Legislature adjourns after budget deal reached

Fireworks burst outside the State Capitol Sunday night -- a celebration of 150 years of statehood. But, for a change, few explosions occurred inside the historic building, after Gov. Tim Pawlenty and legislative leaders reached agreement on a budget that ended the 2008 legislative session.

The House and Senate processed bills to ratify the leaders' agreement, and both chambers adjourned shortly before midnight, with generally good feelings prevailing.

The closing deal means more Minnesotans will be covered by health insurance, more money will flow to public schools and nursing homes, a light-rail line between Minneapolis and St. Paul is a step closer to reality, and so is Minnesota's first new major state park in 40 years.

Property tax relief is also on the way, in several forms. Pawlenty and legislative negotiators agreed to limit increases in city and county property taxes to 3.9 percent annually for the next three years.

In addition, $60 million will be available to fund local services. About $25 million is designated for direct property tax relief to homeowners through a tax refund program.

The property tax relief is expected to save taxpayers $78.5 million in 2009 and $460.5 million over the next three years.

"You have to mark it down as one of the more successful sessions in a while," Pawlenty said in announcing the agreement.

As handshakes were being exchanged between Republican Pawlenty and leaders of the DFL-majority House and Senate, just how the plan might affect individual homeowners was still being sorted out.

For instance, the property tax cap makes exceptions for cities hiring police personnel and for cities and counties facing financial problems due to high mortgage foreclosures. Property taxes statewide are projected to increase by about $450 million next year, and the combined effect of the deal is expected to cut that increase by about 30 percent.

The agreement reached Sunday afternoon erases a $936 million deficit by dipping into about $500 million in reserves, making $355 million in program cuts and reconfiguring how some foreign-operating corporations are taxed.

The budget cuts include about $170 million from health and human services in the 2008-2009 budget cycle and $206 million for the following two years, the largest target for reduction. But nursing homes will see a 4 percent increase.

The state's higher education system also takes a $21.7 million hit in 2008-09 and a $33.5 million reduction in the following budget cycle.

Public safety and corrections also is targeted for $4.7 million in cuts. The state's court system also would be cut $5.5 million, which could result in shorter hours and reduced days for district courts.

Looming over the celebration of bipartisan cooperation is the realization that the state faces the possibility of a $1 billion to $2 billion structural deficit for the upcoming two-year budget cycle that begins in 2009.

Legacy agreements

One of the final components of the agreement involved completing a deal on the Central Corridor light-rail line. It will be part of a supplemental bonding bill that includes the Lake Vermilion state park and a health care facility at the Minneapolis Veterans Home, both projects pushed by Pawlenty.

In addition to the funding question, the Central Corridor had been held up by concerns from the University of Minnesota about its route through campus. For the time being, that issue will not be addressed as planning progresses, said Alice Hausman, DFL-St. Paul, chairwoman of the House bonding committee.

On the park, a last-minute deal provides some payments to local governments in lieu of the property taxes that may be lost by the state land purchase.

The Central Corridor and new state park are legacy agreements that will affect generations of Minnesotans, said House Speaker Margaret Anderson Kelliher, DFL-Minneapolis.

"This is not just about the next coming week, months or couple of years. This is really about being the leaders for a very long time to come," she said.

12,000 more insured

DFLers also said a key to the agreement was a health care bill that would insure 12,000 more people and also make health care more transparent and consumer oriented. House and Senate conferees agreed to allow the use of a portion of a fund designed to ensure access to health care to plug a hole in the deficit, but only if the funds are repaid.

Congrats all around

Capitol leaders lavished praise on one another Sunday, a contrast to previous years when acrimony and partisanship persisted between the DFL majorities, Pawlenty and the Republican minorities.

The goodwill came on a weekend when the state was celebrating 150 years of statehood and as a choir practiced singing the Minnesota state song in the rotunda while talks continued.

"We were at the table with the governor, negotiating the bills out in good faith, not trying to blow things up," said House Minority Leader Marty Seifert, R-Marshall.

"When we are part of the process we can make the process work better," said Senate Majority Leader Larry Pogemiller, DFL-Minneapolis.

The agreement caps a legislative session that featured its share of fireworks: A $6.6 billion transportation bill including a gas tax increase was vetoed by Pawlenty and then overridden. Pawlenty's transportation commissioner, Carol Molnau, was tossed out of office by the Senate.

But Republicans were able to claim credit for no further tax increases, the limits on property tax increases and funding for nursing homes.

"This is a long, hard session and one along the way I thought we were looking at a train wreck," said Senate Minority Leader Dave Senjem, R-Rochester. "As history looks back on this session, it will look back very kindly. We did a lot of good things. We've got a lot of challenges ahead of us."

Mark Brunswick • 651-222-1636