The state may be on the hook for a multimillion-dollar payout if nearly 40,000 state employees are laid off during a government shutdown this summer.

Most state employees would have to be paid severance as well as cash for unused time off, according to union contracts. Those payouts could easily cost the state millions.

For state employees, the prospect is very real. On Friday, 36,000 state employees will get layoff notices that could go into effect July 1 if the governor and Legislature do not agree to a two-year budget by then.

It would be "the largest layoff in the state's history," said Jim Monroe, executive director of the Minnesota Association of Professional Employees (MAPE).

The prospect of paying out a lump sum to employees, at a time when the state lacks a budget and has a $5 billion projected deficit, may be daunting. But that's what the employees' contracts require, say leaders of the state's two biggest state employee unions.

"If the state shuts down July 1, the payout would be included in July 15th paychecks," said Eliot Seide, executive director of the American Federation of State County and Municipal Employees Council 5. About 18,000 state workers who may be out of work in a summer shutdown are AFSCME members.

Jim Schowalter, the state's Management and Budget commissioner, said Thursday that he was not sure how much those lump sums would cost the state, nor did he confirm that they would be required.

"I don't want to give people half an answer. I don't want to give you what could happen at this point," he said. "I do understand that's an important issue for employees and we are going to get it solved."

Monroe said the contract language is clear and the payouts are mandated.

But they also are complicated. While MAPE is encouraging employees to apply for government unemployment benefits if they are laid off, it also is warning them that those benefits could be delayed by the final check payout.

The question over the payouts is just one of the myriad unknowns bubbling over a possible shutdown.

Worker anxiety rising

The calls from employees about what could happen, Monroe said, are escalating. Once tens of thousands of workers get their notices in the mail Friday, the calls may go through the roof. That's when a possible shutdown will go from "what if" to a shockingly real scenario for employees, he said.

The prospect of a near-complete shutdown also has K-12 schools scrambling.

On Thursday, a group of school board members from across the metro area urged legislative leaders to balance the budget and maintain education funding. They said proposed cuts or a state shutdown would dramatically affect schools.

"We really don't know what it means. ... It would be a tough spot," said Peyton Robb, an Edina school board member.

Meanwhile, leaders at the State Capitol continued to point fingers.

A legislative budget commission on Thursday morning thrashed over the state's budget mess. For the second time this week, it failed to accomplish much in the way of bridging the gap between Republicans and DFLers.

The hearings, which come on the heels of two closed-door high-level budget negotiating sessions this week, allowed Republicans to publicly grill Dayton's commissioners.

The sharpest rhetorical flourish of the morning came from Sen. Julianne Ortman, R-Chanhassen.

Dayton's proposal to increase income taxes by $1.8 billion "must be miracle money," she told Dayton's finance and tax commissioners. "Your rhetoric is unbelievable to say our budgeting is somehow draconian, drastic and horrible for Minnesota," she said. But spending another $1.8 billion "makes all the difference between huge thunderclouds and beautiful rainbows and blue skies? ... I don't think so."

Republicans Thursday also belittled Dayton's claim that he came halfway when he cut his tax-increase proposal last month.

Dayton now says he wants to spend about $36 billion over the next two years and raise about $1.8 billion in taxes. Republicans want to spend $34 billion and reject all tax increases. Their position on that has not changed for months.

Republicans contend that Dayton hasn't moved as much as he claimed. His budget plan still includes about $1 billion of fees and surcharges, they said.

Rep. Pat Garofalo, R-Farmington, said: "They may not call it a tax increase, but it's a second round of tax increases outside the $1.8 billion. Those fees he doesn't talk about."

Staff Writer Kelly Smith contributed to this report. Bob Von Sternberg • Rachel E. Stassen-Berger • Twitter: @rachelsb