ST. PAUL - Minnesota lawmakers missed another deadline when the sun came up this morning, the second in just a few hours.
Legislators and the governor could not balance the state budget by midnight, forcing the Legislature into what was supposed to be a brief special session.
Democratic leaders and Republican Gov. Tim Pawlenty agreed to begin the special session at 12:01 a.m. today, promising passage of a budget-balancing measure by sunrise. The sun was well up and the budget bill still was not ready, but debate was expected to begin by 8 a.m.
An agreement about how to fill a $3 billion deficit was announced at 11:40 p.m. Sunday, 20 minutes before the constitutional deadline to pass bills.
The deal gives Pawlenty most of what he sought in the budget bill, including no increased taxes.
"We have reached a bipartisan agreement to bring the legislative session to a productive and good conclusion," Pawlenty said.
"We were able to resolve the $3 billion budget deficit without raising taxes," Pawlenty added. "We've reached a good outcome for the people of Minnesota."
The governor said the deal was that just one item will be on the special session's agenda.
The agreement combines spending cuts with a $1.9 billion delay in state payments to schools. It requires that school borrowing be paid back in the next biennium, Pawlenty said.
Had the agreement not happened, "the state would have been in a very precarious situation," Pawlenty said.
The agreement follows a series of meetings the governor hosted with legislative leaders throughout Sunday night, mostly about health-care provisions in the bill.
"We have an agreement with the governor," House Majority Leader Tony Sertich, DFL-Chisholm, told his colleagues just before midnight. "It looks essentially like the last bill we went to the governor at 6 o'clock this morning, with some modifications."
The deal allows Pawlenty or the governor who takes office in January to join an expanded Medical Assistance Program offered by the federal government. Pawlenty opposes it, but Democrats like the plan to cover thousands of poor Minnesotans.
The lone bill to be considered in the special session also would continue the existing General Assistance Medical Care program, also for the poor,
The House adjourned it regular 2010 session for the year at 11:55 p.m., expecting to return six minutes later. The Senate adjourned at midnight.
The final regular legislative day began Sunday afternoon with House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, weeping from her perch high above the front of the House chamber. She announced months ago that she is retiring, even if her bid for the governor's office fails. She received a standing ovation from her colleagues.
The House and Senate both gave time to retiring members to deliver speeches. In some cases, lawmakers were making their first public announcements that they would not seek re-election.
Even while the speeches were being delivered, work went on behind the scenes to balance the budget in a hurried effort to end the session.
As progress was being reported, so was continued dispute. Pawlenty spokesman Brian McClung talked to reporters with slightly more than three hours left in the session, saying Democrats continued to seek surcharges on health programs even after they promised to drop the request in light of Pawlenty's objections.
And, McClung said, Democrats wanted two budget bills while the governor wanted everything wrapped up into one.
Surcharges were dropped and it was decided to use only one bill.
Budget problems were known when lawmakers arrived in St. Paul in early February, but made worse a couple of weeks ago when the state Supreme Court ruled that Pawlenty's spending cuts from last summer were illegal. That left the $3 billion budget problem, which if not solved could create financial havoc for the state.
The governor late Sunday afternoon proposed cutting spending to help balance the budget, but setting aside controversial proposed health-program changes.
Democratic leaders, who control the Legislature, quickly shot a counteroffer back to Pawlenty, agreeing with much of what he suggested. But the health-care provision that Pawlenty wanted to drop would be left available to the new governor who takes office in January.
If the budget was not balanced, the state could run out of money to pay its bills this summer and it would become difficult or impossible to sell bonds to finance public works projects around Minnesota.
The biggest stumbling block was a Democratic proposal to expand health programs for the poor by spending some state money to bring in $1.4 billion federal money. That would be dropped under Pawlenty's plan, but left available under the DFL counteroffer.
Pawlenty and his Republican legislative colleagues strongly objected to a trio of surcharges that Democrats wanted to help fund the expanded programs. Those surcharges would not be pursued under the governor's plan, and Pawlenty said he would agree to not making some health and humans services cuts he wanted.
"I think this is a pathway forward," Pawlenty told reporters shortly after he gave legislative leaders his proposal.
House Minority Leader Kurt Zellers, R-Maple Grove, said the main point of contention in recent days has been health issues.
"Just get back to balancing the budget," he urged.
Pawlenty said his offer was designed to get beyond talking about the same things that were going nowhere.
"We have been talking for days about the same two or three narrow issues," he said. "We are at a point where we have to decide one thing or another."
Sertich said that part of his party's plan would keep General Assistance Medical Care, a health program for the poor, would remain pretty much the same as now but with additional money made available to rural hospitals to take part in the program.
The House leader said he is optimistic about reaching a deal.
"At some point, the governor is going to have to say 'yes' to something," he said.
Pawlenty said there are things he had to give up besides deeper health program cuts. For instance, he said, education reforms he badly wanted are not likely now.
Andrew Tellijohn of the State Capitol Bureau contributed to this story. Tellijohn and Davis report for Forum Communications Co.