House and Senate negotatiors will return to the bargaining table Monday, hoping to remove the last stumbling block to a resolution of the state's budget deficit. Lawmaker met over the weekend and hammered out a deal to cover the remaining $439 million projected shortfall, but have deadlocked over how to replace the state's reserve funds - most of which were drained to balance the budget.

	House Speaker Steve Sviggum discusses the budget deal with Rep. Kevin Goodno, R-Moorhead, during a break in negotiations at the Capitol Saturday. (MPR Photo/Tom Scheck)

Earlier this year, lawmakers moved in record time to erase a nearly $2 billion projected deficit. They did so over the governor's objections by drawing down the state's reserves and by nipping-and-tucking at state expenditures.

The governor has argued strenuously that those reserve accounts must be replenished to preserve the state's fiscal health. And Senate DFLers have agreed. Sen. Doug Johnson, DFL-Tower, the lead Senate negotiator on the budget bill, says failing to restock the reserve accounts could derail any deal.

"I would be really fiscally foolish to not have a significant budget reserve. And it really is not a Democrat or a Republican issue or an Independence Party issue. It's a Minnesota issue," Johnson said Sunday.

Democrats and the Ventura administration are seeking an extra $300 million to pour back into the depleted reserve account. The governor would have found the funds through deeper spending cuts and through increased taxes. DFLers adopted Ventura's call for a hike in the cigarette and tobacco tax, but House Republicans balked.

GOP leaders say before taxes are raised, lawmakers should look at other available funds, including endowments created from the proceeds of the state's tobacco trial settlement. Those endowments are used to finance medical research at the University of Minnesota and smoking cessation and prevention programs.

Rep. Kevin Goodno, R-Moorhead, says House negotiators would like to replace the spent reserves, but if a consensus doesn't emerge on how to do so, it shouldn't break the rest of the budget deal.

	Sen. John Hottinger, DFL-Mankato, says lawmakers want to finish up the package so they can send the bill to the governor on Tuesday. He says that would allow time for lawmakers to override a potential gubernatorial veto. (MPR Photo/Tom Scheck)

"We have budget reserve in place called the rainy day fund, quite frankly, to deal with rainy days. Now, what is the logic behind having a rainy day fund to help out in rainy days if you have to put money back into it before you can, I mean, before you can get done taking care of the rainy day? That's the logic that we have a problem with," Goodno said.

Senate DFLers have also proposed siphoning cash away from transportation projects to replenish the reserves. The lost highway funding would be paid back by borrowing, which House Republicans say is more costly and could subject important projects to unnecessary delays. House resistance on that point could weaken, however, if a broader transportation package emerges. But so far, GOP leaders have balked at raising the gas tax to fund such a deal.

The impasse over reserves could threaten the large budget-balancing picture. The tentative agreement delays some education and health and human services spending into the next budget cycle, effectively taking those costs off the books until mid-2003. Ventura has warned lawmakers not to resort to such accounting shifts to balance the budget. And his finance commissioner, Pam Wheelock, says if that's the solution they intend to pursue, solving the reserve problem becomes all the more serious.

"Then they darn well better have a responsible position where we can balance our money coming in, money going out and have a decent cushion once they leave. And if they don't have that, I have no other option but to seriously recommend to the governor that he veto their legislation, because it just doesn't meet his standards of responsibility," Wheelock said.

Lawmakers have been planning for just such a veto, and they expect to have enough votes to override the governor if necessary. But timing is an issue. The state constitution mandates the Legislature adjourn by next Monday. Legislators say they must reach a deal and pass bills by the end of the day Tuesday if they're to have enough time for an override.