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Dayton cuts tax hike, but no progress on Minn. budget

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Dayton cuts tax hike, but no progress on Minn. budget
Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

ST. PAUL -- The two sides in Minnesota's budget conflict agree on one thing: They are in no mood to negotiate away issues they hold dear in the remaining seven days of the 2011 legislative session.

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Gov. Mark Dayton on Monday announced he would cut in half the tax increase he wanted, which prompted Republican lawmakers to pack a Capitol room later in the day to make it clear they will accept no tax increase, even a smaller one.

"I don't see any weak knees in the room," House Speaker Kurt Zellers, R-Maple Grove, said.

The news conference, crammed with 55 legislative Republicans, came three hours after Dayton announced he would eliminate half of his tax increase plan.

The new plan would increase taxes on the richest 1.9 percent of Minnesotans.

"I will go halfway," Dayton said. "I won't go further."

With a week left in the 2011 regular legislative session, Republican legislative leaders and Democrat Dayton plan their usual Tuesday morning breakfast together today, but there were more signs of a food fight than budget negotiations.

Republican lawmakers were wrapping up their budget bills Monday, posting online (www.revisor.mn.gov/reports/conference) each conference committee report once differences between House- and Senate-passed budgets were negotiated. Now, Dayton administration officials and GOP leaders are to begin working out details of eight budget bills and a tax bill.

However, before he signs individual bills -- such as those funding, education, public safety, economic development and other areas, Dayton wants to negotiate an overall spending target.

Going into this week, Dayton wanted to spend $37 billion in the next two years, while Republicans opted to keep the budget at $34 billion. With the Monday changes, Dayton's plan would cost $35.8 billion.

Dayton's Monday tax change reduced his planned $3 billion-plus tax increase to $1.8 billion. He dropped his plan to increase property taxes on homes worth more than $1 million.

He now would raise income taxes on fewer than half as many Minnesotans as he originally planned. The new income tax would raise taxes on married couples earning more than $300,000.

"My compromise represents a balanced approach to a balanced budget," the governor wrote to legislative leaders.

Republicans said they can accept no new revenue, including more gambling funds, being used to balance the budget.

However, Senate Majority Leader Amy Koch, R-Buffalo, left the door open to some compromise. "We're open to reforms," she said, without being specific.

At some point this week, the House and Senate must begin passing spending bills just to meet Monday's constitutional adjournment deadline. Zellers and Koch said they wanted Dayton's agreement on the bills, but need to pass them even without agreement.

While there are signs that some in the Dayton administration are working behind the scenes to prepare for a special legislative budget session and the chance of a July 1 government shutdown if a budget is not approved by then, Dayton said he is focused on finishing work by Monday.

Dayton said that it is up to legislative Republicans to act. If budget negotiators cannot reach a deal, "it's their fault," the governor said.

"Every time we meet we are making progress," Zellers said, although he and Koch could point to no specific progress.

Senate Minority Leader Tom Bakk, DFL-Cook, said he does not understand why Republicans are fighting a tax increase so hard. He said Dayton's newest plan would affect only 45,400 Minnesota tax returns, out of more than 2 million filed a year.

"It doesn't seem like a big price to pay," Bakk said.

Most attention Monday was focused on the budget, but the House and Senate voted on several other issues. Included was the Senate unanimously confirming Dave Frederickson as state agriculture commissioner.

While state leaders were debating the budget in public, but not negotiating, leaders of eight chamber of commerce groups from outside the Twin Cities met with Dayton and reporters, asking that state payments to cities continue.

Dayton, who has been a strong supporter of Local Government Aid and other state payments, said on Monday those payments are like the rest of the budget and up for negotiations. He did not offer strong LGA support as he has in the past.

Eight chamber of commerce organizations sent representatives to the Capitol Monday to encourage Dayton to not allow Republicans to cut LGA. Fourteen chambers have passed resolutions in favor of preserving LGA, even though the state organization wants the program to be cut.

Those at the Capitol called for a combination of budget cuts and tax increases to balance the state budget.

"We need these strong, regional hubs to prosper," said President Lori Paris of the Bemidji Area Chamber of Commerce.

Bemidji, Paris said, needs state help in part because more than half of the city's property cannot be taxed since it is government-owned.

Duluth is taking a larger hit than most cities in the GOP budget, President David Ross of the Duluth Chamber of Commerce said. Duluth, St. Paul and Minneapolis are singled out to take deeper state aid cuts and soon they would lose local aid entirely.

"He is our last line of defense," Ross said of Dayton. "We stand shoulder to shoulder with Gov. Dayton."

Ross accused Republicans of playing politics since the three cities that would lose aid under the Republican plan are represented only by Democrats.

President Shannon Stassen of the Crookston Chamber of Commerce said his community is so close to the lower-taxed North Dakota that state aid is vital.

If state aid is cut, Stassen said, property taxes would increase, which "would definitely drive our businesses away."

President Eric Osberg of the Wadena Area Chamber of Commerce said that state aid helped his community respond to last June's tornado outbreak.

"An increase in revenue is essential," Osberg declared.

While the chamber board's decision was "a tough conversation," Osberg said, members realized "you can't just cut, cut, cut."

President Jim Currie of the Laurentian Chamber of Commerce, which serves four Iron Range communities, said the Republican budget would especially hurt small employers. They could lose employees, he said, then those without jobs would stop spending money, which would hurt everyone.

Don Davis reports for Forum Communications Co.

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Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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