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m2144 BC-MN-XGR-Legislature-B 5thLd-Writethru 05-16 0928

DFL prepares budget without tax increase, slim school funding

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By PATRICK CONDON and MARTIGA LOHN

Associated Press Writers

ST. PAUL (AP) — Democrats at the Minnesota Capitol assembled a new budget proposal Wednesday that abandons their desired income tax increase on wealthy Minnesotans, a key sticking point with Republican Gov. Tim Pawlenty.

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Four budget bills, including those that fund state colleges and health and welfare programs, won Senate approval and were headed to the House. An overarching deal on taxes and spending was still out of reach, though, so lawmakers were proceeding without the governor’s consent.

The strategy didn’t sit well with Pawlenty, who said he wasn’t consulted on the budget bills and didn’t like what he knew of them so far.

"They’re going to send us budget bills that they know are probably unacceptable," Pawlenty said after signing a smoking ban into law in Eagan. "I’m not sure how that’s productive or how it’s going to contribute to an orderly and timely end of session."

The new budget package included a reworked preschool through high school spending package that backs down from some parts of the Democratic wish list, including most money for early childhood programs.

It also features a smaller increase in the per-pupil payments to school districts than originally approved by the House, instead directing most of the new education money to special education payments to districts.

The new education package also ditches most of Pawlenty’s proposals to boost student achievement through various teacher incentive plans.

Following Pawlenty’s veto a day earlier of a new income tax bracket on the wealthiest Minnesotans, senators said their new plan doesn’t raise general taxes. It does rely on money from beefed-up collection of unpaid taxes and cracking down on state companies that shelter income through their foreign subsidiaries, a change some argue is a tax increase on businesses.

"We’re hoping the governor will look favorably on these bills," said Senate Majority Leader Larry Pogemiller, DFL-Minneapolis. Taken together, he said, the bills amount to a significant compromise on the part of Democrats, and he said he didn’t think Democrats would be able to retreat any further.

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Pawlenty said he would hold out for property tax relief and his priorities for school spending. Democrats earlier had backed off promises to ease property tax bills for homeowners, saying they wouldn’t have enough money without the income tax hike.

"They threw property tax relief under the bus in an instant so they could fuel their appetite for social service and welfare spending," Pawlenty said. "That is out of whack with the message and priorities they said they were going to stand for during the campaign, and it’s out of whack with where the state should head."

The increase on the basic per-pupil school payments would be less than most lawmakers were hoping for. That rate, currently at $4,974 a head, would go up by 2 percent next year and then be held to that level, with only a minor inflationary increase, the year after that.

But Sen. Tarryl Clark, the assistant Democratic leader in the Senate, said that putting most of the new education money into special ed programs will help equalize overall education spending, because prohibitive special education costs are causing some districts to fall behind.

The schools proposal also includes a $150 million pot of "operating capital" money for schools, which Clark said they could spend on just about anything — new equipment, technology costs, or even some of the Pawlenty backed incentive programs that the Senate dropped.

While the latest Democratic proposal ditches all new revenue, Clark said legislative leaders were hoping Pawlenty would be open to negotiating some kind of revenue to pay for some of the school programs that have been left behind.

As they revamped other budget bills, several of which Pawlenty vetoed the first time around, Democrats pulled back on other priorities. They trimmed $40 million from a college bill, $50 million from a health and welfare package and $35 million from an economic development package.

Republican senators had their biggest problems with one of the biggest bills — a $9.45 billion health and human services spending plan. Among other things, the bill would provide a pay increase for nursing home workers and aim to get more eligible children signed up for public health programs.

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"This bill in my mind simply spends too much money," said Sen. Betsy Wergin, R-Princeton.

Comments like hers drew a sharp retort from Sen. John Marty, DFL-Roseville.

"This isn’t sterile numbers," Marty said. "This is real people and real lives."

Lawmakers are hoping to finish all their work by the constitutional adjournment deadline next Monday.

But Republican leaders said Democrats were taking the wrong approach, continuing to send bills to Pawlenty without giving the governor a chance to negotiate his priorities into the final package. They said it was a recipe for an end-of-session train wreck.

"We need to look at working with the governor on this," said Senate Minority Leader David Senjem, R-Rochester. "That is the only way we’re going to get this thing resolved — or we are going to see a special session."

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