Budget deficit erased and session adjourned, Minn. lawmakers look to election season

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Deficit closed, Minn. lawmakers look to election

ST. PAUL, Minn. — Minnesota lawmakers balanced the state budget and erased a $3 billion deficit Monday, wrapping up their work for the year in a way that allowed Democrats and Republicans alike to claim some credit but also set the terms of the election debate to come.

The deal struck by Gov. Tim Pawlenty, presiding over his last legislative session, and DFL House and Senate leaders headed off what could have been a serious cash-flow problem and potential government shutdown within just a few weeks.

But the deal does little to address an even bigger deficit for lawmakers to tackle next year, with the DFL favoring new revenue sources and Republicans preferring more drastic spending cuts.

“It’s really easy to kick the can down the road like this,” said Rep. Jim Abeler, R-Anoka, who voted against the compromise. The single biggest source of money to close the deficit is a delay in nearly $2 billion in state aid to school districts — money lawmakers have vowed to repay in the next budget cycle, though they are not legally bound to do so.

In addition, the budget deal included a concession to Democrats that would allow either Pawlenty or his successor to extend Medicaid health coverage to more poor Minnesota residents using federal money. Conservative Republicans fought its inclusion, linking it to the health care bill that President Barack Obama recently signed into law.

Those two debates — new revenue versus more spending cuts, and whether Minnesota embraces the federal health plan — are likely to be heated in the race to succeed Pawlenty and in the battle for control of the state House and Senate, with all 201 seats on the ballot.

“We would have preferred a more fair and balanced approach where revenue was involved, where those doing well would have paid more of their fair share,” said House Speaker Margaret Anderson Kelliher, DFL-Minneapolis. She is the endorsed Democratic candidate for governor but must first win an August primary against two Democratic opponents.

The likely Republican candidate for governor, Rep. Tom Emmer of Delano, voted against the final compromise because he said it didn’t do enough to permanently solve the perpetual deficits.

“The Democrats were intent on protecting government,” Emmer said. “We need to redesign government.”

Despite the election-year positioning, Pawlenty and legislative leaders praised the final deal as a fair compromise that headed off a potentially much more serious fiscal crisis. The House and Senate passed the last bill with bipartisan support just before lunch Monday, not quite 12 hours after Pawlenty called them into a brief special session when they failed to meet the midnight Sunday deadline for adjournment.

“We got the job done, warts and all,” said House Majority Leader Tony Sertich, DFL-Chisholm. “No one agreed on every solution in here but that is the definition of compromise.”

Most of the cuts and spending shifts in the deal had been implemented unilaterally last year by Pawlenty after he and lawmakers were unable to reach a final budget agreement. The state Supreme Court ruled this month that Pawlenty exceeded his authority in doing so, and the governor said he considered it ironic that DFL leaders ultimately agreed to most of the steps he took.

While Democrats bemoaned the size of the cuts to local governments and state agencies, and Pawlenty’s unwillingness to consider raising taxes on high earners, they said they were happy to be able to protect schools, nursing homes and hospitals from permanent cuts.

Kelliher said if she’s elected governor, one of her first acts in office would be to enroll the state in the Medicaid coverage program. She said it would help Minnesota get a better return on the tax money its residents pay to Medicaid, would extend health coverage to more uninsured Minnesotans and also create new healthcare jobs in the state.

Emmer termed the program “Obamacare” and said Minnesota would not join if he is elected. Pawlenty, a potential Republican presidential candidate in 2012, did not definitively preclude enrolling the state before his term ends, but said he’s unlikely to do so.

Pawlenty said when he took office in 2002 the state had a choice between a continuation of double-digit growth in government spending, or a trimming back of that growth. He said he’s glad to have been able to hold spending to single-digit increases for most of that time.

“We have sent a signal to job providers and entrepreneurs that this is a place where they want to be and we won’t raise their taxes,” Pawlenty said.

Pawlenty said his biggest disappointment of the session just ended was the failure to approve school reforms aimed at giving Minnesota a better shot at winning federal “Race to the Top” education grants.

In its final minutes of the special session, House Republicans were able to block passage of a bill that included new diploma options for at-risk students and revised some state testing rules. The bill lacked the changes Pawlenty had sought on teacher tenure and licensing, which he said was necessary for a successful application for the federal grant dollars.

Associated Press writers Brian Bakst and Martiga Lohn contributed to this report.