The Free Press, Mankato, MN

July 4, 2011

In state budget mess, two sides have options

The Associated Press

ST. PAUL — As intractable as the budget mess that led to the Minnesota government shutdown seems to be, there is a way out.

For all their rhetoric, Democratic Gov. Mark Dayton and GOP leaders have shown hints they could compromise, and in some cases offered small clues on how.

Dayton has pushed for months to raise income taxes on the state’s wealthiest residents to fix a budget $5 billion in the red. Yet he has suggested he would drop that proposal if Republicans who control the Legislature agree to some other way of raising money to get closer to his spending target of nearly $36 billion.

That’s a big if for the GOP, and yet in the last round of negotiations, party leaders showed they might finally budge on their proposed spending limit of $34 billion — the amount the state is expected to collect in the next two years if no new revenue is found.

“They pick a number in between and find another way to pay for it other than an income tax, which if you’re a Republican, they hate. That’s the third rail of Republican politics — that’s the worst tax,” said Tom Hanson, who served as the state’s finance commissioner during Republican Gov. Tim Pawlenty’s administration.

To get closer to Dayton, the GOP could go for several options that don’t include the dreaded T word, including further delays in school aid payments, surcharges on medical providers, expanded gambling or issuing bonds for tobacco payments.

The shutdown that started Friday — Minnesota’s second in six years — sent 22,000 state workers home, halted road construction and closed state parks leading into the Fourth of July weekend. Minnesota is the only state to shut down government this year, even though nearly all states are dealing with significant budget shortfalls. The standoff started almost immediately after Dayton and GOP legislative majorities were sworn in early this year.

No new talks were expected until Tuesday. Though maddening for a public that has lost a wide array of services, the break could allow time for the two sides to cool off — and gauge the vehemence of public reaction.

“The most likely scenario is that Gov. Dayton recognizes that the Republicans in the Legislature will not agree to a tax increase, and the Republicans in the Legislature recognize that Gov. Dayton will not agree to a $34.2 billion budget. The difference is going to be, I believe, made up by some additional spending beyond where the Republicans are today and Gov. Dayton giving up on his tax increase,” said former Rep. Paul Kohls, a Republican from Victoria who served during the partial shutdown in 2005.

That shutdown ended when Pawlenty, a Republican-led House and a Democratic-controlled Senate agreed to raise cigarette charges by 75 cents per pack. They called it a “health impact fee,” although many saw it as a tax.

Here’s a look at some of the revenue options that could help break the current stalemate in Minnesota:

But the governor left things open in an interview Friday.

“I think everything that has been discussed is certainly open for reconsideration. There are only so many sources of revenue, and believe me we scoured the landscape on both sides to try to find it,” Dayton said. “But my preference would continue to be having the wealthiest Minnesotans pay their fair share.”