Minnesota shutdown seen to be lengthy, costly saga

MINNEAPOLIS Fri Jul 8, 2011 5:05pm EDT

Erik Meade protests in front of the closed Minnesota State Capital in Saint Paul, Minnesota, Friday July 1, 2011. REUTERS/Andy King

Erik Meade protests in front of the closed Minnesota State Capital in Saint Paul, Minnesota, Friday July 1, 2011.

Credit: Reuters/Andy King

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MINNEAPOLIS (Reuters) - Minnesota entered its second week of a government shutdown on Friday with no new top level budget talks scheduled among political leaders, and some experts said the impasse could last a month or more.

With a Democratic governor and Republican-controlled legislature, party polarization in Minnesota has virtually made compromise a four-letter word. In the meantime, the shutdown -- which has furloughed thousands of state workers and closed down revenue-generating operations like the lottery -- is seen taking a toll on the state's economy.

The impasse between Governor Mark Dayton and the Republican legislative leaders echoes similar differences in Washington and in other states and has dragged Minnesota into the national spotlight.

Still, Minnesota is the only state where the government has shut down. Large parts of the government were shuttered when the new fiscal year started July 1 without a budget deal to address a $5 billion deficit.

"I think it is going to go about a month because I don't see at this point any political forces that are driving them to the bargaining table to compromise," said David Schultz, a Hamline University professor and expert on Minnesota politics.

After meeting daily up to the end of the last fiscal year, the governor, House Speaker Kurt Zellers and Senate Majority Leader Amy Koch did not meet over the Fourth of July holiday weekend and had two short meetings this week.

The government shutdown is much broader in scope than a nine-day partial closing Minnesota endured in 2005 when Tim Pawlenty, now a Republican presidential candidate, was governor.

The impasse may have been all but ensured by the election last November of a Democratic governor and majorities in control of the state Senate and House majorities who believe they were mandated to close the budget gap with new spending or cuts alone respectively.

But Minnesota often has had divided executive and legislative branches that forged compromises, and the roots of the impasse run much deeper and defy easy solutions.

INTRACTABLE POSITIONS

"What we are seeing this year is not just sort of a small bump in the road, it is part of something broader that is going on in Minnesota," Schultz said. "It is about the fact that for either side, compromise becomes tantamount to capitulation."

Lawrence Jacobs, a University of Minnesota professor and political scientist, said conservative Democrats and moderate Republicans have been worn away by party polarization that has accelerated the last few years. Past Republican leaders would have negotiated a compromise that raised revenue a little and cut spending more, but not now, he said.

"If Amy Koch brings in a compromise that raises revenue, she is going to have a revolt in her caucus," Jacobs said.

The differences in positions remain stark. Dayton this week proposed increases in income taxes or cigarette taxes along with healthcare surcharges and delayed school aid payments to close a roughly $1.4 billion gap between his budget proposal and the $34.2 billion plan Republicans have proposed.

Republican leaders have said that a tax increase of any kind was off the table. Both sides also have acknowledged they have education and health policy differences to negotiate.

The impasse drove former Democratic Vice President Walter Mondale and former Republican Governor Arne Carlson to form a bipartisan panel to map a third budget plan to try to end the shutdown.

The panel proposed a budget much closer to the governor's spending plan than to Republicans' that included a broad income tax increase and increased cigarette and alcohol taxes. It gained no support from Republicans.

Measuring the economic drag from the shutdown can be hard, but Schultz estimated the furlough of 23,000 of some 36,000 state workers and the impact on private vendors would raise the state's unemployment rate by a full percentage point.

All but critical state services such as prison staffing, police patrols and spending on nursing and veterans homes have been cut back during the shutdown.

Dozens of road construction projects have been halted, state parks closed at night, and the state has suspended its lottery, fee collections for high occupancy vehicle lanes and the tax auditing functions among other services.

"It is going to be a drag on the economy and getting worse as it goes on," Schultz said. "As the economy still is not great, it certainly doesn't help the state of Minnesota."

(Reporting by David Bailey; Editing by Leslie Adler)

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