State Capitol: No one budges on budget

Gov. Tim Pawlenty and DFL leaders met Tuesday to try to resolve their differences on the state's $4.6 billion budget deficit, commencing a ritual of intensive talks that has often pushed legislative sessions toward compromise.

But within hours face-to-face negotiations looked more like hand-to-hand combat as DFL leaders orchestrated a late-night maneuver designed to force the governor to accept tax or fee increases he has repeatedly rejected.

A House-Senate conference committee on education agreed to a compromise that would keep K-12 school spending flat over the next two years, setting aside a Senate proposal that would have slashed school spending more than 3 percent over the next two years.

But the compromise measure also stripped from the bill a $1.8 billion accounting shift that had been a major component of the House's budget solution. Pawlenty also has been counting on slightly smaller school shifts in his budget proposals, which sought to protect schools from budget cuts.

"It's time to smoke the governor out," said Rep. Mindy Greiling, DFL-Roseville, chair of the education finance committee. "Does he want to put his money where his mouth is to pay for public schools?"

In the end, Greiling conceded, shifts would probably be restored. But Pawlenty, she said, "will also have to come up with additional revenue. The $1.8 billion is gone and the governor is going to have to beg to get it back."

House Majority Leader Tony Sertich, DFL-Chisholm, confirmed that DFLers leaders would now insist that any accounting shifts be accompanied a tax or fee increase.

"The governor's answer to ongoing revenue is 'no,'" said a frustrated House Speaker Margaret Anderson Kelliher shortly after Tuesday afternoon's hourlong meeting concluded.

Kelliher, along with Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, remain insistent that the state needs $1 billion in ongoing revenue -- taxes or fees -- to help wipe out the deficit and stabilize the state's long-term finances.

But Pawlenty is equally adamant that wringing more money from taxpayers cannot be part of the solution.

As the lines hardened, Pawlenty said he would consider signing a "responsible lights-on" bill that would keep the essentials of state government going in the event of a stalemate, which could force the shutdown of many state functions on July 1. But he said the version passed by the Senate Monday spent too much and could deepen the state's deficit.

Pawlenty said he did not want to "presuppose" a special session, and both he and DFLers said there was still time to complete a budget before the constitutionally mandated May 18 adjournment.

When asked Tuesday whether he contemplated any compromises such as the "health impact fee" on tobacco that helped close the gap in 2005, Pawlenty said "no."

Kelliher said that Pawlenty continued to cling to his proposal to borrow funds against future revenues, despite any evidence of widespread support for the measure.

House Minority Leader Marty Seifert, R-Marshall, later said that most Republicans had not supported the proposal, but that those feelings might change as legislators edge closer to the deadline.

Over the weekend, Pawlenty struck down a hastily hatched DFL plan that would have raised $1 billion over two years and dedicated the money to hospitals, schools and nursing homes through tax hikes on alcohol, couples earning more than $250,000 and credit card companies that charge high interest rates.

Days later, the two sides appeared no closer to agreement.

Earlier, Pawlenty had expressed skepticism about DFLers' warnings of 20,000 jobs lost through budget cuts, calling the numbers "overbaked" figures from interest groups unwilling to change.

Kelliher and Pogemiller said Pawlenty needed to realize that, just like tax increases, budget cuts carry economic weight.

Though Tuesday's meeting was called by the governor, Kelliher said she would continue to try to change a process in which the overarching budget agreement is traditionally crafted behind closed doors in the governor's office.

In recent weeks, Kelliher and Pogemiller have held public meetings in which top Pawlenty aides and department heads have been called before a special panel to discuss parts of the budget.

Kelliher said DFLers want to "make sure that what happens in the governor's office is public."

Part of their strategy was evident on Tuesday, when they presented an amended health and human services bill that would slice another $400 million from a budget passed Monday that itself cut spending by $500 million.

To accomplish the deeper cuts, DFLers would cut 25 percent from Medicaid payments to nursing homes and group homes and 20 percent from payments to hospitals.

Geoff Bartsch, representing HealthPartners and the Minnesota Council on Health Plans, said that as painful as the cuts would be, those proposed by the governor are worse because Pawlenty's plan also would make about 113,000 Minnesotans ineligible for state-subsidized insurance in 2011.

Public safety bill passes

Minnesotans would pay higher state fees to file a will or a lawsuit, get a transcript or issue a subpoena, under a public safety budget bill passed by the Legislature and sent to Pawlenty on Tuesday.

While Pawlenty has signaled that public safety is among the priorities he wants to protect, the confereed bill would cut $99.3 million over two years in public safety and judiciary.

Some controversial provisions that had earlier earned the bill the name "the Freedom to Steal Act" were removed from the final version, including the repeal of some mandatory minimum sentences, reranking some felony-level DWIs to lower punishments and holding off on imposing sentences for certain low-level drug offenses.

Prisons would have to cut inmate costs by 1 percent, and the bill would prohibit reducing the number of guards.

House Majority Leader Tony Sertich, DFL-Chisholm, said a $1-billion-a-year bureaucracy like the prison system should join in at a time when health care is being cut.

"Let's ask our prison system to also be part of the sacrifice," he said.

mkaszuba@startribune.com • 651-222-1673