DFL Gov. Mark Dayton offered to abandon his long-sought proposal to raise the gas tax Monday, instead recommending a steep increase in license tab fees and dipping into government coffers to pay for $600 million per year in road and bridge improvements.

"Compromise requires us to agree to things we don't agree with," Dayton said. "That is the only way to pass a transportation funding bill this session. Minnesotans everywhere need better highways, roads, bridges, and transit. They are telling us to 'Get it done.' That responsibility now falls upon all 201 legislators."

House Republicans flatly rejected the proposals, saying it amounted to unnecessary tax increases for consumers at a time when the state is sitting on a $900 million budget surplus.

The continued disagreement on transportation, which is a top priority for Dayton as well as House Republicans and Senate DFLers, was a portentous start to the Legislature's final week before the constitutionally-required adjournment May 23.

Legislative leaders have said a transportation deal is a linchpin of other agreements on taxes, a budget for the rest of the year and a major public works package.

Dayton actually unveiled two potential transportation compromise plans: The first included a scaled-back gas tax increase plus a hike in license fees. The other would rely solely on license tab fee increases, raising $400 million a year to create an ongoing stream of money for roads and bridges.

"We're still concerned that with a $900 million surplus, the governor has moved from $880 million in tax increases, to $680 million in tax increases," House Speaker Kurt Daudt, R-Crown, said after a brief meeting with Dayton and Senate Majority Leader Tom Bakk, DFL-Cook.

All sides are under enormous pressure as they consider the consequences of doing nothing when voters choose the next set of 201 lawmakers in November.

Dayton and Daudt said they would set aside work on a transportation package for the moment and try to reach agreement on other issues.

Daudt, who said he remains optimistic, said the parliamentary mechanics of herding a massive road and bridge deal and other measures through the Legislature by the deadline means the parties must have the broad outlines of an agreement by Tuesday evening.

Highlighting the deep divide late in the session, Bakk insisted that a gas tax must be part of the final agreement.

Bakk said the Senate DFL could accept Dayton's lower gas tax proposal, but is unlikely to approve a deal with only the sharp increase in license tab fees. Doing so, he said, would require significant Republican votes.

"Democrats have demonstrated a willingness to compromise. The House [GOP] hasn't," said Sen. Scott Dibble, DFL-Minneapolis, who is chairman of the Senate transportation committee. He said resolution now rests entirely in the hands of House Republicans.

Dayton has insisted on some kind of ongoing funding stream to pay for roads and bridge repair, particularly as transportation advocates and officials say the state faces a multibillion-dollar backlog of urgent projects.

Dayton's offer to do it solely through higher license tab fees would raise registration for a new $15,000 car from $198 to $265, a 34 percent increase. The cost of tabs for a new $30,000 car would go up from $385 to $509. License tab fees go down as a vehicle ages.

Dayton would pull the remaining $200 million of his plan from the general fund budget, which funds everything from health care to state parks to state salaries.

But Dayton would also provide for transit by raising the sales tax in the metro region by a half cent, raising $280 million to improve service for commuters and others who use public transportation.

Daudt, who lives on a farm, scoffed at the continued insistence on the transit tax: "For a mode of transportation that is used by so few … it just doesn't make sense at all to give them that kind of increase. [Dayton] didn't move at all on transit," he said.

On the license tab increase, Daudt's choice of words was telling. By calling the fee increase a "tax increase," he was signaling allegiance to the fiscally conservative wing of the GOP, which has demanded fealty to no-tax pledges. Some Republicans have argued that fee increases are different from tax hikes, providing political cover when talks turn to the need for new revenue.

The Republican plan, which passed the House last year and remains in legislative limbo without Senate approval, uses revenue on items like sales taxes on auto parts and leased and rental cars. That would shift the money from schools and other state government services and dedicate it to roads. Republicans would also use bonding money for roads. Their plan includes nothing for transit.

At a news conference shortly after Daudt spoke, Dayton ripped into the Republicans' intransigence and called their plan "fiction."

"They're not being honest with the people of Minnesota because it's not real money, and there's no movement toward a compromise position," Dayton said. "If that's their stance, we won't have a transportation bill this year, it will just prove to Minnesotans that divided government can't work for the better interests of the state," Dayton said.

patrick.coolican@startribune.com • 651-925-5042

ricardo.lopez@startribune.com • 651-925-5044