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Pawlenty: I will cut budget if no deal

ST. PAUL - Gov. Tim Pawlenty said this afternoon he will use his line-item veto power and other budget-cutting authority to set a new state budget if the Democrat-controlled Legislature will not work with him "on a reasonable budget solution."

Pawlenty said the Democrat-controlled Legislature has passed budget bills in recent days that leave a $3 billion shortfall between anticipated revenue and spending.

"If the DFL cannot balance this budget without reaching into Minnesotans' pockets and increasing our already uncompetitive taxes in ways that will kill job growth, I'm prepared to make the tough decisions they've avoided and take action to balance the budget," Pawlenty said in a statement.

The Republican governor could sign budget bills into law, and then remove certain spending provisions immediately and later cut other state spending.

Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said the governor could take that approach "if he thinks he's king."

Pawlenty said he will not call lawmakers back to St. Paul for a special legislative session if a budget agreement is not reached by the Legislature's Monday constitutional deadline.

Democratic lawmakers have insisted that increasing taxes is the only way to achieve a balanced budget without making deep spending cuts to popular budget areas. Pawlenty has opposed state tax increases.

Pawlenty said final decisions have not been made regarding possible impacts to state programs, but areas that could see funding cuts include government-subsidized health care, education and state aid to local governments.

Pawlenty held an afternoon news conference to discuss his decision.

With four days left in the legislative session, the possibility of leaving a funding gap has been little discussed in public. But Wadena Mayor Wayne Wolden did bring up the possibility that Pawlenty may be forced to unilaterally cut budgets, a process known as unallotment, hours before Pawlenty's announcement.

"Allowing the governor to unallot risks the state's fiscal health and future viability and is unacceptable," Wolden wrote to legislators. "The governor and the Legislature must come to a budget agreement in which both parties are accountable for the outcome."

The possibility of not fully funding the state's spending comes because the Democratic-Farmer-Laborite-controlled Legislature and Pawlenty are $3 billion apart in crafting a two-year budget that begins July 1. Bills lawmakers pass would spend $34 billion, but just $31 billion in revenue is expected.

Pawlenty has vetoed a $1 billion tax increase legislators passed. That and delayed payments to school districts represent most of the $3 billion difference.

Since lawmakers came into session on Jan. 6, they have known the state faces a $4.6 billion deficit. That budget hole was eased by federal economic stimulus funds, probably coming only this year.

In most years, the governor and legislative leaders reach an overall budget agreement before lawmakers send budget bills to the governor. This year, legislative leaders and Pawlenty have met just three times in recent weeks, with DFL leaders insisting most budget talks occur in public meetings.

The biggest problem has been a disagreement between Pawlenty and Democrats over tax increases. The House voted for a $1.5 billion tax increase, upping a variety of taxes, while senators focused on raising income taxes $2.2 billion.

As recently as last December, Republican Pawlenty unallotted money that was supposed to be paid to cities. The Coalition of Greater Minnesota Cities, with Wolden as president, has waged a campaign this year to convince Pawlenty and lawmakers to provide cities adequate funding.

Wolden said local government aid, the state's city aid program, "will likely be on the chopping block" if Pawlenty is forced to make cuts.

If that happens, the mayor added, it "will result in massive property tax increases and significant cuts to police, fire protection, libraries, and other essential city services."

Those cuts would come even under a "lights on" bill the House and Senate passed to keep funding flowing to many state agencies even without a general budget agreement.