Negotiations over a fix for Minnesota's current $3 billion deficit also have lawmakers exploring ways to narrow a bigger shortfall awaiting them next year.
Republican Gov. Tim Pawlenty and leading legislators met privately to discuss the spending cuts and other matters Wednesday without striking a deal.
House Speaker Margaret Anderson Kelliher, a Minneapolis Democrat, said they talked about some ideas but no overall plan. GOP Senate Minority Leader Dave Senjem of Rochester said there was a "conceptual plan" to make some of last year's budget cuts permanent and send the savings to schools. Democrats have been lukewarm on that.
Two ideas they talked about Wednesday: a proposal to set up a commission to eliminate inefficient or unnecessary layers of government and another to combine two state departments that deal with the economy and labor market.
Late Wednesday, the Legislature sent Pawlenty a health and welfare package that he has threatened to veto. The bill would cut spending by $114 million. A key provision would use an option in the federal health care overhaul to expand Medicaid health care for poor adults.
Pawlenty spokesman Brian McClung said Republicans are holding out for more spending cuts in the health care budget.
While actions with a lasting impact will reduce a projected deficit for 2012-13 of at least $5.5 billion, officials are still struggling with how to tackle the near-term problem.
For example, Democrats say cities and counties can't endure steeper cuts to state allowances because past reductions have driven up locally imposed property taxes and put considerable pressure on core services. They also want assurances that the state will catch up in past delays of state aid to schools.
For their part, Republicans won't consider new taxes to plug part of the hole.
The 2010 legislative session can run until Monday, but the practical deadline is Sunday because the Minnesota constitution doesn't allow lawmakers to pass a bill on the final day. Pawlenty is due in far northern Minnesota this weekend for the annual fishing opener.
Even if things stretch into the weekend, Pawlenty said he doesn't plan to scuttle his appearance at the official opening event at Lake Kabetogama. He said he can work through issues by phone or fly back earlier from the lake near the Canadian border.
"Most of the issues are pretty well defined at this point," Pawlenty said. "I don't think the fishing opener is going to significantly affect the close of session."
House Minority Leader Kurt Zellers, R-Maple Grove, floated a plan Tuesday to turn $170 million in temporary spending cuts into permanent reductions. He didn't say where the extra cuts would occur.
Pawlenty said making all the temporary cuts under consideration permanent would yield $1 billion in savings.
Kelliher said her members couldn't embrace the plan without knowing the full picture. But she added, "Everyone has to be open to further cuts."
One forward-looking plan would set up a government redesign commission to closely study whether the state's money is being spent effectively. It would come back with recommendations in time for next year's session, when the entire budget is up for authorization.
Rep. Paul Marquart, DFL-Dilworth, said his innovation council proposal would require the new board to guarantee $3 in savings for every $1 it spends developing new approaches. If that doesn't happen, the council would be abolished in 2014.
"The folks back home, they're not so into this debate of whether we have bigger government or smaller government," Marquart said. "They want a government that works, government that produces better results and better outcomes at a better price."
Associated Press writer Martiga Lohn contributed to this report.
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