Senate DFL proposes cuts, $2 billion tax hike

The richest Minnesotans would pay more taxes and schools would lose $1 billion under a Senate DFL plan.

Democratic senators Thursday proposed chopping state budgets 7 percent across the board, including education, which Gov. Tim Pawlenty spared in his budget proposal.

However, the DFL plan does not include $2 billion in federal economic stimulus money that lawmakers still do not know just how they can use.

The Thursday announcement brought the first public acknowledgment that Democrats would increase taxes to help balance the budget.

Senate Taxes Chairman Tom Bakk, DFL-Cook, said a "lion's share" of the $2 billion in new revenue would come from higher taxes on the rich, apparently via the income tax.

The plan calls for cutting every segment of state government, for a total of $2.4 billion.

While the DFL leaders say they would take roughly equal amounts of new taxes and program cuts to balance the budget, they have yet to figure out where to put about $2 billion in federal economic stimulus money. Given that, Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said education cuts may end up being moderated once details of how the state can spend the federal money are unraveled.

The state's $33 billion two-year budget would be $6.4 billion short without cuts, new taxes and federal money. Pawlenty figures the federal money into his budget and calls the deficit $4.6 billion.

He is to announce changes to his budget in the next week to 10 days, taking into account recent economic changes.

Pawlenty's spokesman said it was good that DFL leaders "are finally publicly admitting they'd like to wallop the families and small businesses of Minnesota with massive tax increases." Brian McClung added that the cuts did not look at funding priorities.

"An off-the-shelf computer program could do these kinds of across-the-board cuts," McClung said. "We would expect more from DFL legislators."

Tom Dooher, president of Education Minnesota, was not happy with the Senate announcement.

"The proposed cuts are not in the best interest of Minnesota's school children," Dooher said. "If enacted, they would seriously harm the quality of education the state takes pride in providing its students."

House leaders plan to announce their budget outline soon, too.

House and Senate committees will work out details of their budgets, then establish conference committees to work out differences between the two budgets.

Pawlenty often has said he will veto tax increases, and Pogemiller has said that he believes Pawlenty.

A third of the budget balancing act Democrats propose relies on higher taxes.

Bakk said he would not allow his committee to consider adding the sales tax to clothing or services. Other taxes may be considered, he said, although higher taxes on the rich are his primary goal.

Bakk also said he would like to freeze the amount of money the state gives local governments at a time when most policymakers are calling for a cut in Local Government Aid. Pawlenty would cut the aid, which has raised city leaders' ire.

Local governments will be forced to enact moderate property tax increases to deal with the DFL budget, Bakk said, but less than under Pawlenty's proposal.

Republican senators said they were not consulted about the proposal. They called tax increases job killers, supporting Pawlenty's proposed business tax cuts instead.

Pogemiller said drastic measures such as the 7 percent cut are needed because of the current recession. Most of the cuts, he added, will be to programs most affecting the state's needy residents. He called the economy "as bad, potentially, as the 1930s."