DFL still a long way from deal on budget

DFL legislative leaders are trying to convey a sense of calm and harmony, but beneath the surface they are scrambling to piece together a budget deal, sort out a funding shortfall for the new Minnesota Vikings stadium and avoid chasing off Mayo Clinic, the state's largest private employer.

Heading into the session's final stretch, Democrats also are digging in on tax increases despite heavy criticism from Republicans and business groups.

"We are not shying away from the fact that we need to raise taxes to invest in education and job creation and property tax relief," said House Speaker Paul Thissen, DFL-Minneapolis.

It's a treacherous political landscape and outside groups are already taking to the airwaves to land body blows during the crucial weeks before the Legislature adjourns on May 20 and campaign season gets underway.

"It's about spending, and spending too much," said Charlie Weaver, executive director of the Minnesota Business Partnership, which is part of a group that launched $600,000 in advertising to bash proposed tax hikes.

While many budget pieces are in play, some key elements are coming into focus.

Legislators will probably approve some version of DFL Gov. Mark Dayton's signature campaign pledge — an income tax hike on high earners. Dayton would use the money to erase the state's projected $627 million deficit and improve education.

But one-party rule is not entirely harmonious.

Senate Majority Leader Tom Bakk said his caucus may propose raising income taxes on the wealthiest 5 percent of Minnesotans. That would more than double the number of taxpayers that Dayton would tap and could reach down into what many Minnesotans consider the middle-class.

There is still no consensus on whether to expand sales taxes, back another pricey construction project or accelerate the payback of $808 million still owed to public schools.

Dayton has already sent strong signals about what he will not do, forcing the House and Senate to pull back expansive transit plans when he gave a thumbs down to raising the gasoline tax.

He has not yet said whether he will back the Senate's proposal for a clothing tax, but does not appear to be receptive.

The governor and Legislature are more than $300 million apart on health and human services, with legislators proposing cuts.

To pay for their wish-lists, legislators are exploring an array of other taxes, including tobacco, alcohol, clothing and consumer services.

"So this is taxing the rich, huh?" asked Senate Minority Leader David Hann, an Eden Prairie Republican. "This is excessive. We don't need to burden hardworking taxpayers by taking more money out of their pocket."

Dayton and legislative leaders have embraced increasing the tobacco tax, which could raise as much as $735 million over the next two years. Others are pressing for a nickel-a-drink hike on alcohol, which could bring in millions.

Dayton has remained cool to that idea, but political insiders are watching the issue more closely as a new lobbying force has entered the Capitol — Bill Messinger.

He is married to Dayton's former wife, Alida. She is an heir to the Rockefeller fortune and mother to the governor's two grown sons. Her millions helped get Dayton elected and the two remain close.

Dayton spokesman Bob Hume said the governor's reservations about the alcohol tax are not as strong as they are to the gas tax or sales tax expansion.

"If it was part of a larger tax bill that he was supportive of, he could come to a compromise," Hume said.

House and Senate leaders have other big differences, and the window for settling them is shrinking.

The House wants to spend $250 million in property tax relief that would largely be spread out across 1 million homeowners and renters in the form of rebates and credits. Some Senators don't like the idea.

Many House members dislike the Senate's proposal to broaden the sales tax to clothing and some personal services. The plan is similar — although smaller in scale — to an ambitious tax overhaul Dayton proposed and then quickly withdrew after searing opposition from the state's business leaders.

"We heard the governor when he said some reform or none at all," Lenczewski said. "We are not going to open that this year."

Legislators also are struggling to thread the needle on two controversial projects: The Vikings stadium and a request by Mayo Clinic for more than half a billion dollars in state aid to finance a makeover of Rochester, the clinic's home base.

Lawmakers who thought they settled the stadium issue last year have found to their dismay that the financing that was to have paid the state's share — e-pulltabs and e-bingo — are bringing in a fraction of the revenue expected, touching off a frantic search for cash.

Some legislator are pinning their hopes on a new tax on all professional sports memorabilia to come up with at least part of the state's $30-million-a-year tab.

Legislators have already rejected the clinic's initial plan, but are trying to craft alternatives, lest the renowned clinic move its expansion to satellite clinics in Arizona or Florida.

We are going to give Mayo's request "a little bit of a haircut," Lenczewski said. "I think it's a pretty heavy lift for Minnesotans, but we do realize that we are big beneficiaries by having Mayo Clinic here and having them grow here."

Legislative leaders have not yet begun meeting privately with Dayton to hack out an overall budget agreement. Some legislators hope the political realities of the coming weeks will resurrect some now dead ideas, like the gas tax hike.

"It's not over until it is over" said House Ways and Means Committee Chairman Lyndon Carlson, DFL-Crystal.

Minnesotans want good roads, Carlson said; "it's a little bit of a tug of war over how you pay for them."