Minnesota grinds budget details to end shutdown

(Reuters) - Minnesota political leaders on Monday were grinding toward reaching agreements on budget details needed to end a now 18-day-old state government shutdown that has left thousands of state workers furloughed.

Minnesota's Democratic Governor Mark Dayton has yet to call for the special session needed to approve spending bills and end the shutdown, but ordered the Capitol and state office buildings in St. Paul reopened on Tuesday morning.

The buildings have been closed to the public since the shutdown began on July 1 and Dayton said the reopening would "allow public access and transparency as the legislature prepares to reconvene to pass a budget."

Final versions of four proposed spending bills were posted publicly on state House and Senate websites by Monday evening. Dayton has said he would call a special session once all of the nine spending bills were prepared and reviewed.

Dayton, House Speaker Kurt Zellers and Senate Majority Leader Amy Koch on Thursday said they had reached the framework of a budget agreement to end the shutdown and hoped to complete the detailed bills for a special session early this week.

The governor and legislative leaders, state commissioners, committee leaders and staff members have been working since Friday to craft the details of spending bills needed for the two-year general fund budget of about $35.4 billion.

Dayton and the Republican leaders have all said they were unhappy with their proposed budget plan but believed it was a compromise they must support to eliminate a $5 billion budget deficit and end the government shutdown.

The debate in Minnesota has mirrored those in the nation's capital over the debt ceiling.

The budget framework does not include any of the income tax increases Dayton sought and it has higher spending levels than Republicans wanted. Republican leaders also agreed to give up on some social policy changes they had sought.

'SIGNIFICANT DAMAGE'

The deal proposes to close a $1.4 billion difference between the Dayton and Republican spending plans by delaying $700 million in school payments and issuing $700 million in state debt with revenue from a tobacco industry settlement.

Economists have said the proposed budget fixes would not resolve Minnesota's longer term fiscal problems, but only push them forward two years into the next fiscal biennium in 2014 and 2015 and make them slightly worse.

The resolution could not come sooner for hundreds of Minnesota bars, liquor stores and restaurants running low on alcohol because their state buyer's permits have expired.

The shutdown has forced closure of state parks, historic sites, rest stops, two horse-racing tracks and the suspension of about 100 road construction projects -- but the threat of beer taps running dry has generated broad attention.

A state judge ruled on Monday that the renewal of those permits was not a critical state function and clerks needed to do so would not be returned to work until the shutdown ends.

About 300 liquor retailers across the state have been unable to buy more inventory because buyer's identification cards have expired. Another 400 or so businesses could face dwindling inventory if the shutdown continues past August 1.

The buyer's cards must be renewed annually for a $20 fee and most businesses renewed them before the shutdown began.

While the bars and restaurants cannot buy any alcohol stronger than 3.2 percent without the cards, the impact is strongest on beer because it is perishable and most businesses keep only about a one or two week supply in inventory.

The Minnesota Licensed Beverage Association had asked state court Judge Kathleen Gearin to require the state to process the permits, arguing in part that the businesses would suffer permanent and significant damage.

Former Minnesota Supreme Court Chief Justice Kathleen Blatz, appointed by Gearin to hear appeals for relief from the shutdown, recommended denial of the association's request and Gearin adopted that position.

Blatz wrote that the businesses could be harmed if not crippled, but the "solution to this problem does not rest with the judicial branch but rather those branches charged with enacting the state's budget."