Dayton's budget spares state aid to cities and counties

Dayton unveils bonding bill
Gov. Mark Dayton rolled out about 200 bonding projects at the State Capitol on Monday, Jan. 31, 2011. The $531 million in projects are part of a larger $1 billion bonding bill. He displayed a map showing the locations of the projects he was proposing.
MPR Photo/Tim Nelson

Gov. Mark Dayton releases his budget plan Tuesday and it's expected to protect funding for state aid to cities and counties.

An official who has seen Dayton's budget plans says the governor will not cut any funding to local government aid in his budget plan.

Over the past few months, Dayton has been critical of any efforts to cut funding for the program, saying such cuts increase property taxes across the state.

The person, who asked to remain anonymous to avoid conflicting with Dayton's official announcement, said the governor will fully fund aid to cities and counties in his budget plan, which amounts to $3.5 billion over the next two years.

The measure is only a small part of Dayton's full budget plan to close a projected $6.2 billion deficit. Dayton is also expected to increase income taxes on Minnesota's top earners to help plug the gap.

For months, Dayton has cited property taxes as being one of the most unfair ways government raises money.

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"It's also an unfair tax because you have to pay it whether or not you have a job, whether or not you have an income, whether or not your farm or your business produces a profit," Dayton told a farm group last week. "You pay the property tax or you lose your property."

Dayton has been arguing that recent increases in property taxes are directly correlated to the cuts in state funding to local governments made during Tim Pawlenty's eight years as governor.

Jim Miller, executive director of the League of Minnesota Cities, spoke to MPR News before the LGA portion of Dayton's budget was released. He said he is still worried cities and counties will be caught in a debate over local government aid.

"I don't think it's going to be an easy resolution to the budget by any means and I suspect that local government aid will continue to be vulnerable right until the very end," he said.

Dayton's decision to fully fund LGA creates a clear distinction between his plan and efforts put forward by the GOP controlled Legislature.

Dayton vetoed a bill last week that would have cut $300 million in LGA over the next two years.

By fully backing LGA, Dayton is trying to set up a distinction that he's representing low- and middle-class Minnesotans, while Republicans are trying to protect wealthier Minnesotans.

Wealthier Minnesotans will pay more under Dayton's plan. The governor has said he wants to raise income taxes on Minnesota's top-earners, a plan that Republicans oppose. Business groups, including the Minnesota Chamber of Commerce, also oppose a tax increase. The Chamber's Tom Hesse said any increases would harm Minnesota's ability to compete with other states.

"From our perspective, we just hope that there's no increased burden on the corporate income tax side in Gov. Dayton's budget," he said. "We'd love to see a reduction, but that's not likely."

Dayton's plan seems likely to hit a wall in the Republican-controlled Legislature. The chairs of the House and Senate Tax Committees say there is little support for Dayton's tax hikes.

Other groups are watching to see whether Dayton maintains his commitment to increase funding for K-12 schools, with a specific emphasis on the state's youngest students.

Scott Croonquist, of the Association of Metropolitan School Districts, said he does not expect Dayton to increase the basic per-pupil funding formula for schools or pay back any of last year's delayed payments to school districts. But he said he's eager to learn how much Dayton wants to spend on all-day kindergarten.

"That is not done on the cheap. It's an expensive investment," he said. "And so, we're looking forward to seeing the governor propose some new funding there, and try to make some advances in terms of being able to make sure that is a program that is available statewide."

If Dayton protects education from cuts, he's keeping about 40 percent of the budget off the table. Health and human services is the next biggest slice of the budget pie at about 30 percent. Patti Cullen, CEO of Care Providers of Minnesota, said the nursing homes and assisted living facilities she represents are bracing for cuts.

"You can't solve this huge budget deficit without some measure of cuts in health and human services, and we're just hoping that it's a minimal amount," she said. "We've gone several years without rate increases, so it's already a tense situation out there."

Committees in both the House and Senate will start holding hearings on Dayton's budget plan on Wednesday.