The Free Press, Mankato, MN

State budget: a closer look

July 4, 2011

In state budget mess, two sides have options

(Continued)

ST. PAUL —

  • Delayed school aid payments. The accounting maneuver helped Pawlenty finish a budget in 2009, when he exercised his executive authority to push $1.2 billion in school payments into the next fiscal year. The price of balancing the state’s books this way is that schools have to wait longer for the money, and the payments must be caught up if budget surpluses return. As the current shutdown started, both sides released documents showing that Republicans had proposed delaying another $700 million in school payments, and Dayton was open to it.
  • Medicaid surcharges on health care providers. Dayton’s initial budget proposal included this complicated financial arrangement to draw nearly $900 million from the federal government. Here’s how it would work: The state would raise surcharges on hospitals, health plans, nursing homes and care centers for those with developmental disabilities, triggering an influx of federal money. The providers would get some of that money back through higher reimbursements. Pawlenty used the move in the 2003 budget. The hard part, according to Hanson, is that some providers win and others lose.
  • Gambling. A perennial proposal to allow casino-style gambling at two horse-racing tracks in Minnesota is still around. Backers say adding slot machines at Canterbury Park in Shakopee and Running Aces in Columbus would raise more than $200 million in new tax revenue over the next two years. Dayton is open to it. Republicans are divided, with some social conservatives opposed on moral grounds.
  • Eliminating tax breaks. The head of the Senate tax committee said early this year that ending exemptions to sales, income, property and corporate taxes could help pare down the deficit, although Republicans were quick to take back the comments. Most Republicans now equate eliminating tax breaks with tax increases.
  • Sales tax expansion. Minnesota doesn’t tax clothing or food, and there have long been proposals to expand the sales tax while perhaps lowering the tax rate. Almost no one at the Capitol likes the idea, but extending the tax just to clothing could bring in roughly $600 million every two years.
  • Tobacco securitization bonds. Republicans revived an idea first floated by Pawlenty in 2009 — raising one-time cash by selling bonds backed by annual tobacco settlement payments the state gets from cigarette companies. The Pawlenty proposal would have raised nearly $1 billion but was roundly rejected by the Democratic-run Legislature then. The Republican proposal was for less, but Dayton rejected the option in the latest round of negotiations.

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.”

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State budget: a closer look