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Early-morning deal suggests end of special session is in sight
Gov. Tim Pawlenty and legislative leaders have made a major breakthrough in budget negotations. Negotiators met late Sunday night and into Monday morning to craft agreements on transportation funding, aid payments to local governments, and state borrowing. Lawmakers are expected to tackle the final piece of the puzzle: the health and human services budget.

St. Paul, Minn. — Almost a week after ending their regular session, legislative leaders and Gov. Pawlenty have put the finishing touches on all but one of their major budget proposals. The agreement struck just after midnight helps erases a $4.2 billion projected deficit through spending reductions, one-time funds, and accounting shifts. It sticks to Pawlenty's no-new-taxes approach, a crucial point for the governor who says state revenue is already increasing.

"We've got to have a state government that will live within its means like families, like businesses, like non-profits. And that means we've got to learn to live within a six-percent revenue growth for now. And this will give us a gateway or a pathway to get the state back on a solid financial platform. And then we can get about the business of rebuilding Minnesota," Pawlenty said.

The transportation agreement calls for the state to borrow $400 million to jumpstart road and bridge projects. That would be matched with an advance on federal highway dollars to inject up to $900 million over the next four years. That's slightly less than Pawlenty had originally proposed. DFLers argue borrowing for roads will only rack up interest fees that will erode future highway maintenance. And they say the overall budget takes a significant bite out of state government, which, they say, will lead to drastic reductions in state programs and services.

Senate Majority Leader John Hottinger says he accepted the package only to avoid a state government shut down.

"As the largest employer in Minnesota, shutting down and causing the employment loss and the revenue of loss for the State of Minnesota that shutting down government would result in would have been a terrible economic blow to a state already reeling. We wouldn't allow that to happen. And so we reached agreement," Hottinger said.

Senate Democrats had already abandoned their call for a $1.3 billion tax increase meant to ease the budget-balancing pressure. And the agreed upon tax bill contains no new revenues. In fact, it slices aid payments that are meant to hold down local property taxes. To prevent a corresponding spike in those taxes, the agreement imposes property tax levy limits for the next year. The tax bill also establishes tax-free economic development zones for rural parts of the state, a key point in Pawlenty's agenda for greater Minnesota.

As a concession to the Senate, negotiators agreed to borrow $209 million to finance long-term projects, including nearly all the higher education requests vetoed last year by then-Governor Jesse Ventura.

The bonding bill also includes 25 of the $35 million requested for a new Guthrie Theater in Minneapolis. Republican Representative Phil Krinkie of Shoreview, who chairs the House Capital Investment Committee, says there was great reluctance among GOP negotiators to approve the Guthrie project.

"There are going to be a number of members in our caucus who don't like that project moving forward. I've had some concerns myself about is this the right year to do that project? But certainly it was something that the Senate felt very impassioned about," Krinkie said.

The elements of the latest deal are expected to be on the House and Senate floors Tuesday for final action. But Senate DFLers say they'll only provide three votes for the major budget bills. When combined with the Senate GOP's 31 votes, that will provide the bare minimum for passage. The deal still leaves health and human services funding an open question. At issue is whether to reduce eligibility for state-subsidized healthcare or to try to maintain access while reducing the level of coverage for those enrolled.

DFL Senator Linda Berglin of Minneapolis chairs the Senate Health and Human Services Budget Division. She's argued for as high an access level as possible.

"We've been fighting very hard to keep health care coverage for unemployed and working, low-income people. And as far as I can tell it still isn't resolved."

Final action could be delayed until Wednesday or Thursday.

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