Minnesota Republican Party Chairman Tony Sutton abruptly resigned his post on Friday, one day before a leadership meeting in which GOP activists planned to scrutinize the party's budget and its mounting debt.

"I think it's what's best for me, and I think it will be good for the party," Sutton said in an interview late Friday afternoon.

After winning control of the Minnesota House and Senate in 2010 and coming within a whisker of the governorship, the state party has faced mounting financial problems, with donations drying up and at least $500,000 in unpaid bills.

Now the party must assess how best to regroup, defend its legislative majorities and position itself in what will be a tumultuous election year. Insiders say that the party may be severely hampered and that outside interest groups may have to pick up the slack.

To pare its cash outlays, the party recently shed more than a third of its staff and laid off executive director Ryan Griffin, according to party officials.

Sutton, 44, said he thought the business community was going to contribute more in 2010.

"It was disappointing because the governor's race was so important," he said. Without big money contributions and with small-dollar donations withering, Sutton acknowledged that he spent money "betting on the come."

But the come never came. Federal campaign reports released in early November show the party continues to spend money faster than it's coming in.

The state Republican executive committee convened in late October to privately review party finances and weak fundraising numbers.

Some party officials were surprised by both the size of the debt and the ongoing spending.

When Sutton took control of the state GOP in 2009, the party had more than $1 million in the bank. By January 2011, it owed creditors $750,000, and it remains more than $500,000 in debt.

Under pressure, Sutton -- who was unanimously re-elected less than a year ago -- allowed party activists to take a more active role in seeking spending cuts. They also clipped Sutton's authority.

Couple of regrets

Sutton said Friday that he regretted not moving quickly enough to replace the small-dollar donors, as well as getting the party into the expensive gubernatorial recount.

Last year Republican Tom Emmer lost the governor's race to DFLer Mark Dayton by about 9,000 votes. The margin was close enough to trigger a recount, but few experts believed Emmer could overcome it.

"With the advantage of hindsight, I should have said no and endured the political heat. However, I thought at the time it was the right thing to do," Sutton wrote to party activists Friday. The recount put a special account created by Republicans significantly into debt. That shortfall is on top of the party's operating debt.

In an interview, Sutton said the party will be just fine without him.

"It forces people to get off their duffs and to pitch in. Sometimes you need a little shot in the arm like this to get the party going," he said.

Sutton said he made his decision over the Thanksgiving weekend and does not know what he will do next.

Looking to 2012

Some party officials said they fear the GOP will not be prepared for the 2012 fight.

"The issue is we are still in poor, very, very poor, financial shape," Pat Anderson, Republican National Committee member, said before Sutton's resignation. "We have negative cash on hand. ... It's really bad."

Given the issues at the party, Anderson said, "I don't know how big of a player the party can be" in the 2012 elections or if the legislative caucuses and outside groups would fill the void.

Michael Brodkorb, the former deputy party chairman under Sutton, said the resignation is a "tremendous loss" to the party.

"Tony Sutton woke up every day and spent every waking moment of his day trying to better this party," Brodkorb said. Without Sutton in charge, Brodkrob said outside groups and the legislative caucuses might have to take on a larger role if the party cannot.

Central committee meeting

On Saturday, the party's central committee is scheduled to meet to approve the party's 2012 budget and elect a new deputy chair of the party. The party will also have to name Sutton's replacement.

"I don't think anybody saw this coming," said state Rep. Kurt Daudt, R-Crown, a party activist and an assistant majority leader in the House.

Republican insiders said they did not know of anyone who planned to immediately step up to take Sutton's post.

Sutton, who kept his plans quiet until Friday, said people will be "jockeying" to be party chair.

Sutton, who has been involved in Republican politics since high school and at every central committee meeting since 1987, said he won't be there to see the political theater.

The new deputy chair will likely take that role for 30 days while a new chair is found.

Republican National Committee member Jeff Johnson said it is not an opportune time to be searching for a chairman, with less than a year before a big election.