Minnesota leaders closed in Sunday night on an agreement to fix a $3 billion budget deficit as lawmakers worked against a midnight deadline to finish the legislative session.
Senate Majority Leader Larry Pogemiller emerged from a negotiation session just before 10 p.m. with an upbeat report.
"We're very close. This is very doable. Our biggest issue now is just technically getting something drafted," Pogemiller said, reflecting the quick turnaround that would be needed to approve an agreement before the deadline. He stressed that no formal settlement with Republican legislators and GOP Gov. Tim Pawlenty was at hand.
Legislators and Pawlenty traded offers all day as they worked to resolve the budget gap and figure out if they could tap into a federal pot of health care money.
If the work wasn't done in time, a special session might be necessary.
Earlier in the day, Pawlenty asked Democrats to give up a deeply desired goal of expanding Medicaid health coverage for poor adults using federal dollars. In exchange, he promised to stop seeking $114 million worth of cuts to health and welfare programs, assuming some anticipated federal aid comes through.
Democrats who control the Legislature came back with a counteroffer that would preserve the option of the Medicaid expansion when Pawlenty's successor is sworn in next January.
Their offer would involve Pawlenty signing a budget bill passed shortly after sunrise Sunday. The Legislature would send him a second bill making adjustments to a state-only health program for vulnerable adults.
Pawlenty said he hasn't yet vetoed - or even received - the budget bill. It would ratify most of the spending cuts he made last year and rely heavily on delayed payments to schools, but it also contains the controversial health care initiative for the poor relying on federal money.
The pressure on the players and the stakes for the state were high.
Without a solution to the deficit by the midnight deadline set in the state constitution, Pawlenty and lawmakers were looking at undesirable options:
-They could resume work in a special session, a risky proposition for legislators eager to hit the campaign trail and particularly for those seeking higher office. Two gubernatorial candidates, Kelliher and Republican Rep. Tom Emmer, would face time and fundraising constraints during a special session.
-Pawlenty, a potential 2012 Republican presidential candidate, could be forced to deal with an unprecedented cash crunch with limited tools at his disposal. Some steps could be withholding tax refunds, delaying state grant awards, putting off construction projects and possibly canceling contracts with vendors. But Minnesota's top-notch credit rating would likely suffer, making future borrowing for construction projects more costly.
Republican have been complaining for days about the health care expansion. Democrats hoped to enroll thousands more low-income patients in a federally sponsored Medicaid program that required the state to put up $188 million. In return, an estimated $1.4 billion in federal money could be sent Minnesota's way over the next few years.
A budget settlement was deemed imperative because the state's available cash is set to dip below $200 million in the coming weeks and could drop into the red this summer.
Lawmakers pledged to stay at the Capitol until the final moments in hopes of a deal. Both houses worked all night Saturday into Sunday morning and reconvened on Sunday afternoon.
Major elements of the budget bill are likely to be part of a final deal, if there is one.
It would push off almost one-third of schools' expected aid checks into the next budget year, forcing short-term borrowing in some districts and use of reserves in others. The accounting mechanism would save the state $1.9 billion in the current budget - $200 million more than was previously counted on.
By putting the school shift in law, there is some assurance that districts will get paid back when the state's economic conditions improve. An aid deferral that Pawlenty attempted on his own last year offered no such promise. The Minnesota Supreme Court found earlier this month that the governor exceeded his authority in making the cuts without lawmakers' approval.
(Copyright 2010 by The Associated Press. All Rights Reserved.)