Budget talks reach critical stage

ST. PAUL -- Chances for a budget resolution by a Monday midnight deadline appeared dim Thursday, after late-night, high-level talks failed to yield an agreement and no new negotiations were scheduled.

On Wednesday night, the top House Republican said there was a "pretty good chance" for a special session.

Gov. Jesse Ventura made a late-hour return to the Capitol and tried to broker a deal that he, Senate DFLers and House Republicans could accept. The key sticking point is the amount of new spending versus the size of a tax cut.

House Speaker Steve Sviggum entered the hourlong meeting confident that Ventura was on the GOP side on tax cuts and limited spending. He left the meeting long-faced and indicating that he didn't get "positive vibes" from Ventura.

"The governor would like to be on our side but I think his desire to end the session would create some spending moves that I don't think I or our caucus can go to," Sviggum said.

Senate Majority Leader Roger Moe said Ventura ended the meeting disappointed and telling the leaders, "It looks like you're going to have a special session." Sviggum gave a similar account.

His spokesman, John Wodele, refused to confirm the remark. But, for the first time, he too opened the door to a special session.

"The situation might force us to move on a special session. But you have to ask yourself what is the difference between now and August?" Wodele said. "Why can't we settle it now?"

About $300 million, out of a $27 billion budget, is keeping the leaders from an overarching budget pact that needs to be in place before lawmakers can divvy up funds for specific programs and tax cuts.

If the Legislature fails to finish its work by Monday, Ventura would have to call a special session or the state could face a shutdown of government services July 1.

There is a possibility lawmakers could pass emergency bills with bare-bones spending to keep essential services running.

Earlier Wednesday, Senate DFLers made what they termed a fair and final budget offer, one that would free up $856 million for a tax rebate this year and have the state take over all basic education costs.

"This proposal goes more than half way," Moe said.

Total new spending would be $1 billion, and tax relief and reform would amount to $917 million over two years, minus the sales-tax rebate.

But Sviggum rejected the offer because he said it still was heavy on spending and too light on tax cuts.

"You don't start at Pluto and expect to say this meets us halfway," Sviggum said.

The House GOP counteroffer seeks tax cuts that would cost the state treasury $1.2 billion over two years, a package that is $343 million smaller than the original House plan.

Under Moe's proposal, the Senate would drop its plans to spend $433 million from the 2001 budget surplus -- roughly half of the amount available -- and concede to wishes by Ventura and House Republicans for a rebate of the full amount. The DFL-led Senate had set that money aside for road and transit projects and affordable housing.

Besides the rebate, the House and Senate have agreed in concept on how to use $343 million in settlement money from the tobacco lawsuit. That would go into an endowment, with the interest flowing to the University of Minnesota's Medical School.

For 2002-03, the two-year budget period that is the main focus of debate this year, the Senate offer adopted a takeover of all state-mandated education costs, which would reduce local property taxes. The takeover is a key goal of Ventura and an idea the House endorsed.

But Moe wanted the House to cut its tax package for 2002-03 by $300 million. In exchange, the Senate would have sacrificed $310 million of the $620 million in new permanent spending it approved.

Last year, the sides resolved a budget impasse by cutting the pot of money three ways, allowing the Senate, House and Ventura to each use their share how they wished.

Sviggum said that wouldn't fly this year.

"It's not as easy as just splitting the difference," he said.