Pawlenty issues ultimatum on state budget

Turning the heat up to a boil in the closing days of the legislative session, Gov. Tim Pawlenty said Thursday that he would use his powers of line-item veto and unallotment to singlehandedly balance a state budget facing a $4.6 billion deficit if a compromise plan can't be crafted in the next four days.

The unusual flexing of executive power seemed clearly designed to make Pawlenty's adversaries in the DFL-controlled House and Senate blink as the clock ticks toward adjournment.

Pledging that there would be no government shutdown or special legislative session, the Republican governor said that every bill sent to him by the Legislature would be subject to his surgical veto pen, and later Thursday, he applied seven line-item vetoes to two bills. Pawlenty said he would use his executive powers to address a $3 billion disparity between expected spending in the DFL bills and anticipated revenues.

"There is a key principle at stake here. You can't spend more than you have. The DFL-majority just did that," said Pawlenty, flanked by GOP legislators at a Capitol news conference. "In these economic times, the people of Minnesota want to see decisive action. We're going to take action to make sure this session ends on time with a balanced budget."

Pawlenty's move is a high-stakes staredown, but he said he remained willing to work with DFL leaders to resolve the budget before the Legislature's Monday deadline to adjourn.

"There is still a good chunk of legislative time between now and Monday at midnight. They've got plenty of time to adjust if they like," Pawlenty said.

The process of unallotting, through which a governor essentially de-funds a program, could have an enormous impact on cities and counties, which depend on state funding called Local Government Aid (LGA), as well as subsidized health-care programs, which Pawlenty has targeted for larger reductions than the Legislature approved.

Heated reaction

If Pawlenty's announcement was designed to produce anxiety and pressure, it worked. Wadena Mayor Wayne Wolden, president of the Coalition of Greater Minnesota Cities, predicted the largest property tax increases in the state's history and cuts to police, fire, and libraries if additional LGA is cut.

"The real losers in this failure to compromise are the property taxpayers and Minnesota families who depend on critical city services," he said.

Cuts would likely come in July, in the beginning of the new budget period.

Pawlenty said his budget for the next two years would likely come in slightly above $31 billion, compared with the current projected budget of $34 billion.

After his announcement, House Speaker Margaret Anderson Kelliher called Pawlenty "Gov. Go-it-alone." The DFL Party released a statement labeling him as "King Tim." Kelliher and House Majority Leader Tony Sertich, DFL-Chisholm, demanded that Pawlenty make a public appearance to explain himself.

Instead, Office of Management and Budget Director Tom Hanson was sent into the breach to field criticism and questions from the Legislative Commission on Planning and Fiscal Policy, a panel Kelliher chairs that has become an open forum for budget negotiations and recriminations.

In one of the day's oddest moments, Kelliher and Sertich sat quietly -- and mostly by themselves -- in a meeting room waiting for Pawlenty and Hanson. Next to Kelliher were an empty chair and a nameplate with Pawlenty's name on it.

It was Hanson alone who finally appeared on behalf of the governor. The meeting that followed was testy at times, with Kelliher saying it appeared the governor had made a decision without involving the DFL-controlled Legislature and Hanson saying Pawlenty was willing to listen to the DFL's ideas through Monday.

"You use words like 'agreement' and 'mutual' as if you mean them, and I don't believe you, quite honestly," Sertich said to Hanson at one stage.

"Come on," replied House Minority Leader Marty Seifert, R-Marshall.

In one exchange, Hanson indicated that even as Pawlenty's chief budget negotiator he did not know the details of what the governor intended to do.

"Do you know the plan?" asked Senate Majority Leader Larry Pogemiller, DFL-Minneapolis.

"In all honesty, I have some ideas of the parameters, but no" replied Hanson.

Pawlenty's budget proposal, Kelliher said in a letter to the governor, throws more than 113,000 people off health care and cuts the jobs of more than 16,000. Later, in speaking with reporters, she said the unallotment would be 10 times larger than any other previous unallotment by a Minnesota governor.

Pawlenty sent a letter earlier in the week suggesting compromise on several issues, including accepting larger school funding shifts, draining of budget reserves and cutting in half a proposal to borrow $1 billion against future revenues. He said his willingness to sign the finance bills reflected "a gesture of significant compromise."

Raucous days ahead

Much action can be expected in the final days of the session. The House and Senate could mount an effort to override Pawlenty's veto of a $1 billion tax bill they passed a week ago. In the House, the majority DFLers would need at least three Republican votes to succeed, and Pawlenty said he was confident the GOP would hold firm. He said he has been talking daily with GOP House members to ensure their backing.

Pawlenty's decision to use line-item vetoes and unallotment in the absence of a budget deal carries political risks, as the governor might end up shouldering all the resentment of the interests that suffer cuts. As late as Wednesday night, House Minority Leader Seifert dismissed the idea of Pawlenty unallotting, citing the political hazards.

House DFLers said they planned to bring Pawlenty's original health and human services bill onto the House floor today to show it had little support.

"Certainly, there's good news on the tax front," said Tom Hesse, vice president of government affairs for the chamber. "The business tax increases will not happen this year."

Hesse, who said the chamber did not know of the plan in advance, added that "I think it is a gutsy move."

Staff writer Kevin Duchschere and the Associated Press contributed to this report.