Politics

ST. PAUL (AP) ― Gov. Tim Pawlenty proposed $1 billion in fresh spending cuts Saturday, turning again to local governments, health and welfare programs, colleges and universities to close a budget gap.

Democrats who run the Legislature spent most of the day hashing out the details in a public hearing. Late Saturday, they offered an alternative that includes $1 billion in unspecified tax or fee revenue, but Pawlenty spokesman Brian McClung said the governor isn't interested after vetoing a similar tax increase a week ago.

"It seems like you just took one big step away from us," said Tom Hanson, Pawlenty's top finance official. Early Sunday, Hanson asked DFLers to set aside the tax increase and focus on cutting where they could agree.

With a deadline of midnight Monday, lawmakers' options are limited after the Republican governor vowed to balance the budget without their consent using line-item vetoes and his authority to delay payments and cancel spending in a deficit. Minnesota's budget is running $4.6 billion short over the next two years.

House Speaker Margaret Anderson Kelliher said DFLers are flexible on a mix of taxes or fees, but the money has to come in on an ongoing basis. That has been the crux of their disagreement -- Pawlenty sought to borrow $1 billion while Democrats want to raise the same amount in taxes.

Their proposal also seeks to reinstate General Assistance Medical Care, a state health care program for low-income childless adults that Pawlenty vetoed starting in July 2010.

Pawlenty proposed slicing $450 million from cities and counties, $250 million from health and social service programs and $190 million from higher education -- areas he targeted for a round of cuts in December and in this year's budget plan. Another $100 million in savings would come from reducing or eliminating tax credits for renters, political contributors and others.

University of Minnesota President Robert Bruininks said the loss in state aid would result in close to 15 percent tuition increases and layoffs of as many as 750 people, on top of jobs already being eliminated.

"The cuts would be really savage and severe," he told a legislative commission. "I think they would cost the state money, cost the state opportunity and cost the state additional jobs in the private economy, so I think it's a really bad bargain for the state to make."

Cities, hospitals and others were also bracing for worst-case scenarios.

Mayors from around the state urged lawmakers and the governor to settle on a budget fix that would spare cities and counties from the deepest reductions. Such cuts would push up property taxes sharply and slice into police, fire and other city services, they said at a Capitol news conference.

Floodwood Mayor Jeff Kletscher said his city operates close to the wire financially, with little to trim other than two police officers, a maintenance worker, an administrator and four occasional part-timers.

"I can't afford to lose them, and that's what cuts in local government aid mean to my small city and many other small cities," he said. "My toolbox is empty."

Pawlenty signed spending bills for K-12 schools, agriculture and veterans programs, state agencies and higher education. He pruned the higher education and agriculture packages, nixing $2 million for a free tuition program for inner-city students, $500,000 for tuition scholarships for early childhood educators and $130,000 for farm programs.

He also shaved $85 million from a $300 million construction projects package. Cuts included a natural history museum at the University of Minnesota, building expansions at Minnesota State Colleges and Universities campuses in Duluth and Brooklyn Park and on the Iron Range and civic center expansions in Mankato and St. Cloud.

The K-12 education bill included a message of disappointment.

"I signed this bill with reluctance. The state's K-12 education system is in need of significant reform. This bill, unfortunately, does not meaningfully address that need," Pawlenty wrote.

Pawlenty made his first offer during an hour-long meeting with top legislators Saturday. He agreed to a $1.8 billion delay in payments to schools to help erase the deficit. But Senate Majority Leader Larry Pogemiller said Senate Democrats wouldn't go for the delay, a proposal that came from House DFLers, without "budget stability."

Democrats have been holding out for new revenue. But Pawlenty vetoed a $1 billion package of tax increases on the wealthy, credit card companies and alcohol drinkers.

An override attempt is a long shot in the House, though leaders haven't ruled it out.

Pawlenty and lawmakers are working against the deadline for a negotiated settlement, if one can be reached. House Minority Leader Marty Seifert said making a deal would be smoother than letting Pawlenty trim spending on his own.

"It's a little bumpier ride, I think, and a little bit more turbulence than if we did it legislatively," said Seifert, R-Marshall.

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Lawmakers managed to narrowly avoid a special session drafting the budget last year.

(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)