Update: Panel Offers Alternative Plan to Break State Budget Stalemate

At the end of the first week of the Minnesota government shutdown came this alternative plan: $2.2 billion in permanent cuts, $1.4 billion in accounting shifts and $1.4 billion in new revenue — including a temporary, across-the-board 4 percent tax increase on personal incomes.

Those are the proposed recommendations from the independent panel of Republicans, Democrats and policy experts who came together to solve Minnesota’s budget impasse.

The bipartisan committee tasked with creating a so-called third alternative issued its recommendations Thursday afternoon to Gov. Mark Dayton and Republican lawmakers.

In a two-page document, the committee outlines a framework for closing the $5 billion deficit by balancing 70 percent of it through spending cuts and the remaining 30 percent by increasing revenue.

The committee based its recommendations on three strategies:

• Cut state spending $3.6 billion from projections, which results in a biennial budget increase of 3 percent (or 1.5 percent increase per year).
• Raise income taxes 4 percent for everyone during the two years of this budget (an expected $700 million).
• Increase state revenues from a Human Services surcharge ($250 million), a tobacco tax increase of $1.29 per pack (an expected $330 million) and an alcohol tax inflation increase ($140 million).

Over the long term, the committee recommended, sales taxes should be broadened and lowered.

“I note that most of the committee’s recommendations parallel my own proposals,” Dayton wrote in a statement to the media.

Dayton cited that the $2.2 billion in recommended permanent spending cuts is close to the nearly $2.1 billion he has proposed. The recommend $700 million from raised alcohol and tobacco taxes, along with a human service surcharge, also seems drawn to the letter of Dayton’s latest proposals.

Still, Dayton wasn’t ready to wholeheartedly endorse the recommendations. Specifically, he said, the governor does “respectfully differ” with the recommended 4 percent temporary income tax hike for all Minnesota taxpayers.

“My goal has consistently been to protect most Minnesotans from either an income tax increase or a property tax increase, by raising state income taxes on only the wealthiest 2 percent of Minnesotans,” he wrote.

Roseville State District 54 Sen. John Marty called the alternative plan from the bipartisan committee "a good attempt to bridge the gap. I think it is a reasonable compromise and something we should be looking at. I think it's got some potential." 

Marty added that he hopes GOP leaders back away from their immediate reaction to dismiss the proposal. Asked about the viability of the proposed 4 percent temporary income tax increase on all Minnesotans, Marty said that probably an attempt by the panel to spread the pain to all taxpayers."

Minnetonka City Manager John Gunyou, a member of the committee, told Patch “there was a surprising commonality of thinking in the room” during the process of devising this budget resolution.

“We were all pretty pragmatic. We didn’t look at it from a real political standpoint,” Gunyou said. “But we’re also realists, so we talked through a lot of the options. The framework just made sense.”

Committee members knew there would be little happiness over the proposal to raise taxes on Minnesotans, Gunyou said.

“We had a nice long talk about that,” he said with a laugh.  “Interestingly, everyone was pretty much in agreement. The feeling was that this needs to be shared by everyone. We’re hoping that might be a way to address this disagreement about who is paying what share, or a fair share.”

Dayton turned the pressure on Republicans in the legislature, calling this framework the third “compromise proposal (the Republicans) have received in the past 24 hours.”

The committee was created by former Minnesota politicians Vice President Walter Mondale, Gov. Arne Carlson and U.S. Sen. Dave Durenberger. Along with Gunyou, members included former Republican senator Steve Dille, former DFL legislator Wayne Simoneau, former state Finance Commissioner Jay Kiedrowski, former Wells Fargo CEO Jim Campbell, former Medtronic vice-president Kris Johnson and current Minnesota Management and Budget commissioner Jim Schowalter.

OK — ready to run. (matt)

July 7 UPDATE

YOUR PATCH Prepares for Transit Cuts in Shadow of Government Shutdown

By Jeff Roberts

<<LOCALIZE>> Lakeville, Burnsville, Minnetonka, Stillwater, Woodbury and Hopkins <<LOCALIZE>>

Metro Transit has proposed cutting bus routes throughout the metro within the next year because of funding cuts from the Minnesota state legislature.

The Metropolitan Council is bracing to lose 85 percent of its 2012-2013 Metro Transit funding when the Minnesota state legislature passes its budget at the end of the state government shutdown.

With the shutdown showing no signs of ending soon, the Met Council is planning its future services based on the most recent proposal it received from the legislature—a worst-case scenario reduction of $109 million for 2012-13 transit operations.

If the actual budg