Gov. Tim Pawlenty is scheduled to meet with members of his cabinet Friday to discuss the state's budget problems in light of the recent Supreme Court ruling that undermines his ability to balance the budget on his own.
Pawlenty and legislative leaders met twice Thursday to discuss how the state will react to the ruling that could make the state's budget problems dramatically worse. The governor has canceled a political trip to South Carolina this weekend to continue negotiations.
When the Minnesota Supreme Court ruled that Pawlenty's unilateral budget cuts were unlawful, the prospects for the state budget twisted from a major problem to a potential tailspin.
Minnesota now faces a cash flow crisis. Management and Budget Commissioner Tom Hanson said that means the state could run out of cash soon.
"It's all to say we need a resolution as quickly as possible. We don't have the money in our bank account to pay for the big expenditure that may be coming," Hanson said.
That big expenditure could be a $1 billion payment to schools that Pawlenty delayed when he erased a $2.7 billion budget deficit through a process known as unallotment. A lower court and the Minnesota Supreme Court ruled Pawlenty overstepped his authority with the unilateral cuts.
The concern is that a school superintendent, a city mayor or any other group affected by Pawlenty's action could petition the court for the lost funds. If that happens, Hanson said finance officials would be forced to spend money the state doesn't have.
House Majority Leader Tony Sertich, DFL-Chisholm said it's a problem created by Pawlenty when he decided to sign all of the spending bills last May but veto the tax bill to pay for it.
"This is absolutely a place where the governor has put himself. He signed all of the checks last year and didn't have money in the bank and tried to go it alone and in an illegal way," Sertich said. "The chickens are coming home to roost with this Supreme Court case. We're looking for a way out of it, though. We want to make sure that the state of Minnesota doesn't run out of money."
The key question is how they come up with that deal. Sertich said he'd like to see Pawlenty agree to a balanced approach that includes cuts, the school payment shift and new revenue like a tax increase. But,Pawlenty says he won't raise taxes.
The governor and Republicans in the Legislature say the best solution is to enact Pawlenty's unallotment cuts. But Democrats say the House and Senate rejected Pawlenty's budget plan on a bipartisan basis. GOP Senate Minority Leader Dave Senjem said he still thinks it's the best option.
"Can we put enough votes together to codify these unallotments? If we can, we're going to survive this," he said. "If we can't, we're going to have some bleak days ahead of us in terms of what the consequences might be."
But Senjem and Republican House Minority Leader Kurt Zellers stopped short of saying whether they can convince Republicans to vote for Pawlenty's cuts. Zellers said he won't vote for a bill until Democrats produce a budget plan of their own.
As the governor's office and the Legislature continue to negotiate over the budget plan, they're also keeping an eye on the courts. Pawlenty said he's concerned that the Ramsey County District Court judge who initially ruled against him could be forced to determine which programs get funding.
Several city and school officials say it's unlikely that they'll try to get their funds restored, given the state's budget problems. But Common Cause, a good government group, may pursue a lawsuit.
Mike Dean, the group's executive director, sent a letter to Pawlenty asking him to restore a $10 million cut to the Political Contribution Refund.
"The Supreme Court made a clear decision on this that these unallotments are illegal. The governor really should unilaterally reverse his decision. If the governor doesn't do that, we're going to have to pursue legal avenues to address that," Dean said.
Pawlenty's spokesman said the governor will reject the request.
While the Supreme Court decision may have upended the state's budget situation it may also produce something that hasn't happened too often at the State Capitol: compromise.
Officials in both the governor's office and in the Legislature say the court ruling takes Pawlenty's unilateral power to cut spending off of the table until the governor reaches a deal with the Legislature to balance the budget.