The state budget that Gov. Mark Dayton plans to present Tuesday spares Minnesota cities and counties from further cuts in state aid.
Dayton will propose nearly $3.5 billion in funding to local governments, keeping aid exactly at the levels they had counted on. That's according to an administration official with knowledge of the budget and a page of the budget document to be released Tuesday.
The Dayton budget actually would increase city and county aid levels compared with current levels because of a temporary cut last year.
The GOP majorities in the House and Senate have made local government aid a target as the state attempts to cope with a $6.2 billion projected budget deficit. Meanwhile, cash-strapped cities and counties have seen local taxpayers in revolt as residents cope with higher property taxes and fewer services.
"Dayton's commitment to [local government aid] shows that he isn't going to stand for it anymore," said Nancy Carroll, president of the Coalition of Greater Minnesota Cities and mayor of Park Rapids, Minn.
Dayton makes that point in a page of the budget proposal to be released Tuesday.
"The state has exported part of its budget problems to local taxpayers," the page says.
During previous budget crunches, former Gov. Tim Pawlenty, a Republican, repeatedly cut state aid to cities and counties as a way to check rising state expenditures while keeping state tax rates steady. In response, local governments cut services, but also raised property taxes to help make up the gap.
To close the state's massive budget shortfall, Dayton will look for cuts elsewhere and will propose raising income taxes on the wealthy. He has also said he plans to increase funding for K-12 education.
Dayton's budget is expected to raise income taxes on those he called "the rich" during the campaign. The exact shape of that tax increase, and how much it will raise, will not be clear until Tuesday morning.
"I believe we must make taxes fairer in Minnesota. Doing so means asking our state's wealthiest citizens to pay more in taxes," Dayton said in a Star Tribune opinion piece.
In proposing that local governments get the aid they were expecting, Dayton will also lay an added measure of responsibility on them.
"Steady funding levels [mean] ... accountability for increased property taxes will rest squarely with local officials," according to a page of the budget obtained by the Star Tribune.
Not a done deal
The two-year, $35 billion state budget plan Dayton will release Tuesday is far from becoming reality.
Defying a request by the governor to wait on "piecemeal" budget proposals, the Legislature late last week passed nearly $1 billion in spending cuts that featured heavy reductions to local government aids. Within hours, Dayton issued his first veto to quash the bill.
House Taxes Chairman Greg Davids called Dayton's decision to spare local governments "a very unrealistic approach."
An income tax hike, said Davids, R-Preston, will never pass the Republican-led Legislature. "He needs to deal with the political realities of a House and Senate that are not going to go for that," he said.
Off the table
By sparing local aid and increasing K-12 funding, Dayton has protected a large portion of the state's budget -- the two budget areas together make up almost half of the state's $30 billion-plus budget. Health and human services make up the next largest chunk.
That means cuts and taxes elsewhere will have to be deep. Those details won't be released until Tuesday morning.
Dayton has leaked few hints on exactly where he would cut, but has said it will include pain.
City and county officials say they have shared enough pain. Now they are ready for a little relief.
"You can't keep beating communities over the head with increased property taxes -- which hit people the hardest -- and expect families to stay and businesses to survive," said Carroll, of the Coalition of Greater Minnesota Cities.
Rachel E. Stassen-Berger rachel.stassen-berger@startribune.com
