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With ethanol subsidy restored, House budget-cutting plan headed for floor debate
The House Ways and Means Committee on Thursday night approved a budget-balancing plan that tracks closely with the priorities outlined by Gov. Tim Pawlenty. The $468 million deficit-reduction package now heads to the House floor where the Republican majority anticipates easy passage. But provisions of the plan have upset state employees unions and advocates for the state's steel industry.

St. Paul, Minn. — The House Republican plan hits Gov. Pawlenty's budget target almost to the dollar. That means it closes the $356 million deficit expected over the next five months and leaves a cushion of more than $100 million in case the economic situation worsens.

"There are some things in it that, all things being equal, we'd maybe rather not do," said Rep. Jim Knoblach, R-St. Cloud, who chairs the Ways and Means Committee. "But I think that everyone understands that there has to be some sharing of the pain as we go forward here. And I think that, all things considered, it's a pretty reasonable bill that balances the needs of the state and still allows us to get the core things done we need to do."

The bill also contains language favored by the governor's office giving the state greater authority over its workers. The bill would allow agency heads to force state employees to take up to 80 hours of unpaid leave over the next five months. In addition, it would repeal a provision that bans hiring outside contractors for state work when qualified state employees are available to perform the task.

Julie Bleyhl, the legislative director for the state's largest employees' union, the American Federation of State, County, and Municipal Employees, Council 6, says repealing the ban would deny workers an important protection.

"They no longer have to follow the process of determining whether there's a state employee that's available and able to do the work. The budget times that we're in right now, this would be a major benefit to existing state employees as they would have the opportunity to do other work and be trained for other work," she said.

Bleyhl and some legislators, including the chair of the State Government Committee who offered the worker contract language, seemed not to have understood the language's significance at first. But an attempt to remove the provision was voted down. Knoblach says no one should have been surprised by the proposal.

"This was the provision that Gov. Pawlenty called, as I recall, 'the stupidest law in the world,' saying that we're prohibited from contracting something out if we can save money doing it. And I personally thought that it had received a lot of publicity and that people were all aware of it. And I gather that most were, but a few weren't," Knoblach said.

The House budget plan also preserves most of this year's anticipated ethanol subsidies. Pawlenty had proposed eliminating $27 million in payments to 13 producers of the corn-based fuel. The House proposes to keep roughly 80 percent of the funding intact. But to offset the ethanol dollars, House Republicans dipped even deeper into an Iron Range development account, known as the 21st Century Minerals Fund.

Bob Gunther of Fairmont chairs the Jobs, and Economic Development Finance committee. He says the Minerals Fund was simply underutilized.

"The difference between ethanol and what the 21st Century Mineral Fund was there, is ethanol is an ongoing, viable, working committment from the state. And it is there and producing a profit and a return for the state," Gunther said.

But Iron Range lawmakers objected nonetheless. The House plan would leave $10 million in what is currently a roughly $60 million account.

Rep. Tom Rukavina, DFL-Virginia, says the fund would spur more development projects and steel plants if steel enjoyed the same perks as ethanol. He notes that the state requires all gasoline that's sold be a 10 percent blend of a cleaner-burning oxygenate, of which ethanol is the nearly universal choice in Minnesota.

"You let us mandate half of what was mandated in ethanol at the pumps, and just let's just say that by 2006, 20 percent of all iron used in this state by the state and its local subdivisions has to be purchased by steel made in this state, and you'll have all this money spent and a couple of plants built," he said.

The House bill now heads to the full body for a vote, perhaps as early as Monday. It must then be reconciled with a Senate version that retains the money for ethanol and the Minerals Fund, but which leaves a thinner cushion and makes fewer permanent cuts.

Pawlenty has called the Senate "unacceptable."

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