With less than 24 hours to solve Minnesota's nearly $3 billion budget deficit, Gov. Tim Pawlenty and lawmakers were still working out a plan that could satisfy members of both parties.
Leaders of the DFL-controlled Legislature said Saturday night that the deal could come together around a plan to get permission from the federal government to use Medicaid money to cover a group of low-income Minnesotans without the state giving up its authority to administer the program.
Democrats want the state to expand Medicaid early, before it's fully funded by the federal government in 2014. But Republicans have been resistant to using the $1.4 billion in federal money from the new health care law, worrying that it's a pathway to "socialized medicine."
DFL House Speaker Margaret Anderson Kelliher said it's possible the state could obtain a waiver from the federal government to participate in the early adoption of an expanded Medicaid program while still having the state administer it.
"I think there's a lot of interest in being able to bring those federal dollars into the state," Kelliher said. "So we're open to that as an idea."
If Pawlenty and DFL leaders can agree on the language for such a plan, Kelliher said it "becomes relatively easy to complete the work" on the overall budget.
A conference committee is expected to start work on a budget bill in anticipation of final language being worked on by the governor and legislators.
After returning from his fishing trip on Saturday afternoon, Pawlenty was optimistic a deal would be reached by the deadline of midnight Sunday.
Pawlenty, who spent the morning at the governor's fishing opener on Lake Kabetogama in northern Minnesota, said the health care bill remained the main point of contention between Republicans and Democrats.
"We've been going around and around on the same issues now for several days. We need to find a new way out of the box," he said. "We'd like to get a deal on a bipartisan basis, get this done in a timely, orderly fashion."
It appears Democrats will accept a $1.7 billion delayed payment to school districts and will ratify most of Pawenty's unilateral cuts from last summer as long as the state participates in the early expansion of Medicaid.
But in addition to describing the Medicaid expansion idea as an embrace of "Obamacare," Republicans were taking issue with the $166 million in surcharges on health care providers the plan includes to help pay for the Medicaid expansion.
And some lawmakers said it isn't smart for the state to keep relying on federal money to fix its budget problems.
"In a country where we're $1.5 trillion in deficit, approaching the problems Greece, Spain and Portugal have, I think it's unreasonable to expect that money tree will keep shaking forever," said Rep. Jim Abeler, R-Anoka.
DFL Senate Majority Leader Larry Pogemiller said Republicans had already agreed to accept other federal Medicaid money to fill the budget deficit, although that money won't arrive in time. He said they should be willing to accept federal money from early Medicaid expansion, too.
"Somehow this money is bad money," he said. "I tell you, in the fiscal straits that we're in, any federal money that's available I think we should participate in -- if we can."
DFL House Majority Leader Tony Sertich accused Republicans of trying to bring tea party politics and the federal health care mandate into the state budget discussions.
"We're not talking about the mandate. We're not talking about what's going on in Washington," Sertich said Saturday. "We're talking about a good deal for Minnesotans and getting their tax dollars back to Minnesota."
Lawmakers were facing a budget shortfall of only $536 million until last week, when the state Supreme Court ruled against one of Pawlenty's unallotment cuts. In a split decision, the court ruled the unilateral cuts should only be made after the governor and Legislature agree on a budget plan, which hadn't happened last year when the unallotments were made.
Because of the Supreme Court decision, Pawlenty and lawmakers now consider the deficit to be nearly $3 billion.
While there's no requirement to close the budget shortfall by the end of the session, the state would face severe consequences if Pawlenty and the Legislature don't reach an agreement.
State budget officials have warned of a serious cash flow problem, which means the state could have a hard time paying its bills. There are also questions about whether the problem could prevent Minnesota from issuing bonds later this year.