuts and transportation, and $682 million for additional spending on state programs and services.

“I think this is fair and equitable, half and half — meet halfway,” Dayton said. Republicans took issue with that characterization of what Dayton proposed, and budget talks again appeared stalled by Thursday morning.

While prospects for settling the budget remained cloudy, the Real ID agreement constituted actual progress on a long-unresolved issue.

Lawmakers from both parties worked for years to bring Minnesota in compliance with the 2005 federal law, but compromises repeatedly fell apart over disagreements on driver’s licenses for undocumented immigrants. Republicans argued that the state should strengthen a rule that currently prohibits licenses for people in the country illegally, while DFLers including Dayton said that shouldn’t be part of the Real ID debate.

Meanwhile, the state edged closer to a January 2018 deadline by which it must approve Real ID standards, or leave Minnesotans unable to fly or visit military facilities without a passport.

Under the Real ID deal, the issue of licenses for undocumented immigrants will become part of the debate over a broader public safety budget bill.

Once Dayton signs the bill, Smith said the state would be able to secure an extension through October 2020, by which time the state should be up to speed in issuing Real ID-compliant licenses. He said under the extension, standard driver’s licenses would temporarily be accepted at military facilities and federal buildings.

After that point, Minnesotans will have options: a Real ID license that will allow for access to airports, military facilities and federal buildings, or a standard license, which won’t be valid for air travel or entrance to military or federal buildings. A separate “enhanced” license, which is available now at an added cost, is accepted for air travel and at federal facilities, and can be used for travel between the U.S. and Canada, Mexico and some Caribbean countries.

The new Real ID licenses will have the same renewal fees as standard licenses, Smith said.

A handful of lawmakers remained holdouts, bothered by the specter of federal intrusion: “It is subjecting our state to the federal government,” said Sen. Warren Limmer, R-Maple Grove.

But most lawmakers were relieved to finally solve a problem that threatened to create major headaches for their constituents.

“Minnesotans should be confident that when they get to the airport they’ll be allowed to fly,” said Rep. Gene Pelowski Jr., DFL-Winona. “I’m grateful we were able to reach a bipartisan compromise that makes that a reality.”

Momentum in budget talks was harder to find, even after both sides made some concessions a day earlier. But a big setback also presented itself Tuesday when the House failed to pass an $800 million package of borrowing for public works projects around the state, usually a popular measure that allows lawmakers to deliver construction dollars back home.

Because bonding bills leverage state debt to pay for projects, they require a three-fifths “supermajority” to pass, and the bill offered up Tuesday fell a few votes short in the House.

Star Tribune reporter J. Patrick Coolican contributed to this report.

Erin Golden • 612-673-4790