Progress being made, but no budget deal yet at Capitol

Gov. Tim Pawlenty said Friday that progress is being made to erase a nearly $3 billion budget deficit less than three days before the deadline for legislators to pass bills.

The Republican governor offered his upbeat assessment from a northern Minnesota resort area, where he was preparing for the Governor's Fishing Opener.

But as the day wore on, one DFL legislative leader said he doesn't believe there will be a deal that truly solves the state's fiscal crisis, and Pawlenty's spokesman said there were still disagreements between legislators and the governor over a new health care bill that could be related to an overall deal.

Pawlenty, who hosted his weekly radio show from Lake Kabetogama near the Canadian border, spent most of the show highlighting angling and tourism. But he also talked about the budget-balancing work still under way back in St. Paul.

He said a big part of the ongoing negotiations involve reworking his unilateral budget cuts of $2.7 billion from a year ago that became part of the presumed budget deficit after a ruling last week by the Minnesota Supreme Court.

"Now we're asking the Legislature to just ratify those unallotments. They don't want to do that completely, plus they want some other things that they're interested in," Pawlenty said. "Progress has been made at least in terms of an outline."

But one of the DFL lawmakers involved in the budget negotiations painted a significantly gloomier picture. Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, told reporters that the governor's continued opposition to new taxes has forced legislators to manage a fiscal crisis with a lack of tools.

"We're ultimately backed into a situation where we have to patch things together with bubble gum."

Pawlenty vetoed a DFL budget-balancing bill earlier this week that included an income tax increase as part of its fix. Pogemiller is particularly concerned about the governor's resistance to pay back a $1.7 billion delay in school aid payments.

"This level of fiscal irresponsibility will lead to a $5 to $8 billion deficit to be confronted by the next governor and the next Legislature," Pogemiller said. "The governor has been rigid. ... We're ultimately backed into a situation where we have to patch things together with bubble gum."

Pogemiller also warned about the state's worsening cash-flow problem. He said the lack of money in the state check book could soon lower Minnesota's bond rating and put in jeopardy many of the construction projects approved earlier this session in a bonding bill.

In negotiations with the governor, Democrats have resisted additional cuts in state aid to cities and counties. They're also trying to reassemble the health and human services bill that Pawlenty vetoed Thursday.

But there's still disagreement over a proposed early expansion of federal Medicaid, as well as a surcharge on health care providers that's used to help pay for the expansion.

More than 80,000 low-income single adults who had been on General Assistance Medical Care and MinnesotaCare could be covered by Medicaid, but the federal government is requiring states who want to enroll early in the plan to pay for part of it. In Minnesota's case, the cost is about $188 million.

House Majority Leader Tony Sertich, DFL-Chisholm, said all the remaining issues involving budget cuts and the health bill must be addressed for the session to end on time. As closed-door meetings continued, Sertich was not ruling out an attempt in the House to override the governor's veto of the budget plan that contained tax increases.

"At this point, a negotiated solution is one that works best. Absent that though, we have to keep all of our options open," he said. "We don't want to go to special session. We believe there's enough time to get this done with the governor."

House Democrats would need the help of three Republicans to override a veto. Senate Democrats have a veto-proof majority.

Senate Minority Leader David Senjem, R-Rochester, said a final budget deal won't come easily, because it will have to come from spending cuts alone. Senjem urged DFLers to work with Republicans and remain serious about concluding the session.

"There are rumors at least where I walk that would suggest that maybe there is another tax increase on the way," he said. "That would simply delay and maybe frankly nullify our ability to bring this session together in terms of a conclusion."

Another idea for raising revenue -- electronic gambling in bars -- isn't getting much traction either. Pawlenty opposes it, and it isn't clear whether there are enough votes in the Legislature.

The deadline to adjourn the session is Monday, but the Constitution says lawmakers can't pass bills on the last day. That means if legislators want to avoid a special session, they'll have to complete their work by midnight Sunday.

Pawlenty's tentative schedule lists his last fishing opener event at 5 p.m. Saturday.

(MPR reporters Madeleine Baran and Elizabeth Dunbar contributed to this report.)

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