Time nears for lawmakers to fix the state's $935 million budget deficit

ST. PAUL -- Cue the music for the latest end-of-session budget dance.

With less than three weeks left in the 2008 legislative session, Gov. Tim Pawlenty and top Democratic lawmakers soon could begin earnest negotiations on how to fix the state's projected $935 million budget deficit.

Republican Pawlenty and Democrats who control the Legislature have swapped written budget offers in recent weeks, but Pawlenty said Wednesday his new proposal could facilitate high-level talks needed to reach a budget deal.

"We believe this is a framework or a pathway to close the session," Pawlenty said in announcing his offer that includes items both attractive and objectionable to Democratic-Farmer-Laborites.

The governor said he wants to begin meeting privately with top lawmakers by this weekend, and Democrats said they are eager to start those talks. Such meetings traditionally are the beginning of the end of session.

Solving the budget problem is the main issue before lawmakers as they look toward a May 19 constitutional deadline to adjourn for the year.

House Majority Leader Tony Sertich, DFL-Chisholm, said Democrats did not see much movement in Pawlenty's latest effort. The two sides need to move beyond swapping written offers, he said.

"Now's the time when we sit down in a room and get this hammered out," Sertich said.

That is when Capitol deals are reached, he added.

"There's a lot of posturing and dancing that go on right now, and I think we're still in that phase," Sertich said. "Hopefully we can take it to the final phase."

Pawlenty's latest budget-balancing offer, which he unveiled with a handful of Republican lawmakers at his side, is a twist on earlier proposals to erase the deficit by cutting spending, using reserve funds and changing a corporate tax law some policymakers call a loophole. However, the offer also includes imposing a cap on property tax increases and a tax exemption on military pay -- two issues Pawlenty earlier proposed and DFL leaders rejected. House Democrats offered an alternative tax plan that lowers property taxes for some homeowners, but Pawlenty called it "a really misguided piece of legislation."

Select public construction projects Pawlenty earlier this year stripped from a bonding bill appear to be back at the negotiating table. The governor's proposal includes borrowed funds for a Minneapolis-St. Paul rail transit project and two of his favored projects -- a state park along northern Minnesota's Lake Vermilion and a new Minneapolis veterans' home.

Sertich said he still has concerns about how the state is approaching a proposed purchase of land on shores of Lake Vermilion.

Earlier Wednesday, House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said House Democrats want the Central Corridor rail project to proceed and are open to discussing the veterans' home proposal.

While top lawmakers and Pawlenty prepare to meet, legislative negotiating committees have been meeting for weeks, trying to hammer out differences between competing House and Senate budget proposals. Yet without an overall budget agreement, conference committees' ability to wrap up work is limited.

"Until that's established, it's real tough to get down to the nitty gritty," said Rep. Dennis Ozment of Rosemount, one of two Republicans on a House-Senate budget panel. "It all has to come together as a package, and that hasn't happened yet."

Budget agreements can be reached very quickly, Ozment added.

Lawmakers and Pawlenty expect to make funding cuts, but some legislators anticipate modest spending increases in a few areas. LeRoy Stumpf, the top senator on funding early-childhood-through-Grade 12 education, said that area could see a small bump in state aid this year.

Stumpf, DFL-Plummer, said an education funding panel finished its work weeks ago and must wait for higher-level agreements.

"There's this kind of grinding away that is not productive," Stumpf said of slow-moving budget talks. "We've literally lost several weeks."

Some of the angst among lawmakers may involve concerns about a bleaker budget picture in 2009, Stumpf said.

Pawlenty said he wants the Legislature to keep all budget items in one package, rather than having lawmakers pass a deficit-fixing bill along with numerous other finance bills.

"If we're going to have an agreement, we would expect to have a global agreement that would extend to all of the expected or agreed upon spending buckets coming out of this session," he said.

The state budget must be balanced by June 30, 2009, but Pawlenty and lawmakers do not want to wait until next year to erase the deficit.

Some questioned whether most Minnesotans will notice the impact of cuts that could be made to fix a deficit that is equal to less than 3 percent of the state's two-year, $34 billion budget.

That is far less than the $4.5 billion deficit the state faced five years ago, Ozment said.

"How much (of that) does the public even remember?" he asked.

If lawmakers and Pawlenty make good budget decisions in the next few weeks, the impact on most Minnesotans will be minimal, Ozment added.