Minnesota revenue falls

Revenues flowing into Minnesota state coffers slowed in February.

While individual income tax revenues exceeded earlier expectations, other revenues fell from what was predicted in February.

Minnesota Management and Budget reports that some of the change comes from lower taxes paid on tobacco product sales. Various other smaller revenue sources also fell.

Overall, total February revenues were $2.6 billion, down $67 million from expectations. Income taxes were up $28 million.

Sales taxes were $4 million below predictions, which state officials said may due to lower spending during a harsh winter.

State officials warn not to draw long-term conclusions from monthly revenue reports.

House budget bill leans toward greater Minnesota

Anzelc lobbies Fabian

By Don Davis

Much of the money in the Minnesota House’s plan to tweak the state’s two-year budget would go to greater Minnesota.

“We focused on rural Minnesota and greater Minnesota,” House Majority Leader Erin Murphy, D-St. Paul, said, because many rural parts of the state have not recovered from the recession as well as the Twin Cities.

The House passed the bill 70-59 late Thursday to add $322 million to the $39 billion, two-year state budget enacted last year.

House Minority Leader Kurt Daudt, R-Crown, said the budget plan is one “Democrats are pushing like drugs on the House floor. They can’t spend enough.”

Provisions aimed at areas outside the Twin Cities include those giving a 5 percent increase to home health care providers, pumping more into rural nursing homes that pay employees $14 an hour or less, adding money to elderly meal programs that mostly serve rural Minnesotans, setting up grants to develop high-speed Internet connections, putting $6 million more into greater Minnesota economic development efforts, increasing spending more for highway repairs and creating a center to fight invasive plants and animals moving into the state.

When they were briefing the media on the budget bill, Democratic House Speaker Paul Thissen of Minneapolis and Murphy Paul frequently pointed out items that would help rural or greater Minnesota.

For instance, they said, in approving $25 million for broadband Internet improvements, a fraction of what supporters wanted, businesses in areas of slow Internet coverage could become competitive with places that enjoy faster service.

“Expanded access to broadband Internet access is critical for greater Minnesota,” said Rep. Erik Simonson, D-Duluth. “If we want businesses to set up shop and expand in our communities, we need to provide them the resources they need in order to be successful. But in many areas of the state, high-speed Internet access just isn’t an option.”

Murphy denied that the rural emphasis is an attempt to improve Democratic chances in this year’s elections. At least seven rural House districts now held by Democrats are considered to be in play this year.

Overall, the bill divides the $322 million it spends several ways:

– $92 million for education, including raising public school funding $58 per pupil, adding money to school lunch programs and reducing special education paperwork.

– $91 million to health needs, including increasing funds 5 percent for care providers who serve patients at home, raising rural nursing home payments and assisting mostly rural elderly meal programs.

– $37 million for economic development, including the broadband grants and $6 million for six greater Minnesota economic development programs.

– $50 million for transportation, half of which would go to fill potholes after a winter that has been tough on roads.

– $36 million for public safety, especially sending more to the Corrections Department.

– $16 million for agriculture and the environment to fight invasive species moving into Minnesota and help fund locally grown food for food shelves.

The Senate Finance Committee plans to finish its budget proposal today. It could come up for debate early next week.

Added money for home health care providers follows last year’s 5 percent increase in nursing home funding.

Rep. Tom Huntley, D-Duluth, said funds for rural nursing homes need to increase because the expected passage of a $9.50-an-hour minimum wage would affect them since many workers do not receive the minimum wage.

Some new money the Corrections Department would receive is to pay county jails to house up to 500 prisoners. Rep. Michael Paymar, D-St. Paul, said the department underestimated the number of prisoners it would house this year.

As a snowstorm headed toward St. Paul, Rep. Frank Hornstein, D-Minneapolis, said his transportation funding provisions include $15 million to help local governments fill potholes after a rough winter, with another $10 million destined for the state to do the same.

Hornstein’s bill also provides $10 million for the Corridors of Commerce highway repair program that mostly would go to greater Minnesota roads.

Also in the bill is a provision to increase an assessment on railroads and add one on pipelines to fund $2.5 million worth of more training that first responders such as firefighters need to battle crude oil accidents.

The House voted to ban state funds for abortions and to prohibit an abortion of a fetus more than 20 weeks old. Most of the nearly 100 amendment proposals were rejected.

Republicans repeatedly tried to pass amendments to change the MNsure health insurance exchange, but Democrats would not allow most to be debated.

Dayton would limit surplus spending to $162 million

By Don Davis

A $1.2 billion budget surplus does not mean massive new state spending.

Gov. Mark Dayton made that clear Thursday when he unveiled his plan for election-year budget changes: About half of the projected surplus would go to tax cuts, $162 million would be spent on what he called “essential” needs and the rest would go into the state budget reserve.

Lawmakers and Dayton last year approved a $39 billion, two-year budget and Thursday’s announcement centered on how the governor would deal with the $1.2 billion surplus announced Friday. Legislators will draw up their own budget proposals and negotiate with the governor before the legislative session ends by May 19.

New spending Dayton suggests includes a boost for those who care for the elderly and disabled, and $20 million legislators already approved to increase heating aid, especially for those who cannot afford propane after big price spikes earlier this year. He also wants to add $3.5 million to the school lunch program to help students that cannot afford to buy meals.

The Democratic governor remains confined to home after hip surgery and released his budget tweaks in a conference call with reporters.

He said he wants to cap spending increases at $162 million so the state can put $455 million more in the budget reserve in case the economy goes sour. That would leave the reserve at $1.1 billion.

After his announcement, Dayton took hits from both sides: some criticized him for not recommending spending on their pet projects while Republicans were not happy with his suggestion to increase spending at all.

“Gov. Dayton is squandering the opportunity for real reform, using the surplus to adjust his 2013 tax increase and adding millions more in spending, even after his budget spent 10 percent more than the last two years,” Senate Minority Leader David Hann, R-Eden Prairie, said.

Dayton’s biggest spending increase request is $64.3 million for people who serve the elderly and disabled.

There is widespread support for increasing worker pay, but soon after Dayton released his budget plan a key organization supporting the added pay was critical.

The Long-Term Care Imperative issued statement saying the Dayton plan “takes a good first step toward restoring the funding of long term care for older adults,” but said the governor did not go far enough.

Dayton said he knows not everyone got what they wanted.

“Most of the agencies have had to restrain, if not cut, their operating expenses,” Dayton said.

An example is the Department of Natural Resources. A February story in the West Central Tribune of Willmar reported the department has a $1.5 million shortfall in its parks account, forcing some jobs to remain empty.

Dayton said the DNR did not seek more parks money, and said that state agencies need to watch their spending.

“There are a lot of needs out there that I am not addressing,” Dayton said. “There are people who are going to be unhappy with that.”

A rural issue that Dayton lists as a priority also did not get extra money: statewide high-speed Internet.

“I wanted to see border-to-border cell phone and high-speed Internet coverage by the end of my first term,” Dayton said. “We are going to fall short of that, but that still is my goal.”

The governor said he did not put broadband funds in his Thursday budget plan because those who want to increase coverage and speed have asked for up to $100 million, but have not spelled out specific details about how the money would be used.

Glencoe Mayor Randy Wilson, president of the Coalition of Greater Minnesota Cities, was not happy that Dayton left out broadband.

“Given the importance of the issue and years of talk, it is perplexing that Gov. Dayton failed to dedicate a portion of the surplus to enhance broadband speed and accessibility across Minnesota,” Wilson said.

Wilson also criticized Dayton for not recommending that the state increase aid it pays to cities.

Dayton proposed increasing Minnesota State Colleges and Universities system spending $17 million so it will not be forced to lay off faculty.

He also wants to up the University of Minnesota budget $5 million. While he and the Legislature cannot tell the university specifically how to spend the money, he said that he wants the money to go to the University of Minnesota Duluth.

“It is my intention of providing an additional $5 million … so they will not have to lay off faculty there,” Dayton said.

Also getting more money under Dayton’s plan would be the Minnesota Sex Offender Program, which is under a federal court order to fund an expert review of its services. A federal judge could take over the program if the state does not change it from a program that looks more like a prison to something that treats offenders.

Dayton wants more than $30 million new money for the Corrections Department to keep staff as prison populations grow.

Lawmakers divided on priorities for $1.2 billion state budget surplus

Kalambokidis

By Don Davis

Good economic news looks like it will lead to a few Democratic squabbles over how to spend a budget surplus, with Minnesotans wondering if they will see taxes fall or state spending increase.

“I’m happy to be here to deliver this budget forecast, not the weather forecast,” Commissioner Jim Schowalter of Minnesota Management and Budget said Friday, as snow began to fall in St. Paul.

He announced that the state has a $1.2 billion budget surplus, up $408 million in the past three months.

The news means state leaders must decide what to do with the money: give it back to Minnesotans via tax cuts, increase spending or boost the budget reserve. They likely will do a bit of all three, but Democrats who control the House, Senate and governor’s office do not fully agree on the split.

House Speaker Paul Thissen, D-Minneapolis, and Gov. Mark Dayton put priorities on a $500 million tax cut and spending cash on some public works projects that the state usually borrows money to fund.

Senate Majority Leader Tom Bakk, D-Cook, said it may be too late for some of the House’s $500 million tax-cut bill to help people filing this year. He doubted that software could be upgraded in time to include any state tax changes before April 15.

Bakk and Assistant Majority Leader Katie Sieben, D-Cottage Grove, did not reject tax cuts and higher spending, but indicated their priority is putting more money into the reserve.

The debate over how to use surplus money has not been common in recent years. The $1.2 billion surplus is the biggest projected since February 1999. Since then, the twice-a-year budget forecasts often have shown deficits.

The report shows revenues up $366 million above earlier projections in the budget that ends June 30, 2015. Individual income tax led the way with a $188 million increase, followed by sales taxes up $167 million.

A 0.1 percent spending decrease and lower-than-expected interest rates on bonds sold to finance a new Vikings stadium also helped the financial picture.

Schowalter and State Economist Laura Kalambokidis warned that good times are not guaranteed. For one thing, harsh winter weather could have a more long-lasting impact than predicted.

While many legislative Democrats credit the surplus to a $2.3 billion tax increase and spending changes they passed last year, fellow Democrat Dayton did not. Republicans took credit because of budgets they wrote or heavily influenced in recent years, saying the economy could not turn around in eight months since Democrats’ budget started.

Schowalter and Kalambokidis said there is no evidence that the 2013 tax increase affected the economy.

Kalambokidis said the harsh winter weather influenced the 2014 economy to begin on the soft side, but predicted that it will pick up.

All aspects of the state economy are improving, she said, other than federal government employment and manufacturing.

Dayton singled out figures in the report that showed Minnesota employers added 3,500 jobs a month in 2012 and 3,800 last year.

Schowalter, who favors a bigger budget reserve because it provides a “shock absorber” for the state budget, said the state has about 2.3 percent of its budget set aside now, but financial agencies prefer to see 4.9 percent. He is expected to recommend that to Dayton, who hinted he is unlikely to recommend that big of a reserve.

The governor plans to release his proposal for budget and tax changes next week, a document legislative leaders will use to craft their own proposals.

The Legislature and Dayton approved a $39 billion, two-year budget last year and only need to make minor changes this year.

There is widespread legislative support to spend some of the surplus on nursing homes and other long-term care programs, with a goal of increasing worker pay.

A group pushing for more elderly and disability aid said the forecast bolsters their chances. The 5 Percent Campaign is seeking $80 million to help 92,500 Minnesotans.

“A rate increase for home and community-based services is the major issue that wasn’t addressed in 2013,” bill sponsor Sen. Kent Eken, D-Twin Valley, said Friday. “Today’s forecast tells us we have the resources to address this priority in 2014.”

Other than long-term care spending, Senate Minority Leader David Hann, R-Eden Prairie, said: “We think we need to give it back.”

Budget surplus up to $1.2 billion

By Don Davis

Minnesota’s state budget surplus is growing.

A report released this morning shows the state has a $1.2 billion surplus, $408 million more than predicted in early December. Minnesota Management and Budget reports that revenues are up $366 million from December projections and spending is falling slightly.

A $2.6 billion surplus is predicted for 2016-2017.

The report opens the door to increased spending requests, deeper tax cuts and, perhaps, adding more to the state budget reserve during the legislative session that began Tuesday.

Details of the budget forecast, including predictions about the state’s economy, were to be released later today.

A similar December budget and economy report, known as a budget forecast, showed the state with about a $1 billion surplus, which shrunk to $825 million after the state repaid schools money it had borrowed from them in recent years.

The forecast is important because it shows Gov. Mark Dayton and legislators how much money they have available this year.

In the third day of the legislative session, Thursday, the House Taxes Committee approved a bill sending $500 million back to businesses and middle-class Minnesotans, eating up a good portion of the surplus they thought they had at the time.

Before the forecast was released, Senate Majority Leader Tom Bakk, D-Cook, said he would wait to make decisions about spending, taxing and whether to add to the state’s budget reserve until after the forecast. Bakk said he remembers the days during Gov. Jesse Ventura’s administration when the state sent rebate checks to the public, with the state soon running into economic problems and running low on money.

Senators are not up for election this year, but all House districts are elected every two years and leaders of that chamber are eager to show their willingness to cut taxes this year after last year raising them more than $2 billion.

The Legislature and Dayton approved a $38 billion, two-year budget last year and only need to make minor changes this year.

Dayton planned to wait until after the forecast to announce plans to tweak the existing budget.

The governor and legislative leaders warn groups against asking for money this year, saying that even with a surplus the state cannot afford expanding the budget. However, groups ranging from those supporting expanding high-speed Internet service to those behind better long-term care are asking for money. Most groups say that funds could come from the surplus.

House Speaker Paul Thissen, D-Minneapolis, said before the forecast that he cannot support proposed transportation tax increases made by fellow Democrats. However, he added, funds could come from surplus money.

Bakk floated a plan to use surplus funds to increase spending on public works projects. He said, for instance, that the $100 million-plus needed to finish the state Capitol renovation project could come from cash, opening the regular public works funding bill for more projects.

Notebook: Tax revenues mixed

By Don Davis

Minnesota sales and personal income tax receipts were up in the first three months of the state fiscal year as state revenues came in just short of projections.

Minnesota Management and Budget on Thursday reported that overall state tax collections were down $2 million, less than 0.1 percent, compared to expectations.

Cigarette and other tobacco taxes fell $29 million below projections, about 21 percent short. Corporate income taxes were down $342 million, an 11 percent fall.

Nearly making up for those losses were a $46 million sales tax gain (4.2 percent higher) and $27 million more in individual income taxes (1.3 percent up)

The state collected more than $4 billion in the three-month period. Tax increases the Legislature and Gov. Mark Dayton approved earlier this year were to bring in $240 million during that quarter, but total revenue was $336 million more than a year ago.

No gun sales?

A Minnesota lawmaker questions a provision in contracts for a new stadium that he says appears to ban many businesses from selling guns there.

The chairwoman of the authority that runs the stadium said that Rep. Pat Garofalo, R-Farmington, misread the document.

“We certainly never intentionally prohibited gun sales” in the documents signed last week, Chairman Michele Kelm-Helgen of the Minnesota Sports Facilities Authority said in an interview.

However, the document Kelm-Helgen and other authority board members signed a week ago says that it prohibits the stadium from being used by “any gun shop or other store whose primary business is the sale of guns or other weapons.” It also bans “adults-only use,” such as movies and other adult entertainment, as well as pawn shops or head shops.

Kelm-Helgen said the authority’s intention was to not allow the Minnesota Vikings football team to sell guns in its team store in the stadium.

In a letter to the authority, Garofalo said exhibitors at outdoor trade shows and the like should be allowed to sell weapons as long as they comply with laws and stadium policies.

“The people’s stadium should not, under any circumstances, arbitrarily prohibit these types of events…” the lawmaker wrote.

Kelm-Helgen said the authority so far has dealt only with rules dealing with the Vikings. “We haven’t really addressed whether we can have a gun show there.”

Invasive training required

More Minnesota businesses now are required to take training dealing with aquatic invasive species.

The Department of Natural Resources offers the training to lake service provider businesses this fall so they can legally work in the state’s waters. Those firms include ones that rent or decontaminate boats and other water equipment.

A law that began in July requires the three-hour training.

“Before this change, the law applied only to businesses such as marinas, dock haulers, boat clubs and others who install or remove equipment from state waters,” the DNR’s April Rust said.

Capitol, floods, veterans, disaster bills end 2013 legislative session

Thissen gavels out session

By Don Davis

The Minnesota Legislature ended a historic 2013 session seconds before midnight Monday after voting to renovate the state Capitol building, help communities fight floods, give veterans a new facility and provide disaster assistance.

It was an end to a session that approved gay marriage, increased taxes $2 billion and boosted spending for education and other priorities of Democrats who control the House, Senate and governor’s office.

“We had a tough session,” Senate Minority Leader David Hann, R-Eden Prairie, said, but there were many bills that passed with bipartisan support.

“We can have strong disagreements and still keep the conversation civil,” Senate Majority Leader Tom Bakk, DFL-Cook, said.

“Tomorrow everybody’s going to try to put their political spin on it,” Bakk added. “But I’m very proud.”

House Speaker Paul Thissen, DFL-Minneapolis, said that while Republicans accuse Democrats of overreaching this year, his party did what it could to catch up after 10 years of budget cuts.

House Majority Leader Erin Murphy, DFL-St. Paul, said Democrats and Republicans worked together to end the session. Minority Leader Kurt Daudt, R-Crown, said Republicans brought the two parties together to wrap things up.

After working leisurely much of Monday, the pace kicked into high gear after 9 p.m.

The key to the session-ending deal is a $177 million public works bill, funded by the state selling bonds. Once House and Senate leaders from both parties agreed to the bonding bill, a day-long logjam broke, allowing other bills to pass quickly with little debate.

The House passed the public works bill 121-10 and the Senate 57-6. Last week, the House defeated an $800 million proposal with opponents saying it was too big.

The largest portion of the bonding bill is fixing the state Capitol, a $132 million expenditure. More money will be needed in future years to complete the project.

“Our Capitol is the symbol of Minnesota, let it stand solid and strong to serve generations of Minnesotans long into the future…” Rep. Dean Urdahl, R-Grove City, said. “This building has no lobbyist, it has us, and we must not let it down.”

The 108-year-old building’s walls are crumbling and state officials say mechanical systems need to be replaced.

Also in the bill is $20 million for flood prevention projects, $19 million for a Minneapolis Veterans’ Home building and $8 million for various sewage projects. Some previously approved bonds no longer needed are canceled.

Once the bonding bill passed, the door opened for spending $1.75 million to help southwestern Minnesota recover from an April ice storm.

Federal funds will pay three-fourths of the public property damage repair.

The bill overwhelmingly passed the House and Senate.

Sen. Bill Weber, R-Luverne, told senators there is $6 million in public property damage, but more than $20 million in damage overall.

The bonding bill also looks to prevent future disasters. It spends $20 million for flood prevention work in Ada, Afton, Alvarado, Argyle, Austin, Borup, Breckenridge, Browntown, Climax, Crookston, Delano, Granite Falls, Inver Grove Heights, Maynard, Melrose, Minneota, Minnesota River area, Montevideo, Moorhead, Newport Nielsville, Oakport Township, Oslo, Roseau, Rushford, St. Vincent and Shelley. The bill says Moorhead should get priority for funds needs.

While the Capitol is the headline project in the bonding bill, a $22.7 million parking ramp nearby also is funded.

As time ran out on the session, a 10-hour debate, spread over the last three days, about allowing some child care providers and personal care attendants to join unions ended with conflict.

Thissen announced that the bill won on a 68-66 vote, prompting loud applause and cheers from union supporters in the House gallery. Such demonstrations violate House rules.

Thissen began to gavel down the demonstration, sternly yelling: “Stop, stop.”

Several Republicans began to protest the demonstration and Rep. Pat Garofalo, R-Farmington, jumped up and shouted into his microphone: “Just let them applaud, they own the place.”

Republicans often said during the unionization debate that Democrats were pushing the bill to reward their union supporters.

In its final days, the Legislature passed bills to:

– Raise taxes $2 billion.

– Fund the state $38 billion, two-year budget.

– Allow same-sex couples to marry.

– Fund arts and outdoors programs from a sales tax increase voters approved in 2008.

– Ask Minnesotans to vote to constitutionally establish a council to set legislators’ pay because, as Sen. Kent Eken, DFL-Twin Valley, said, it is a conflict of interest for lawmakers to raise their own pay.

New income taxes will be placed on the top 2 percent of Minnesota earners, cigarette taxes increased and sales taxes charged on some business purchases.

Lawmakers wrapped up most of Democrats’ priorities as they neared their deadline. But they also left undone other priorities such as a school anti-bullying bill, a minimum wage increase and gun control.

Reporter Danielle Killey contributed to this story.

Loud demonstrations join budget debate in Minnesota Capitol

Falk, with Sen. Benson and daughter

By Don Davis

Heather Falk fanned herself Saturday in the hot, muggy Minnesota Capitol building as legislators gradually worked toward finishing the state budget and adjourning for the year.

The Cloquet child care provider joined a few hundred others who exercised their lungs and freedom of speech in the Capitol, awaiting a hot House debate about whether child care providers and personal care attendants should join unions.

The relatively small crowd, compared to 2,800 who turned out for Monday’s Senate gay marriage debate, made enough noise to be heard even in remote areas of the Capitol.

While demonstrators on both sides of the issue chanted, legislators plowed through bills that help make up the state’s $38 billion budget for the next two years.

The Senate on Saturday passed a bill funding state health programs for the elderly and disabled, approved a measure changing some transportation policies and took up a variety of smaller bills.

The House began the weekend passing several routine bills, preparing to take up a natural resources and agriculture spending measure, setting the stage for a public education finance bill and looking forward to the union proposal late Saturday or early today.

With Minnesota legislators facing a Monday night constitutional deadline to adjourn, they planned to work through Saturday night, return at midday today and put in a full Monday.

The $16 billion education funding bill, the biggest single spending area of state government, is a keystone for Democrats who control the House and Senate.

But if education is a key political issue this weekend, noise bouncing off the Capitol’s marble walls came from child care workers.

“I still think my voice should be heard,” Falk said, sweat dripping off her face, even though all in the Capitol knew the Democratic-controlled House most likely would follow the Senate and approve allowing child care workers and personal care attendants to join unions.

Falk is a longtime opponent to the unionization effort and predicted that once it becomes law, she and her colleagues will challenge the issue in court.

Another child care provider, Lynn Barten of Alexandria, was thrilled that representatives appeared poised to approve the unionization proposal.

“It’s kind of a historic day,” she said, standing a few feet from Falk.

Associations that represent child care workers have not been effective at the Legislature, Barten said. Unions are better capable of lobbying lawmakers for more money and better regulations, she said.

She said she understands why some would oppose the idea: “Anything new is scary.”

Also standing just outside the House chamber was child care worker Terrie Boyd of Detroit Lakes, holding a sign asking “what part of unconstitutional didn’t you understand?”

Union opponents say it is not constitutional to let business owners such as child care providers join unions. That is a provision only for employees, she said.

“This is my business,” Boyd added. “I am not an employee.”

Boyd and Falk said most child care workers in their areas oppose unionization.

Democrats back two unions that want to sign up child care workers and personal care attendants. Unions say they can do a better job of negotiating state subsidies and rules that govern the services.

Also on Saturday, a transportation bill passed, but without a provision the House and Senate earlier approved to raise some speed limits from 55 mph to 60.

Sen. Torrey Westrom, R-Elbow Lake, long has worked to raise speed limits and was upset that a House-Senate conference committee dropped the higher speed limit.

Senate Transportation Chairman Scott Dibble, DFL-Minneapolis, said state transportation officials oppose the higher speed limit because it “would decrease safety.”

Also in the transportation bill is a provision that makes it legal for a bicycle to have a horn or bell, which is not allowed now.

House and Senate members on Saturday approved coming back for the 2014 legislative session Feb. 25.

Barten

Boyd

Budget pieces slowly begin moving toward governor’s office

Rep. Paul Marquart

By Don Davis

Minnesota legislators have taken baby steps in passing a $38 billion, two-year budget that must be finished by midnight Monday.

The biggest step so far was set to come late Friday or early Saturday as the House edged toward approving money for state-subsidized health programs, the second-largest part of the state budget.

“I think we have time to get the budget bills done,” House Majority Leader Erin Murphy, DFL-St. Paul, said even as Republicans complained that the Legislature was debating nonbudget bills.

“I’m concerned that with the amount of time left in the legislative session, we may not have enough time for public input and debate on these important bills,” said Sen. Bill Ingebrigtsen, R-Alexandria.

Budget bills headed for Gov. Mark Dayton’s approval fund public safety, judiciary, higher education and economic development programs.

Much of the budget still was being negotiated among the Democratic-controlled House and Senate and Democratic governor’s office, including measures to fund natural resources, agriculture, public schools, various state agencies and transportation.

Some of the budget became clearer Friday. Murphy said she doubted gasoline taxes would rise, as some proposed. She also said legislative pay likely will not be increased.

A bill raising $2 billion in taxes remained in negotiators’ hands late Friday, but Dayton and legislative leaders gave them instructions to raise income taxes on the highest-paid Minnesotans, add a sales tax to some business services and raise cigarette taxes.

The House began a debate late Friday to fund state health programs for the elderly and disabled.

Supporters of nursing homes and other long-term care organizations said the health and human services bill averts a crisis.

The bill increases nursing home funding 5 percent in the first year of the next budget cycle and 1.5 percent in the second year.

Still, long-term care supporters say the work is not over to find sustainable funding for years to come.

“Every year that we put off discussions and decisions on sustainable long-term care funding will only make the problem more difficult to solve,” President Gayle Kvenvold of Aging Services of Minnesota said. “The state’s current funding approach is already strained.”

Earlier Friday, the House defeated a plan to spend $800 million on public works projects across the state. The vote was 76-56, but bills funded by the state selling bonds need 81 votes.

House Minority Leader Kurt Daudt, R-Crown, said the bonding bill and a proposed constitutional amendment that filled Friday afternoon are “distractions” from setting the state’s budget. The constitutional amendment would remove the decision about legislators’ pay from the Legislature.

The House plans to take a break from the budget for a time Saturday, perhaps a long time.

Nearly 100 amendments have been filed for a bill to allow child care providers and personal care attendants to join unions. There were fewer amendments than that when senators debated the bill, a debate that stretched 17 hours before it passed 35-32.

Murphy said she will use “all of the tools in the toolbox” to shorten debate if Republicans venture into filibuster territory instead of what she considers legitimate debate.

Rep. Jason Metsa, DFL-Virginia, sponsored the legislative pay amendment.

“This isn’t a bill about giving legislators a pay raise,” he said. “It is about being transparent.”

Daudt said there was no need to take up the bill this year because Metsa’s plan calls for voters to consider the measure in 2016, leaving three more legislative sessions where it could be debated.

Daudt and other Republicans raised their voices during the pay debate.

“Uff-da. I think the caps lock was on there,” Murphy said.

No tax solution yet as Minnesota legislative session winds down

Capitol visitors want more transportation money

By Danielle Killey and Don Davis

Taxes remain a key issue as the Minnesota House, Senate and governor’s office negotiate a final budget deal in the last days of the 2013 legislative session.

House-Senate tax conference committee members exchanged a number of proposals Wednesday, but did not come to a solution. They have agreed to raise about $2 billion in new revenue, but differ on how to do it.

Members are slowly coming closer to creating a new fourth-tier income tax bracket for the richest Minnesotans, likely to land somewhere between 8.94 percent and 10.6 percent. The current top tier rate is 7.85 percent.

The House also still wants a surcharge on those making $500,000 or more for up to two years, to repay schools for money the state borrowed from them. That would add up to nearly $900,000 on top of the $2 billion.

Committee members still disagree on alcohol and cigarette tax increases. The House proposes an alcohol tax, but the Senate does not include it, and they had not landed on a final cigarette tax increase amount by Wednesday evening.

House Taxes Committee Chairwoman Ann Lenczewski, DFL-Bloomington, said the House will propose Gov. Mark Dayton’s plan to fund a shortfall in Vikings stadium construction money, but the governor’s plan has not been released.

The members also are exploring sales tax changes such as expanding it to warehousing and storage, which primarily would affect businesses. The House proposed a 13 percent sports memorabilia tax to bring money to the state’s general fund as well.

Former tax chairman Rep. Greg Davids, R-Preston, said no matter where the committee lands, the total amount they plan to raise is too high for Republicans. “It’s so far gone for anyone in our caucus to support.”

Davids acknowledged that Republicans have little say in the final plan because Democrats have enough votes as the majority in the House and Senate to pass it.

“When you have no balance, this is what you get,” Davids said.

The Minnesota Constitution requires legislators to wrap up their work for the year Monday, and while tax debate continues, the first negotiated budget bills are headed to final votes.

A jobs and economic development bill was merged with one setting solar energy standards and was due for a late Wednesday House debate.

Major finance conference committees with work remaining Wednesday included those dealing with public school education, health and human services, environment and agriculture, transportation, public safety, higher education and state departments.

The House and Senate have passed their own versions of finance bills, and conference committee negotiators are merging their work with a budget plan offered by Dayton.

With most conference committee work expected to be done by Friday night, the end of the session likely will be busy with lawmakers passing the entire $38 billion, two-year budget in its final hours.

Republicans have said Democrats might struggle to meet their deadline.

“We’ve got several moving parts,” Davids said. “I don’t know if they can get done on time.”

Earlier this week, Senate Majority Leader Tom Bakk, DFL-Cook, worried aloud that Republicans could filibuster and delay progress on spending bills that make up the budget.

“It is possible they could talk things to death and run out the session,” Bakk said.

Democrats control the House, Senate and governor’s office and can pass nearly every bill without Republican help. However, a proposed $800 million public works finance bill does need some GOP votes, and the party’s legislative leaders have not been very supportive.

Update: Dems release budget and tax guidelines with details to come

Bakk

By Don Davis

Minnesota political leaders have spent months preparing state budget plans, and eight days before the Legislature must adjourn for the year they announced they have reached agreement on some tax and spend guidelines.

Included in the budget framework is that the state would not raise sales taxes on consumer goods, such as clothing, but probably would add taxes businesses pay on sales to other businesses. They plan to raise income taxes on the top 2 percent of Minnesota earners and put a surcharge on taxes paid by the richest of the rich.

Cigarette taxes would go up under the plan, and negotiators could raise taxes on alcoholic drinks, too.

“It is a budget that is going to work for Minnesota and put Minnesotans to work,” Gov. Mark Dayton said Sunday when he announced the agreement with Democratic legislative leaders on their $38 billion, two-year budget plan that aims to raise taxes $2 billion.

Dayton, Senate Majority Leader Tom Bakk, DFL-Cook, and House Speaker Paul Thissen, DFL-Minneapolis, briefed reporters on the budget deal Sunday afternoon. The Legislature must adjourn by May 20, and the trio of leaders said House-Senate conference committees will negotiate details, such as how much the various taxes would increase.

“On the tax side, the tax committee is going to work out all the details,” Bakk said.

Bakk said the budget outline will make sure two Minnesota priorities are met: more money for education and property tax relief.

When Democrat Dayton released his budget plan in January, he called for higher sales taxes at the consumer and business levels. The idea produced protests from many segments, so he dropped them from a revised plan and pledged to oppose Senate efforts to revive the concept.

Dayton said there is nothing in the tax plan, other than a cigarette tax hike, “that will affect middle income taxpayers.”

However, after reporters pressed him, he admitted that “any tax on business, economists will say, could filter down.”

Eventually, he added about the middle class paying more: “I can’t say they won’t.”

Some of the guidelines Dayton, Bakk and Thissen said they are passing to conference committees include:

– Education at all levels would receive more than $1 million more than under the current two-year budget.

– The sales tax would not rise on consumer goods, including clothing, but businesses could pay sales tax on goods sold to other businesses.

– Income taxes would go up on people in the top 2 percent of Minnesota earners, couples with $250,000 or more annual taxable income and individuals making $150,000 or more.

– An income tax surcharge would be added for Minnesota’s richest of the rich, with proceeds going to help repay money the state has borrowed from school districts. The level of the surcharge would not be decided until the current budget ends June 30.

– Cigarette taxes would rise and taxes on alcoholic drinks also could go up.

– Some business tax breaks would disappear.

– All-day kindergarten would be funded across the state.

– The state would spend $400 million in property tax relief, such as by increasing aid sent to local governments.

Thissen said legislative pay could be raised under the budget, but the leaders did not make that decision. There also was no decision on whether to raise the gasoline tax, as the Senate voted last week.

Also awaiting a decision is how to back up lagging Vikings stadium construction funding.

The three leaders said the tax conference committee will decide the stadium issue, but Dayton said that “we have a couple ideas.”

Taxes on electronic pulltabs are far short of expectations, and there has been a demand from legislators and others to find a more reliable source of funds.

“We are going to get a stable source that is more than sufficient,” Dayton promised, without giving a hint about how that might look.

An $800 million public works funding bill, to be financed by the state selling bonds, was included in the budget framework.

House Minority Leader Kurt Daudt, R-Crown, said Republicans are not interested in that large of a bonding bill. Many Republicans have said they support renovation work on the Capitol building, but little else this year.

Daudt and Senate Minority Leader David Hann, R-Eden Prairie, said that when all Democratic-Farmer-Labor taxes are added up they could approach $3 billion in the next two-year budget cycle.

If Democrats vote together, Republicans do not have the votes to stop any spending or tax bill other than bonding.

Hann, Daudt