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More signs point to a lengthy siege

"If this thing goes to the State Fair," said Rep. Larry Howes, "it will probably go to January."

Article by: BAIRD HELGESON, ERIC ROPER and RACHEL E. STASSEN-BERGER , Star Tribune staff writers

Updated: July 10, 2011 - 7:43 AM

At 10 days and counting, Minnesota's state government shutdown has already lasted longer than any in recent U.S. history.

And there's no sign it will end soon.

No new budget talks were scheduled over the weekend, and the two sides seem farther apart than ever on patching the state's budget crisis. In an ominous conclusion to the week, DFL and GOP party leaders held dueling news conferences Friday to clobber one another and assign blame.

"I don't see a quick conclusion," said Rep. Larry Howes, R-Walker. "If this thing goes to the State Fair, it will probably go to January. That's my gut."

The longer the shutdown lasts, the deeper the impact across the state.

Even bars and restaurants could start feeling the pain as state-issued cards that allow them to buy liquor begin to expire.

When its previous two-year budget ended last month, the state was forced to lay off 22,000 workers, close state parks and halt hundreds of road projects. That left Minnesota alone among the 50 states. And it may not be long before things get more dire.

A string of court orders now temporarily funds K-12 schools, the court system, health and human services and local government aid -- about 80 percent of state spending.

And because there is no new budget, the court is paying out funds based on older, higher spending assumptions. That means the state treasury is beginning to burn through what could become hundreds of millions of dollars more than it is taking in.

"If we keep spending more than we are bringing in, we will run out of money," said Jim Schowalter, commissioner of Minnesota Management and Budget. "We don't have a huge cushion."

Even more alarming to many local governments: Many of the court-ordered payments -- which sometimes come in a few large chunks each year -- will likely be reduced as part of a final budget deal, particularly state aid to cities and counties.

Meanwhile, crowded or worn schools facing pressure to complete new buildings or remodel by the fall could see their projects suddenly stop because out-of-work state inspectors can't visit the sites. And new teachers might not get licensed before the start of the school year.

The University of Minnesota and the state's higher education system would have to limp along without state aid. State grants for students could be in peril. Businesses and professionals needing permits could also be out of luck.

The price of gridlock

Across the state, some bars are facing the prospect of losing their lifeblood, alcohol.

The Liberty Restaurant and Bar in St. Michael, for example, might have to shut its doors when its supply of booze dries up at the end of the week.

"I have two options," said Norm Freske, the bar's general manager. "One, I can continue to serve food, obviously with no alcohol. Or we shut down."

The St. Paul Hotel stocked up on beer, wine and liquor before the shutdown. The hotel can't buy more, but general manager David Miller said it can hold out at least a month. "It's annoying more than anything," Miller said.

Restaurants could see profits drop if they have to substitute $2 glasses of soda for $10 glasses of wine.

School officials are also bracing for a host of shutdown-related problems.

Toward the end of summer, for example, officials from the state's 350 school districts must begin the process of setting property tax levies. If a school district wants residents to vote on a referendum for a new building or project, the state education department must sign off. That can't happen until state government reopens.

"From the smell of it, it feels like it could go on quite some time," said Charlie Kyte, outgoing executive director of the Minnesota Association of School Administrators.

Minnesotans counting on rebates and refunds from the state are also out of luck. Roughly 70,000 tax refunds totaling $90 million won't be issued until the two sides strike a deal.

At the Capitol, many legislators and staff members now being paid out of short-term cash reserves could be off the job if the shutdown slides too far into summer.

Where's the urgency?

The intensifying national spotlight on Minnesota's shutdown isn't helping matters.

Fitch Ratings last week lowered the state's credit rating, which means it will now cost the state more to borrow money for new schools, roads and even a possible new stadium for the Minnesota Vikings.

"They've put us on notice that we aren't addressing the crisis," Schowalter said.

Despite mounting fiscal pressures, and the new aggravations and hardships the shutdown is imposing on average Minnesotans, Capitol leaders appear in no rush to strike a deal.

Last week both sides quickly dismissed key parts of a plan put forth by a bipartisan group of political elders that advocated solving the budget problem through a mix of deep spending cuts and new taxes.

"I don't think we've ever had a situation like this in the history of Minnesota," said state Rep. Tom Rukavina, DFL-Virginia.

Tom Hanson was a top official for Gov. Tim Pawlenty during the brief 2005 shutdown. The bickering now has led him to a simple conclusion: "There's no end in sight."

Staff writer Bob von Sternberg contributed to this report. Baird Helgeson • 651-222-1288

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