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The first test of whether Gov. Mark Dayton and Republican legislative leaders can work together comes Tuesday when the sides must settle on a mediator, or tell the Minnesota Supreme Court they can't. 

The state Supreme Court issued an order Friday that stopped short of resolving the case the Legislature filed against Dayton for using his line-item veto power to 

, and instead sent the two sides to mediation to try to agree on a way out. 

MN justices throw Dayton, Legislature funding fight to mediator

It's important to note the court said mediation, not arbitration. A successful mediation depends on sides in a dispute using a facilitator and coming to an agreement. Arbitration ends in a binding decision by a neutral party.

"In mediation, all of the decision-making rests with the individuals who are involved in that mediation, not the mediator," said professor Sharon Press, who directs the Dispute Resolution Institute at the Mitchell Hamline School of Law. 

Press said the necessary buy-in also leaves room for failed talks, and that the outcome of a mediation may be that there is no agreement.

But here, Press said she's optimistic about chances for a breakthrough.

"I think the Legislature and the governor have strong incentive to figure out what do they want that relationship to be like going forward so that they can get back to the work of the state, which both sides absolutely want to do."

Dayton's unprecedented use of the line-item veto to zero out money for the House and Senate came because he wanted to revisit tax breaks on cigars and cigarettes, a freeze in some business property taxes, and broader exclusions for estate taxes. He criticized the tax items as either unwise or unaffordable in the long run.

Lawmakers contend Dayton violated the constitutional separation of powers clause, and they won in a lower court. Then came Friday's high court surprise.

"What I think the court has done here is basically give a dynamite charge to the two branches," said Doug Kelley, the lawyer hired by Republican legislative leaders, meaning that the court clearly wants the legislative and executive branches to work out their disagreement so justices don't have to. 

Justices want Kelley and his counterpart to agree on a mediator. If they can't, the court will name one. 

"My clients will enter into the mediation with open minds and in good faith and will listen to what the governor has to say," Kelley said.

Dayton said his side is also ready to work. A progress report is due by month's end.

That's also when a temporary funding agreement for the House and Senate expires. Dayton's budget chief Myron Frans said it puts the two sides under time pressure. 

"The court has made it clear that they don't believe they have the authority to issue emergency or core funding at this time," he said. "So, we're not going to request or seek any additional funding in the interim."

Dayton's list of demands has been out there for months. It's less clear what tradeoffs the Legislature would bring to the table.

Top Republican lawmakers aren't saying much beyond a prepared statement pledging good faith.

Sen. Ron Latz, DFL-St. Louis Park, said Republicans haven't shown any willingness to reopen the budget until now.

"I say the forecast is still cloudy," he said.

Latz cited comments made by House Speaker Kurt Daudt that he won't renegotiate the tax bill because it would set a bad precedent.

"My guess is he's just going to stonewall until they get to the point where the Supreme Court has to make another decision on a Legislature that is more imminently running out of money to operate," Latz said.

Rep. Matt Dean, R-Dellwood, is among the rank-and-file legislators who are either pessimistic or just outraged by it all.

"Unfortunately, the courts are just perpetuating this bad behavior by legitimizing it and saying now we have to go to counseling or something," Dean said.

Both sides will expect concessions in a deal, Dean said, which may end up back before the Legislature in a special session.

"If you had 201 legislators that got a do-over they would want to do it 201 different ways, which is why you can't do stuff like this," Dean said.

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The Minnesota Supreme Court's unprecedented order that the Legislature and Gov. Mark Dayton go to mediation is no guarantee they'll be able to resolve a budget dispute prompted by Dayton's line-item vetoes.

Mediation no guarantee Dayton, lawmakers will agree

Gov. Dayton, right, greets Doug Kelley, representing the legislature.

Mediation no guarantee Dayton, lawmakers will agree

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