Pawlenty vetoes tax bill (and more)

Capping a regular legislative session defined by his vetoes, Gov. Tim Pawlenty fulfilled a threat and vetoed a tax bill on Wednesday, taking down with it more than $70 million in local government aids and $33 million in direct homeowner property tax relief.

Also falling to Pawlenty's veto pen were public subsidies for expansion of the Mall of America and Thomson-West publishing, as well as a state guarantee of costs associated with next year's Republican National Convention.

Pawlenty did sign three other funding bills, for transportation, higher education and K-12 schools, but he used his line-item veto to kill seven appropriations, including $4.5 million in state money for the merger of the Minneapolis and Hennepin County library systems.

Pawlenty's office and legislative leaders kept open the possibility of a special session, but Pawlenty spokesman Brian McClung said there was no immediate need to have legislators return to the Capitol before the 2008 legislative session. The failure of a tax bill has no direct impact on any of the other funding bills.

Pawlenty, who left some of his own pet projects on the cutting-room floor, said he was supportive of much in the tax bill. But he said he refused to sign the measure because it contained a provision that would factor in inflation-caused spending increases in future budget forecasts.

Republican Pawlenty and DFL legislative leaders went head-to-head over the provision in the waning days of the session, with both the House and Senate leadership contending that inflation is a fact of life, and including it in budget forecasts more accurately reflects the financial shape of the state. In his veto message, Pawlenty said the provision would have put "government growth on autopilot."

DFLers had hoped to use a provision tightening corporate tax breaks to fuel $125 million in property-tax relief, mostly through local government aids and credits. In his veto letter, Pawlenty said more relief should have flowed directly to homeowners rather than to governments.

Minneapolis had expected to see an increase in Local Government Aid of more than $13 million. St. Paul was due to receive an increase of more than $9 million.

"The impact of the governor's stubbornness is clear: this veto will only mean higher local property taxes and fewer cops on the streets of cities throughout the state," said Minneapolis Mayor R.T. Rybak.

And St. Paul Mayor Chris Coleman said Pawlenty's "decision to shift the fiscal burden onto local governments has ... jeopardized our ability to continue investing in public safety programs and provide quality core services such as parks and libraries."

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said during an appearance on Minnesota Public Radio that she was open to the prospect of a one-day special session but that she would want to explore options for reviving a capital investment bill that also was vetoed by Pawlenty.

McClung did not completely rule out a special session when he said: "Today's action by the governor concludes the 2007 legislative session. It [a special session] seems to be an annual ritual, but we're just going to leave it that a special session doesn't seem to be necessary."

Despite voicing general support of state assistance with infrastructure improvements for the $1.7 billion Mall of America expansion project, Pawlenty said he objected to tapping a commercial-industrial tax base sharing program in the metro area, known as Fiscal Disparities. Pawlenty urged the Legislature to explore a different method of funding. The money would be used to fund an 8,000-space, $180 million parking garage.

A mall representative would not say whether the veto jeopardizes the expansion plans and refused to elaborate beyond a statement that said, "We are hopeful our political leaders will find a solution to the omnibus tax bill that will allow Phase II to move forward as soon as possible."

Education and transportation

Pawlenty vetoed only a couple of small items in the $3.2 billion higher education bill. That bill takes a step toward controlling mushrooming tuition and textbook costs, limiting tuition increases to about 3.5 percent a year over the next two years at the University of Minnesota and to less than 4 percent a year at Minnesota State Colleges and Universities (MnSCU) institutions.

His pen was busier on the $13.7 billion K-12 education bill, which he noted he signed "reluctantly."

He vetoed the $4.5 million appropriation for the merger of the Hennepin County and Minneapolis library systems, saying the merger should be a local decision.

Hennepin County Board Chairman Randy Johnson said late Wednesday that he was "stunned and frustrated" and that the veto "very definitely jeopardizes the merger." He hopes to speak with fellow Republican Pawlenty today.

Approved was almost $790 million in new funding for schools, including $326 million to reimburse schools for special education costs, and a basic education funding increase of 2 percent this year and 1 percent next year.

As expected, Pawlenty signed a bare-bones transportation funding bill with no tax increases, vetoing only one item. The bill replaced one vetoed by the governor that would have raised taxes on motor fuel, vehicles and general sales in the Twin Cities to pump about $640 million a year in new money into roads and transit. The revised bill appropriates $3.8 billion over two years, mostly from existing revenue.

Staff writers Norman Draper, Terry Collins, Conrad DeFiebre and Pat Lopez contributed to this report. Mark Brunswick • 651-222-1636 • mbrunswick@startribune.com