Public schools would suffer a nearly $1 billion budget bite over the next two years under a fiscal blueprint outlined Thursday by DFL Senate leaders, who also hinted at the likelihood of large income tax increases for the wealthy.
Republicans and education advocates decried the proposal, but DFLers said including schools in a 7 percent reduction to nearly every part of the state budget was necessary as the state and national economies continued to spiral through a major recession. "If everyone shares in it, this is going to be much easier," said Sen. Tom Bakk, DFL-Cook, the Senate Taxes Committee chairman, explaining the across-the-board budget cut plan.
With Republican Gov. Tim Pawlenty expected to release a revised budget shortly, Thursday's announcement signaled the beginning of a political tug of war at the State Capitol over how to resolve a budget deficit that has ballooned to $6.4 billion but has been tempered by a $1.8 billion injection of federal stimulus money.
Republicans said the DFL Senate plan to raise revenue by $2 billion, especially in a difficult economy, would lead to a backlash from taxpayers, and there were indications the plan would even find opposition among House DFLers.
Hours after the Senate plan was announced, House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said the House proposal, expected late next week, would include "significant cuts in spending, but not cuts across the board. Minnesotans tell us they want a strategic approach to budgeting that identifies priorities."
Bakk said the "lion's share" of the $2 billion in new revenue would come in income tax increases that would be focused on higher-income Minnesotans. But he said he personally opposed extending the state sales tax to clothing and service providers, such as accounting and legal services. Bakk, one of the Senate's most influential members and a gubernatorial candidate, also said he favored having local governments forgo various state aid payments and credits in a move he said would "freeze their aid payments where they're at today."
Republicans, including Senate Minority Leader David Senjem of Rochester, said that increasing taxes by $2 billion was almost certain to target middle-income taxpayers as well. "On a good day, maybe tax[ing] the rich is worth $800 million," he said. "Is Minnesota ready for this?"
But DFLers said the plan, which would cut $2.4 billion in spending over the next two years, would balance the state budget without resorting to what they described as one-time accounting gimmicks that Pawlenty wants to employ. Senate Majority Leader Larry Pogemiller also said the plan, by making difficult cuts now, would position Minnesota to avoid the budget rollercoaster many other states are experiencing. "If we don't resolve and balance now, we will be like California and other states that never get ahead of the game and are constantly cutting budgets and raising taxes," he said.
Senate leaders acknowledged that the $973 million in proposed K-12 education cuts over a two-year period would be difficult but said education represented too large a share of the overall state budget to be exempted. Under the plan, higher education would face $221 million in cuts over the same period. While pledging to spare local police and fire departments, the DFL Senate plan nonetheless calls for $78 million in public safety cuts over the next two years.
In an unusual political break from the DFL, the state's largest public teachers union criticized the education cuts as shortsighted. "The cuts would be devastating to our K-12 system," said Tom Dooher, president of the 70,000-member Education Minnesota. "Kids would end up in classrooms of 45 [students] or larger and that doesn't, to me, set a priority for Minnesota.
"Prioritize schools -- that's the way we're going to get out of this economic challenge," he said.
Dooher found an unlikely ally in Brian McClung, Pawlenty's spokesman, who had similar criticisms. "The DFL's proposal fails to set priorities by cutting everything equally, including some of the state's most important priorities: military and veterans programs, public safety, K-12 education, programs to crack down on sex offenders, and much more," said McClung.
"At least DFLers are finally publicly admitting they'd like to wallop the families and small businesses of Minnesota with massive tax increases," he added.
Tax aversion questioned
The plan's 7 percent cut would mean a $719 million reduction over two years to health and human service programs, a move that also brought a negative reaction from at least one prominent DFL senator. "There needs to be cuts, but we can't be cutting the most vulnerable," said Sen. John Marty, DFL-Roseville, another gubernatorial candidate. "From what I know about it, I'm not going to sign onto this."
Republicans had for weeks said that DFLers, who hold majorities in the House and Senate, would be proposing a tax increase but were reluctant politically to make it public. At one point Thursday, House Minority Leader Marty Seifert handed out an internal DFL document he said he obtained that showed DFLers had for weeks been debating a $2 billion tax increase plan. "This plan confirms what everyone has been waiting for," Seifert told reporters.
But Wayne Cox, the executive director of Minnesota Citizens for Tax Justice, a union lobbying group, said Republicans may in the end miscalculate the state's opposition to a tax increase. Twice within the past year, with the DFL's transportation initiative and the constitutional amendment for the outdoors and the arts, legislators and taxpayers had opted for tax increases, he said. "It seems to me like the voters are way ahead of the Republicans," Cox said.
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