The vote happened Monday morning a few hours after Gov. Tim Pawlenty called a brief special session after legislators failed to hit a midnight deadline for finishing their work.
ABOUT THE COMPROMISE
With no time to spare, Capitol Democrats and Republicans reached a last-minute deal Sunday night to close a $3 billion hole in the state budget.
But with no time left to actually process a bill, Gov. Tim
Pawlenty called the Legislature into a post-midnight special session
to vote on it. He said he expected the Legislature to act on the
agreement and adjourn for the year "by breakfast."
About the deal
While the 2010 session ends today, midnight was the deadline for passing bills.
"We were able to resolve a $3 billion budget deficit without raising taxes," Pawlenty said. "I feel very good about the negotiated settlement."
Over the weekend, a politically drenched debate about health care emerged as the major sticking point in budget negotiations, with Democrats seeking to expand health care coverage and Republicans looking for ways to cut costs.
But under the deal, a decision about whether to opt in to an expanded federal program to give more poor Minnesotans health care would wait for another time, likely beyond the November gubernatorial election.
Pawlenty said the "opt-in arrangement" would allow him or the next governor to decide whether to put the state in that program. The agreement would require him to consider it, but the governor said he's "no fan" of the federal option.
After initial overtures, several hours passed without a deal Sunday. House and Senate members made retirement speeches as lobbysists scurried through the Capitol trying to learn more about the details of a deal.
The budget contains no additional cuts to public safety, military and veteran's affairs and corrections than were already handed down. It preserves — for now — a General Assistance Medical Care program that pays hospitals a lump sum for treating poor Minnesotans making less that $8,000 a year.
But the deal includes numerous cuts to health care and other areas and cost shifts, including delayed aid payments to schools. More than $400 million in federal money expected to be passed by Congress within weeks would be used to protect the state's cash flow account, which is dangerously low.
Earlier in the day when Speaker Margaret Anderson Kelliher, DFL-Minneapolis, gaveled the House to order at 3:05 p.m., the representatives gave her a standing ovation that choked her up momentarily. The DFL-endorsed candidate for governor, Kelliher is not seeking re-election.
"Now we really need a prayer," Kelliher remarked when Chief Clerk Al Mathiowetz summoned the chaplain to the House rostrum for the opening prayer.
With the midnight Sunday deadline looming, lawmakers had worked throughout Saturday and beyond sunrise Sunday, with talks between the two sides breaking down at 3 a.m. At 6:17 a.m., Senate Democrats forced through their own bill to balance the budget without a general tax increase.
But it did have one controversial provision, to which Republicans — especially those in the House, including gubernatorial candidate Tom Emmer — objected to: language to offer Medicaid coverage to childless adults making less than $8,000 a year.
That so-called early option — those people would be enrolled in government health care programs beginning in 2014 anyway — is allowed under the federal health care reforms. But Republicans labeled it "Obamacare," and said it was a nonstarter.
That position infuriated Democrats, who said the Medicaid option, known in Minnesota as Medical Assistance, is not among the controversial parts of the federal bill. They pointed out that Minnesota would receive $1.4 billion in additional federal money over the next three years, by spending $188 million more.
But the Democrats' budget bill also included a surcharge on hospitals, which Pawlenty opposes despite hospital support. The hospitals argued that the early option was better for their bottom lines than a reformed health care program for the poor that Pawlenty negotiated with Democrats earlier in the session.
Pawlenty said the surcharge was removed under the deal.
Among Democratic ranks, there was widespread belief that a deal was in hand Friday before the governor announced that evening he would not support an expansion of Medical Assistance. When asked, Emmer said he didn't have a role in Republican opposition, though he was believed to be influential. He said expanding Medical Assistance "is not a good idea."
Sen. Linda Berglin, DFL-Minneapolis, the architect of the Senate plan to opt in early, said early Saturday that Democrats couldn't force the governor to sign a bill, even though it cut spending across a wide swath of the health care industry, including on doctors and hospitals.
"We're doing everything we can to make the governor like it better, but we can't," Berglin said.
Earlier this session, Pawlenty and legislators hammered out a reformed General Assistance Medical Care that all but a few large metro hospitals balked at, potenitally leaving GAMC patients in rural Minnesota without health care. The agreement provides additional money for rural hospitals, Pawlenty said.
The program would be continued under the deal, which also calls on Pawlenty to sign the Democratic budget bill and provides a window that expires January 15, 2011, for the governor — be it Pawlenty or his successor — to expand Medical Assistance.
Pawlenty is not expected to do that. That sets up health care as a major issue during the 2010 governor's race, since Republicans and Democrats are likely to use the campaign trail to debate how far Minnesota should go in adopting federal health care programs.
Two House figures that have been key to later-session budget negotiations are candidates: DFLer Kelliher and Republican Emmer. DFLers Matt Entenza and Mark Dayton are challenging Kelliher in the Democratic primary. Tom Horner is the Independence Party endorsed candidate.
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.
"I think the state would have been in a very precarious position" if they failed to reach agreement, Pawlenty said. "We would have been in uncharted territory.
"There would have been lots of unclear issues around executive authority, the ability to shut off appropriations, further court orders, further litigation. So there was a lot of uncertainty in that path."
The settlement was complicated by a Minnesota Supreme Court ruling that said Pawlenty overstepped his authority when he made unilateral budget cuts at the end of the 2009 session.
With the governor opposing any tax increases, Democrats were forced to adopt many of those cuts anyway in order to balance the budget.
Pawlenty and lawmakers agreed to solve two-thirds of the $3 billion problem on the backs of school districts.
Their plan delays $2 billion in state aid payments to school districts for three months. The measure requires the state to pay back the schools in the two-year budget cycle that starts in mid-2011, but it doesn't provide any money to pay for it. Legislative leaders warned that it may take years to repay them because of projected future budget shortfalls.
The payment delays will force most school districts to borrow money to keep operating, and the interest costs on the loans will require cuts in programs, staff, extracurricular activities and increased fees, said Scott Croonquist, lobbyist for the Association of Minnesota School Districts.
The delayed payments come after several years of no increases in state school aid, Croonquist said. "District fund balances are already down, and we have been making cuts and laying off staff."
The 33 predominantly suburban school districts he represents laid off almost 900 staff this school year, he said, and they anticipate another 1,800 layoffs next year.
The agreement ratifies the $180 million in state aid cuts to cities that Pawlenty has imposed over the past year.
State grants to cities has dropped 30 percent during that period. "From our point of view, that's a disproportionate share of the state budget," said League of Minnesota Cities lobbyist Gary Carlson.
"Cities are already laying off people, cutting services and taking extraordinary measures just to make ends meet." Carlson said.
The University of Minnesota and the Minnesota State College and University system each will lose $50 million in state funding.
Corporate and sales tax refunds will be delayed by about six months.
Most state agency budgets will be cut 1.5 percent.
The Legislature failed to pass a bare-bones education bill Sunday. The House approved it on a 77-53 vote, but the Senate decided to send the bill back for negotiations, ultimately dooming it.
The bill would have allowed school districts to extend taxes without voter approval and included an overhaul in charter-school regulations.
But it includes none of the proposed changes — such as alternative teacher licensing and more stringent teacher evaluations linked to student performance — that could make Minnesota's second application for Race to the Top federal funds stronger. Pawlenty has said the state wouldn't apply unless legislators make those changes to state law. Minnesota could receive up to $175 million if the state qualified.
That was a huge stumbling block for some lawmakers, who argued it's time to start making changes to Minnesota's education system. The state has one of the largest achievement gaps in the nation.
"This is a year that we had an opportunity to do great reform," said Sen. Claire Robling, R-Jordan. "It's just so disappointing."
But others argued the bill still had some important provisions for schools — and a small bill was better than no bill.
Supporters of allowing districts to extend expiring levies until the economy improves argued it's essential to help schools get through these difficult financial times. There is also a provision that would allow for voters to overturn the decision of the school board.
"I think it's a good bill for the times," said Rep. Mindy Greiling, DFL-Roseville, and chairwoman of the House K-12 Education Finance Division.
Megan Boldt contributed to this report.