politics

Negotiations between Gov. Tim Pawlenty and key legislators broke up early today over major spending bills on education, economic development, health and social services as time was running short in the legislative session.

After talks ended about 1:30 a.m., DFL legislative leaders said there remained significant obstacles, especially over additional revenue that they say could come from reducing a corporate tax loophole.

“It is a disappointment,” said Senate Minority Leader David Senjem, R-Rochester, who only seven hours earlier had described negotiations over the bills as “generally pretty close.”

Sen. Tom Bakk, DFL-Cook, chairman of the Senate Taxes Committee, and Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, emerged from the early morning session to link the breakdown to a disagreement over reducing loopholes for corporations with foreign operations. DFLers say shrinking the tax break would generate about $244 million that could help finance spending initiatives.

“The issue still is whether the governor is willing to close the corporate loopholes,” said Bakk, who added that Pawlenty was willing to partially close the loophole but wouldn’t go as far as DFLers propose.

Pawlenty spokesman Brian McClung later said that the governor was willing to consider reducing the loophole in exchange for other forms of tax relief for businesses.

Despite the disagreement, there were signs that a breakthrough is possible before the regular legislative session is scheduled to adjourn at midnight Monday. DFL leaders plan to hold public committee meetings beginning at noon today to discuss new and perhaps slimmer spending targets. “We would like to show that to our members to see if it makes sense,” Pogemiller said.

And DFLers also plan to resume talks with Pawlenty this afternoon.

Still, House Minority Leader Marty Seifert, R-Marshall, said he was disappointed after “what I thought was a lot of progress in the last two days.”

Progress was a struggle throughout Friday.

The clash over taxes was foreshadowed earlier in the evening, when Bakk said the governor was resistant to tightening tax enforcement as well as closing the corporate loophole. But Seifert countered that DFLers “want to raise money, and they don’t know what they want to spend it on.” He said the plan for committee meetings today showed that DFLers “want to move ahead without an agreement on [spending] targets.”

The breakoff on talks followed cautiously upbeat pronouncements earlier Friday. House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said on TPT’s “Almanac” television show Friday evening that negotiators were “pretty darn close.”

However, the late night bargaining followed a sometimes tense round of budget negotiations earlier Friday. “Today will be a key day,” Pawlenty said Friday. “There are still some significant issues outstanding, but we’re making progress.” He described the talks, which continued Friday afternoon, as akin to “trying to stuff 60 pounds of potatoes in a 30-pound sack.”

But even after an overall budget deal is struck, several controversial issues could gum up the works and slow progress.

Seifert said House Republicans would do what they could to block passage of a K-12 education bill until it had gone through a conference committee. The bill, in its latest version, was created in a Senate rules committee and has never come up for a House vote.

“We can’t have the Senate writing the K-12 bill on the back of a napkin and sending it over to the House,” Seifert said.

He also predicted that DFL leaders would have to pull back several high-profile bills — medical marijuana, stem-cell research and an outdoors and arts amendment — or risk hours of debate that could push the Legislature into overtime.

If those bills were so important, Seifert said, leaders should have taken them up earlier in the session. The Republican governor and DFL House and Senate leaders must agree on the broad outlines of a $35 billion state budget for 2008-09 before legislators can hammer out individual budget bills on education, health and human services, transportation and others.