Senate Republicans make latest proposal

By Lenora Chu

Senate Republicans came forward Monday with a solution free of tax increases for the state's budget problem -- use accounting shifts and the state's tobacco endowment to plug the $439 million shortfall remaining for 2002-03.

Republicans and Democrats have been largely unable to break a stalemate on how to balance the budget, which is required by the state constitution. Senate DFLers advocate a 60-cent-per-pack increase in the cigarette tax and resist tapping the state's anti-smoking fund. House Republicans oppose tax increases and support further cuts in state spending.

Senate Minority Leader Dick Day, an Owatonna Republican, says the Senate Republicans' plan is the answer.


"Our caucus totally, unanimously believes this is what we should do," he said. "It puts the shortfall away, and we're outta here."

The plan would transfer $100 million from the smoking-prevention share of the state's $1.3 billion tobacco endowment fund. The proposal would also shift $312.5 million in state payments to school districts and $36.9 million in social services block grants from one fiscal year to the next.

Anticipating opposition from DFLers, Day offered a defense of the plan's use of the tobacco fund, originally earmarked for anti-smoking initiatives and smoking-related health research.

"People keep whining about the tobacco fund," Day said. "But $1.3 billion is actually what we could write a check for." Day went on to list about 10 states that are already using their tobacco settlements to attack deficits.

Day also offered his frank justification for the plan's use of accounting shifts.

"People say you're just shifting money," he said. "Who cares what you're doing if you're balancing the books?"

Sen. Grace Schwab, a Republican and 10-year school board member in her hometown of Albert Lea, supported the education funding shift, saying school districts could use short-term borrowing abilities -- leveraging the 15 percent yet to come -- to secure low-interest loans and invest at a higher rate of return.

"Is this the best solution for school districts?" Schwab asked. "No. But in times of shortfall, they still get the money they need."


The budget logjam follows a speedy resolution earlier in the session, when the House and Senate passed, over the governor's veto, a budget bill that erased $1.95 billion of the 2002-03 deficit.

The Phase II budget-balancing conference committee made small steps late last week when House Republicans and Senate DFLers exchanged offers with slight compromises on either side. Budget meetings continue this week.

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