- The Washington Times - Monday, June 27, 2011

Cut funding for state nursing homes or chop money for local police departments? Slice budgets for municipalities or halt key construction projects?

These are the fiscal quandaries about to hit home in Minnesota, where a deepening budget impasse between the new Democratic governor and a new Republican majority in the state Legislature is threatening a state government shutdown on Friday.

Partisan conflict in Washington over spending, budgets and deficits is being replicated across the nation, especially in states such as Minnesota, where the two major parties share power, often uncomfortably. As in the nation’s capital, the two sides are angling to place the blame on the other side if the impasse produces a government shutdown in St. Paul.

Tax talks between Gov. Mark Dayton and top Republican lawmakers broke off Sunday, but were back on Monday afternoon. GOP lawmakers have been demanding a special legislative session to focus on the budget impasse, while staunchly resisting the idea of tax increases.

“Most Minnesotans are not seeing an increase in their family budget,” House Speaker Kurt Zellers told reporters at a press briefing at the Stillwater Lift Bridge, which connects Minnesota and Wisconsin and could be closed in a shutdown.

“We think we should be able to prioritize within our budget and live within our means.”

Republicans, who captured both houses of the state Legislature in November for the first time in nearly 40 years, say any budget deal will have to change the fundamental direction of fiscal policy in the state.

“What the Republicans don’t want to become is the highest-tax state in the country,” state Rep. Rich Murray told the Albert Lea Tribune on Monday. “If we could look for other sources of revenue, maybe that’s a way that the governor and the leadership can come together.”

Compromises have been made on issues such as education and public safety, yet both sides remain divided on a final deal. One lawmaker described the strained eleventh-hour negotiations as two sides talking different languages.

Mr. Dayton, a former U.S. senator who took over the governorship from Tim Pawlenty, now a Republican presidential hopeful, has balked at Republican insistence that spending for the two-year budget be capped at $34 billion.

Mr. Dayton, who campaigned on what one free-market policy strategist described as a “class-warfare” platform, insists on another $1.8 billion in new state revenue to be gleaned, in part, through raising taxes on the top 5 percent of high-income earners — joint filers earning more than $250,000. The increase would mark a nearly 11 percent increase in state income taxes alone on some residents as the nation’s economic progress continues to drag.

The governor has defended himself by saying he is trying to close a projected $5 billion deficit, as he and state Democrats have looked for ways to generate more state revenue.

In recent weeks, tensions have continued to rise in St. Paul, where the Legislature adjourned May 23 without a finalized state budget. The governor held a news conference on Wednesday to urge a deal and has continued to negotiate.

“I remain willing to compromise and mystified why the Republicans will not do the same,” Mr. Dayton said at that news conference. He compared Republican offers on budget compromises to “rearranging chairs on the deck of the Titanic.”

Senate Majority Leader Amy Koch defended her party last week by saying, “It cannot be said enough that the compromise is coming from Republicans.” She said they had yielded on budget options to satisfy at least some of the governor’s priorities.

Mr. Dayton urged lawmakers to rethink their positions, but said he would not call a special legislative session until a full budget deal had been reached. Some Republican lawmakers asked to work through specific line items piecemeal as a way to make progress.

A shutdown would mark Minnesota’s second in a decade, the last over similar tax issues in 2005.

On Thursday, attorneys for the state appeared before a judge in Ramsey County to get down to deciding which state services were crucial enough to sustain during a shutdown.

A “tsunami” of groups, including the League of Minnesota Cities and the Minnesota Council of Non-Profits, lobbied the court with briefs arguing for fiscal protection from the state.

The governor wants a ruling that would allow him to make decisions on spending if a shutdown occurs, along with a mediator to help negotiate with legislators. Minnesota’s state attorney general wants an appointed judge to decide. The judge’s ruling is expected this week.

Steve Stanek, a research fellow on budget and tax policy at Chicago’s Heartland Institute, called the governor’s proposal “outrageous.” Raising taxes on what would include many beleaguered small-business owners will ruin any economic progress the state might see, he said.

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