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Deep revenue differences remain

House Speaker Margaret Anderson Kelliher tells reporters Tuesday that she hopes to pass a half-dozen budget bills on Wednesday. She and other legislative leaders met with Gov. Tim Pawlenty later in the day. (Bulletin photo by Don Davis)

ST. PAUL - The Minnesota legislative session could come to a smooth end if the Democratic-controlled Legislature and Republican governor could agree on a way to raise $1 billion.

There is no sign that is about to happen.

On Tuesday night, the costliest spending bills and revenue to fund them remained stumbling blocks to ending this year's session by Monday's constitutional deadline.

Legislative leaders were determined to finish the outstanding budget bills - even without Gov. Tim Pawlenty's acceptance - and vote on them in what promises to be a marathon session today.

But lawmakers continued to break their own deadlines. Tuesday was supposed to be the last day for them to send the governor compromise budget bills, but a half-dozen remained unfinished. Last week they blew past a deadline for negotiators to finish their work meshing House and Senate bills.

The key to bridging the budget gap seemed to be revenue - Democrats want to raise taxes $1 billion, while the governor wants to borrow that much to plug a budget deficit. And so far, they have not come close to agreeing on a compromise.

Gov. Tim Pawlenty last weekend vetoed Democrats' $1 billion tax increase, but that money remains key to the two biggest funding bills - public education and health and human services.

Pawlenty said he is considering whether to sign the massive bill funding health and human services programs that passed Monday. Talks on the education bill continued late Tuesday.

There were no signs of an imminent breakthrough on outstanding issues as the governor and legislative leaders struggle to write a two-year, $33 billion budget while filling a $4.6 billion deficit.

Pawlenty termed the differences between himself and DFLers "a pretty significant gap."

Rank-and-file lawmakers watched the lack of progress from afar.

"I'm concerned," Rep. Tim Faust, DFL-Hinckley, said of chances the budget will pass by Monday.

That was the attitude of many lawmakers, some of whom outright predicted an agreement is not possible in time.

Republicans said passage of the health and human services bill did not help matters.

"We are not going to get there if we keep passing bills like we did yesterday of nearly 20 percent increases in health and human services," Rep. Pat Garofalo, R-Farmington, said.

Pawlenty said health and human services program costs are rising so rapidly that they threaten funding to other areas, such as education.

Expecting a veto, House and Senate negotiators on the health bill resumed meeting Tuesday to prepare a new bill. They brought in people to testify about deep program cuts that Democrats say would occur under Pawlenty's budget plan.

"We are going to see what the public says," said Rep. Tom Huntley, DFL-Duluth, the House health finance chairman.

Most testimony came from health-care lobbyists whose clients would receive less money than expected under the Pawlenty plan.

"We're trying to get the governor to negotiate, which he doesn't want to do," Huntley said.

Emerging from talks with Pawlenty, Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said he thinks the governor will sign bills funding agriculture, veterans, economic development and other state programs. But he and House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, could report no progress on the major sticking point - whether, and how, to raise revenue.

The Senate and House compromised on a $1 billion tax increase, after both passed larger increases. Pawlenty immediately vetoed it.

Then Pawlenty offered a three-part plan that he said would produce $1 billion, but DFL leaders rejected it out of hand.

Neither side gave an inch Tuesday, with Pawlenty refusing to consider any state tax increase and legislative leaders turning down Pawlenty's plan to borrow nearly $1 billion to fund state operations.

With public school education one of the major undecided funding areas, Kelliher visited a "bake sale" set up in the Capitol rotunda to emphasize the need for money.

Such fund-raisers are "not the expectation Minnesotans have for the classrooms. ... A bake sale is not enough. We need a renewed commitment to education."

Most Republicans oppose tax increases that Democrats say are needed to prevent deep cuts in areas such as education. But even those who may consider backing higher taxes say they cannot buy into current plans.

"I want to make sure we are doing all we can do to lower our costs and reform how we are doing business," Rep. Morrie Lanning, R-Moorhead, said before he would consider a tax increase.

Lanning blamed Pogemiller for brinksmanship that threatens a special session.

"He loves the drama we are in now," Lanning said.

Faust said he holds out hope that three House Republicans join Democrats and override Pawlenty's tax veto. There are not enough Democrats to meet the constitutional requirement to override a veto, necessitating three Republicans also to vote against their governor. Pawlenty said that will not happen.

House Minority Leader Marty Seifert, R-Marshall, blamed Democrats for lack of budget progress.

"They are going to have to get off their stubborn position to raise taxes," Seifert said.

Sen. Steve Murphy, DFL-Red Wing, said that there is plenty of time to finish the session by Monday, but said Pawlenty has to immediately begin serious negotiations.

Murphy said that as chairman of Senate transportation committees he only had contact with the governor's office a half-dozen times this year, not enough to work together. "The governor has not been engaged."

Lawmakers representing areas along the Red River said they worry that these late-session budget talks could threaten $67 million planned for flood prevention and recovery.

"You worry about leadership, if they somehow are going to hold the flooding money as a bargaining chip," Lanning said.

Sen. Keith Langseth, DFL-Glyndon, said the flooding money is secure - for now. However, he said that he would worry if the public works spending bill that contains the funds is not wrapped up during the regular session; in a special session, he said, it could be threatened.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.