UPDATE 2-Minnesota government shutdown begins after talks fail

Fri Jul 1, 2011 4:18pm EDT

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(Adds comment from bond rating agency)

By David Bailey

MINNEAPOLIS, July 1 (Reuters) - Minnesota's state government began a broad shutdown on Friday going into the July 4 holiday weekend after the Democratic governor and Republican legislative leaders failed to agree on a budget.

The impasse means around 23,000 of roughly 36,000 state employees will be furloughed, and all but the most critical state functions suspended. Parts of the government had already begun to shut down on Thursday ahead of the midnight deadline.

State parks and campgrounds have closed ahead of what is usually their busiest stretch of the year for the July 4 holiday, and dozens of highway rest stops were shut down for one of the biggest travel days of the year.

As with tensions across state governments from Wisconsin to Ohio, the shutdown had its origins in elections last November, when Minnesota voters elected the state's first Democratic governor in 20 years and Republican majorities in the House and Senate that were not big enough to override his vetoes.

"This is a night of deep sorrow for me because I don't want to see this shutdown occur," Governor Mark Dayton told reporters on Thursday night.

Dayton and the Republican-led Legislature have been far apart in their public positions over a two-year budget plan to close a $5 billion deficit. Only the agricultural budget was approved during the legislative session that ended in May.

Dayton vetoed the other spending proposals. He also vetoed Republican-backed bills to restrict abortions after 20 weeks of pregnancy and require voters to present photo identification at the polls similar to Republican efforts across the country.

Dayton said his last proposed two-year general fund budget was $35.7 billion, but the differences between his approach and the Republican leaders had not changed since January. The gap between the two sides stood at $1.4 billion, he said.

Republican leaders had asked Dayton to call a special session to approve a 10-day funding extension, saying they believed they were close to a budget deal. Dayton dismissed the offer as "a publicity stunt."

Senate Majority Leader Amy Koch said in a statement she was troubled by Dayton's rejection of the temporary funding bill.

"We will continue working on a solution to the state budget deficit when the time is appropriate," she said.

POLICE PATROLS SPARED, ZOO CLOSED

Dayton's first budget proposal included an income tax increase on the wealthiest state residents and an expansion in overall spending. Republican leaders first sought some tax cutbacks in aiming to halt spending increases.

In the latest talks, Republicans offered to raise $1 billion by shifting payments to schools and issuing bonds for tobacco settlement money. Dayton offered to limit his tax hike to those earning over $1 million a year. Neither offer stuck.

"Tax revenues are still, in my view, the fairest way to resolve this, but we have offered an awful lot of different possibilities, and they have, too," Dayton said.

All but the most critical state functions will be suspended while the impasse continues into the new fiscal two-year period that started on Friday, making the 2011 shutdown much broader in scope than one in 2005.

Neither Dayton nor the Republican leaders gave any indication when they would meet next to discuss the budget.

Prison staffing, state police patrols and staffing at nursing and veterans homes were among services found critical and allowed to continue by a Ramsey County judge. Staffing at numerous other departments will be cut to the bare bones.

Other functions deemed critical include the executive and legislative branches of state government and the courts.

Payments to schools and local governments, and programs such as food stamps, Medicaid and temporary assistance to needy families will also continue during the shutdown.

However, numerous other programs not considered critical will be closed, including the state lottery, the gambling control board and the racing commission.

Standard & Poor's Ratings Services said on Friday the shutdown would have no immediate impact on Minnesota's triple-A bond rating, noting that a court order that expires on July 31 continued funding for debt service payments.

"If the shutdown persists and there is an inability to reach consensus on the fiscal 2012 budget and progress toward structural budget balance is threatened, there could be credit implications," S&P said.

The shutdown forced Canterbury Park horse racing track to suspend gaming operations and begin laying off "substantially all" of its 1,100 full- and part-time workers, it said on Friday. The park will lose more than $1 million of gaming and concession revenue each week during the shutdown, it said.

Driver's licenses, and fishing and hunting licenses, will not be issued, but residents may be able to renew car license plate tabs at non-state operations.

The Minnesota Zoo would also close to the public with spending permitted only to feed and care for the animals.

Among popular Minnesota spots, vacationers may stay at the privately run villa and lodge operations at Giants Ridge golf resort, but its lauded golf courses will be closed. (Additional reporting by Karen Pierog in Chicago; Editing by Greg McCune, Jerry Norton, Cynthia Johnston and Jan Paschal)

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Comments (4)
Bratachari wrote:
The nation will soon follow Minnesota, thanks to our self-serving politician crooks.

Jul 01, 2011 5:05pm EDT  --  Report as abuse
acey49 wrote:
Way to go Minnesota! That’s the way to help your sagging economy. Just shut it all down.

Jul 01, 2011 5:35pm EDT  --  Report as abuse
0ldRNCowboy wrote:
Perhaps closing down non-critical departments and programs will cast a light on which departments and programs can be successfully shuttered forever. It will be interesting to see how this plays out.

Jul 01, 2011 6:36pm EDT  --  Report as abuse
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