Gov. Tim Pawlenty and Legislative leaders don't have a budget deal yet, but they could be setting up the framework for a solution.
Pawlenty insists he won't support a tax increase so Democrats are saying he needs to give up something in return.
Pawlenty and lawmakers say they're looking at several options to plug the budget gap but three key issues keep coming up. First, Pawlenty and Republicans are pushing for the Legislature to ratify the governor's unilateral budget cuts from last July.
Second, as part of those cuts, the governor delayed a $1.7 billion payment to schools. Democrats say they won't support the measure unless there's a way to pay the schools back.
The third issue is the transfer of thousands of poor Minnesotans from state health programs to Medicaid under the new federal health care law.
SCHOOL PAYMENT SHIFT
DFL House Speaker Margaret Anderson Kelliher, who's running for governor, said Democrats in the House and Senate aren't willing to accept Pawlenty's past budget cuts unless he promises to pay the school shift back and accepts early adoption of the federal health care law.
“The outstanding pieces are still around kids in schools and health care.”Rep. Margaret Anderson Kelliher
"The outstanding pieces are still around kids in schools and health care for Minnesotans," Kelliher said. "That is where we started this session and that looks like we're going to end this session in terms of where the debate and questions are."
Kelliher and the other legislative leaders met behind closed doors with Pawlenty once on Wednesday to try to resolve the nearly $3 billion budget deficit. The deficit grew last week when a decision by the state supreme court called into question Pawlenty's authority to make the cuts on his own.
The payment delay to schools is the single biggest piece of the budget puzzle. Pawlenty said he's working with Democrats on the issue, but disputed the notion that schools won't eventually get their money.
"The notion that the schools don't get paid back, even if the shift stayed forever ... they get all of the money that they're otherwise entitled to," Pawlenty said. "They just get it a little later than otherwise."
Pawlenty and other Republicans say they're trying to see whether they can generate savings from permanent budget cuts to pay back the funding shift.
WAITING ON THE FEDS
Another issue is how they find another $400 million to completely close the budget gap. Republican Sen. Dave Senjem said they're looking at several options including spending cuts. Another possibility may be an unspecified accounting shift that would be paid back if $400 million in federal money arrives this year.
President Obama and Congress have both booked the funds in the budget but haven't passed the bill into law yet. Senjem called it a contingency plan.
"It may not be the right solution, but these are ideas as we sit around the table contemplating what might or what could work," Senjem said. "There will be a point in time where we can put these ideas on paper, where we can look at them [and] understand them at the same time. I would believe that we're getting pretty close to that step."
On the federal health care issue, lawmakers say it would expand coverage to as many as 20,000 more Minnesotans than are currently covered under state programs.
The Democratic-controlled Legislature defied another veto threat from Pawlenty late Wednesday and sent him a health and welfare package he opposes. Democrats hope to make a key provision -- an expansion of Medicaid health care for poor adults -- part of the budget deal.
Rep. Tom Huntley, DFL-Duluth, says the bill would require the state to spend an additional $188 million on health care.
"But that $188 million is offset by the federal government sending $1.4 billion to the state of Minnesota," Huntley said. "So the net result is going to be a very large increase in the amount of money going to hospitals, and to physicians and clinics."
The bill would replace the revamped General Assistance Medical Care program that was scheduled to start next month. Democrats don't appear to have enough votes to override a potential veto of the bill.
The governor's spokesman did not rule out accepting the plan as a part of a final budget deal.
Pawlenty and lawmakers may have to focus closely on budget negotiations on Thursday since Pawlenty will be attending the Governor's Fishing Opener in northern Minnesota on Friday and Saturday. Pawlenty said he won't cancel the trip.