An effort by House DFLers to undo Gov. Tim Pawlenty's veto of funding for a health care program that serves 30,000 people in Minnesota has failed.

The House voted 87 to 47 early Sunday eveningon a motion to override the veto, short of the required two-thirds majority. The line-item veto revokes $381 million from the General Assistance Medical Care program, essentially killing it beginning in mid-2010.

The program serves childless adults near or below the poverty line. Some of them could qualify for a premium-based state insurance program.

But hospitals worry they will feel the brunt of the cut because the level of uncompensated care could rise. In upholding the veto, Republicans said there is a year to find a different option.

After that vote, the House debated a motion to override Pawlenty's veto of a bill that would raise $1 billion through taxes. 

The action came as Pawlenty and legislative leaders grappled with the most daunting budget crisis of modern times.

But with just a day remaining before adjournment on Monday, neither side had moved far from positions that for months have prevented a solution to a massive deficit.

On Saturday, the Republican governor offered to close a $2.7 billion budget hole by continuing to slice into aid for local governments while cutting even deeper into health care and higher education spending.

DFL legislative leaders delivered a counteroffer late Saturday that stood firm on their demand for nearly $1 billion in permanent new revenue -- whether taxes or fees -- to make up for any shift or cut in education, a position not likely to sit well with the governor.

"You need a balanced approach, with cuts being higher than revenue, but you do need revenue, and it needs to be permanent," said Senate Majority Leader Larry Pogemiller, DFL-Minneapolis. "If he's got a different idea to permanent revenue we're open to that."

The legislative offer also included $169 million in cuts to state government.

Before delivering their counteroffer, House and Senate leaders in the DFL majority had provided a forum for the rising anxiety among groups bracing for increased cuts.

A group of mayors came to the Capitol fearful that more cuts to local governments, on top of reductions earlier this year, would result in higher property taxes and reductions in police and fire protection.

Other targets of possible reductions -- from University of Minnesota President Robert Bruininks to officials from various hospital groups -- lined up to warn of the possible effects of the cuts, from a 15-percent tuition increase to the newly uninsured arriving at hospital emergency rooms in crisis from otherwise controllable ailments like diabetes.

"They are going to show up at the hospital emergency room because they know that we will take them," said Mary Krinkie of the Minnesota Hospital Association.

Pawlenty's office acknowledged his proposed cuts would be difficult. "But rather than holding hearings at this late hour in the legislative session, we hope Democrats will focus on working with us toward a solution," said Pawlenty spokesman Brian McClung.

McClung said the legislative offer did little to move things forward.

"Most disappointing, the Democrats are again calling for a $1 billion tax increase. It's just not going to go anywhere in that form," McClung said.

A little closer

After four months of haggling, arguing, votes and vetoes, Pawlenty and DFL leaders still have not bridged the gap that prevents them from erasing what began as a $4.6 billion deficit, with a deadline for adjournment looming at midnight Monday. Their standoff has taken a familiar shape, with Pawlenty steadily repeating an effectively simple refrain -- no tax increases -- while the DFLers have proposed one complex revenue raising package after another.

By Saturday, leaders appeared to be only little closer.

Pawlenty's plan also would adopt a $1.8 billion accounting shift proposed by House DFLers. His cuts would include $450 million from local government aid, $250 million from health and human services and $190 million from higher education. Pawlenty would also cut $100 million from the renters' credit, political contribution refunds, taconite aid and other smaller programs.

The legislative plan accepts the accounting shift and $120 million in local government cuts along with the cuts to state agencies and the new revenue. It would restore $363 million Pawlenty cut from health care programs with line-item vetoes.

At 12:30 Sunday morning, Pawlenty’s chief negotiator provided legislative leaders a second offer that suggested the sides agree to take the issue of the nearly $1 billion in revenue increases off the table and to close as much of the $2.7 billion gap with items they can agree on. Those would include the education shift, cuts to local government aids, higher education cuts and some spending cuts in bills Pawlenty already has signed.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said leaders would sleep on the offer and reconvene today.

Legislative leaders were still smarting Saturday from the ultimatum Pawlenty issued last week, when he said failure to agree on a budget would lead him to cut spending singlehandedly rather than call a special session. He would do that with his authority to veto individual items while signing spending bills and by using a process known as unallottment to cut other programs during the new budget period that begins this summer.

Others were sounding alarms about what the cuts might mean. A group of mayors representing cities from St. Paul to tiny Floodwood came to the Capitol on Saturday to make the case for protecting the state funding they have left in the face of potential higher property taxes and possible layoffs and cuts in services.

"My toolbox is empty. We're a very poor community and we can't afford to see tax rates go up," said Mayor Jeff Kletscher of Floodwood, in northern Minnesota.

St. Paul Mayor Chris Coleman said his city faces a potential $30 million cut in 2010 and said that reductions in police and fire departments would be necessary. Pawlenty has criticized local mayors who have claimed the cuts in LGA would come from public safety rather than non-essential services.

"Anyone that stands here and tells you that public safety is a priority and then tries to cut aid to cities that provide it is not being honest with you," Coleman said.

On Saturday, none of the caucus leaders appeared eager to put up votes for more cuts.

Asked whether the House GOP would endorse Pawlenty's cuts, House Minority Leader Marty Seifert of Marshall, was guarded. "We have to see the details," he said, noting that with an 87-47 majority in the House, DFLers had the responsibility to pass budget bills.

By contrast, Seifert said his small band of Republicans was certain to block the override of any veto Pawlenty issued. "Bring it up," he said. "We're ready to roll."

Pawlenty took other action Saturday, signing into law a higher education funding bill with a modest $2.5 million in line-item vetoes. He signed a state government funding bill with no reductions, but sliced a $290 million capital investment bill to under $200 million. A K-12 school funding bill awaited action Saturday night.

After the session

Even though DFLers control the House and Senate, they have hardly marched in lockstep this session, being unable to agree on a single set of tax increases or spending cuts. DFL leaders have been steadfast in rejecting a long-term borrowing proposal of Pawlenty's, GOP pitches for allowing video-slot machine gambling at Canterbury Park, and a broader proposal to put electronic pulltabs in bars, favored by rural DFLers.

In the closing hours, DFLers and interest groups worked frantically to convey the message that deeper budget cuts would damage the state's ailing economy more than would higher taxes, a recent line of argument designed to counter Republican claims that higher taxes would compound what is already the worst recession since World War II.

With revenues continuing to fall below projection every month, no one is sure what will happen after adjournment at midnight on Monday.

If worst-case scenarios emerge, Pawlenty might be forced to call legislators back, as happened in the '80s when a stubborn recession prompted a series of special sessions.

Should he unallot, Pawlenty would have to bring the specific reductions before the Legislative Advisory Commission, an elite committee of legislative leaders who must be advised, but who cannot block, Pawlenty's budget actions -- a process that could drag out over weeks or months.

"The go-it-alone, behind-closed-doors approach is not the open, accountable government we expect in Minnesota," said House Majority Leader Tony Sertich, DFL-Chisholm. "If unallotment happens, we are going to publicly vet the governor's choices and make sure people know the impacts to Minnesota.

Pawlenty exercised only modest powers of line item vetoes on a number of bills late Saturday. He signed an agriculture and veterans bill with only two minor vetoes. He vetoed a "lights on" bill that would keep state funding for state agencies, saying the bill was not needed. He signed a K-12 education bill outright, but complained that it did not go far enough in reforms.

Late Saturday Pawlenty line-item vetoed about $85 million in a $299 million capital improvement projects bill, including $24 million for a new Bell Museum for the University of Minnesota and about $40 million in projects for the state’s colleges and universities. He also cut some anticipated regional projects for a Mankato Civic Center and St. Cloud Civic Center expansions and for the Shubert Performing Arts Center in Minneapolis.

But Pawlenty left intact $26 million for high speed rail study and $21 million for other rail corridor projects. The bonding bill also includes $53 million for flood relief funding.

House Capital Improvement Finance Division Chairman Alice Hausman, DFL-St. Paul, said the cuts were a lost opportunity to provide shovel- ready jobs at low interest rates.

Mark Brunswick • 651-222-1636 Patricia Lopez • 651-222-1288