$1.2 billion does not buy agreement
ST. PAUL -- Good news to the tune of $1.2 billion changed little about Minnesota's budget debate.
There was little evidence after Monday's news that a projected budget deficit has dropped from $6.2 billion to $5 billion smoothed differences between Democrat Gov. Mark Dayton and Republicans who control the Legislature.
"It is still a matter of serious concern," Dayton said.
Democrats and Republicans could not even agree on who was responsible for the better budget news.
House Speaker Kurt Zellers, R-Maple Grove, thanked employers and employees for paying more taxes to the state. House Minority Leader Paul Thissen, DFL-Minneapolis, thanked President Barack Obama and Dayton for creating a better economic climate.
The extra money produced immediate movement from Dayton. The Democrat governor immediately changed his proposed budget to eliminate an income tax surcharge and restore some funding to health programs such as nursing homes.
Monday's fiscal announcement, known as a budget forecast, lays the groundwork for the 2011 Legislature's major work: building a two-year budget.
If existing law remains in effect, the state would spend $39 billion in the two years beginning July 1, compared to about $30 billion in the current budget. Just $33 billion is due to be collected in taxes and fees, and nearly $1 billion will be left over from the current budget.
The new deficit figure is a "modest and helpful improvement," Commissioner Jim Schowalter of Minnesota Management and Budget said. "This does not mean the crisis is over. ... There are still quite a few budget challenges ahead for the state."
The challenges include questions about the Minnesota and national economy, which could be sent reeling by high oil prices.
Dayton, however, remained hopeful: "I am more optimistic than pessimistic."
Minnesota's deficit improved mostly because of $984 million higher-than-expected revenues in the next two years. Much of that improvement came from federal government changes that prompted more spending that in turn produced more state taxes, State Economist Tom Stinson said.
Dayton said that the better forecast means he will not pursue his proposed 3 percent income tax surcharge on people earning more than $500,000 a year.
The governor announced he will add back $200 million of cuts he planned for nursing homes, home-health-care providers and other health programs. However, there still would be some health-care cuts under his budget plan.
After returning from a National Governors' Association meeting in Washington, D.C., Dayton said Monday night that nursing home and home-health-care cuts that he earlier proposed appeared to be the most objectionable, so when new money appeared he restored some of what he trimmed.
Also, he will restore transit funding so city and rural bus fares do not need to increase.
Dayton's budget continues to trim $765 million from what agencies had expected to receive.
The changes were made to the budget plan Dayton presented two weeks ago.
Republicans who control the Legislature say they will release their own budget outline within a couple of weeks, with deeper cuts and no tax increases. Committees working on budget details must have their work done by March 25.
Big differences remain between Dayton and GOP leaders.
Dayton's budget plan called for spending $37 billion, while Republicans insisted on $32 billion. It was not clear if they would raise that amount in light of Monday's budget forecast.
Republicans had said they would negotiate how to spend the $32 billion, but will not raise more money.
"We live within our means with what is in the checkbook," Zellers said.
For Senate Minority Leader Tom Bakk, DFL-Cook, Monday's report was just returning the state budget to where it was a year ago, before economists boosted it to $6.2 billion.
Among Dayton's proposed tax increases that remain in his budget plan are his much-discussed plan to raise taxes on the richest 5 percent of Minnesotans, joint filers who earn more than $200,000 a year.
He also would place an extra property tax on homes worth more than $1 million.
Republicans say such tax increases would drive away businesses and business leaders that Minnesota needs to produce new jobs. They prefer cutting business taxes and finding other ways to make life easier for Minnesota companies.