GOP plan to repay schools vetoed

Gov. Mark Dayton on Thursday vetoed Republican legislators' measure to repay schools using Minnesota's reserve funds, issuing the first of what could be a string of vetoes against GOP signature proposals.

The DFL governor said drawing down the state's reserves to refill school coffers might be politically appealing but would be fiscally irresponsible. Dayton had proposed paying back schools by closing a tax rule that allows Minnesota companies with foreign operations to avoid paying the state.

"The legislative majority decided that protecting large corporations' tax breaks ... was more important than paying back our schools responsibly," Dayton said in his veto letter.

The move quashes a Republican priority and may presage a coming raft of vetoes before the session ends this spring. Dayton has indicated that several GOP education and tax bills also may fall to his veto pen.

The state now owes K-12 schools $2.4 billion, the result of accounting shifts and forced borrowing to avoid tax increases or deeper cuts elsewhere in the budget.

House Speaker Kurt Zellers, R-Maple Grove, said Dayton's veto letter read like a "diatribe" or a fundraiser for the liberal group MoveOn.org. House Majority Leader Matt Dean, R-Dellwood, declared himself perplexed by Dayton's action.

"To say that it is somehow political? Just because something is popular with the people and it is something that the people want, doesn't necessarily mean that we shouldn't do it. This is a good idea," Dean said.

"Only in DFL la-la land is paying back money borrowed from school districts 'irresponsible.' In fact, it's the only responsible thing to do," he said.

Last year, the governor and the Republican Legislature adopted a school shift that delayed state payments to schools, helping end a three-week stalemate and state government shutdown.

The shift makes it more difficult for schools to do their own budgeting and is unpopular among school administrators and in many cities and towns.

This year the state projected a more than $1 billion budget surplus, which by law goes to build the state's budget reserve back to $653 million. The state began to pay back the school finance shift with $318 million. Republican lawmakers wanted to tap the newly refilled reserve to repay schools more quickly.

But Jim Schowalter, Dayton's Minnesota Management and Budget commissioner, said the state is already in a "really perilous" cash flow situation that the GOP school shift payback plan would have made worse.

The debate over who is more fiscally responsible is sure to leak into the November elections, in which the entire Legislature will be on the ballot. DFLers, who applauded Dayton's veto, say they hold the upper hand in good budgeting; Republicans say their methods have common sense on their side.

But Dayton, who is not up for re-election until 2014, has sole power to sign or veto any idea that crosses his desk. He started this session by vetoing three Republican-supported bills that would have overhauled legal tort rules. Thursday's veto was his ninth this year.

"If they decide they are going to send the bills to me that I'm not willing to support, then I'll veto them," Dayton said. "If they are willing to negotiate between now and the end of the session ... then there are still things we can work out."

Rachel E. Stassen-Berger • Twitter: @rachelsb