Queensland Premier Annastacia Palaszczuk is considering Katter's Australian Party's response to her demand that its state members denounce Senator Fraser Anning's divisive maiden speech.
KAP replied on Friday to a letter from the premier calling on it to denounce the controversial federal MP's speech by 5pm.
Senator Anning sparked fury among parliamentarians and the public when he used the Nazi-associated term "final solution" during his first speech last week.
In calling for a ban on Muslim immigration and a plebiscite he said "the final solution to the immigration problem of course is a popular vote."
Spokesmen for both the premier and KAP declined to comment about the contents of the letter sent by state leader Robbie Katter.
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Earlier in the day, Mr Katter said he would not denounce Senator Anning's speech after the premier suggested a review of its staffing hinged on the party condemning the senator.
"I think they're skating on very thin ice legally, appropriating money or misappropriating money in the parliament for the purposes of whether or whether they do not agree with someone's political view," Mr Katter told reporters.
He said he and fellow Katter party MPs Shane Knuth and Nick Dametto shared three parliamentary staff and he also had four staff spread across his two electorate offices.
He said cutting back on staff would slow the party's daily operations and efforts to deliver on its parliamentary agenda.
Mr Katter also accused the Palaszczuk government of colluding with the Liberal National Party to disadvantage the KAP.
"They've already increased our electorate sizes and they've made it more difficult for us and now they're talking about reducing more resources," he said.
"Everywhere we walk here they just keep trying to tie our hands behind our back."
