Republicans in the Minnesota House and Senate plan to start negotiating Tuesday with Gov. Mark Dayton's commissioners on individual budget bills.
Dayton authorized the discussions during a morning meeting with GOP leaders, but there's still no sign of an overall deal to erase a projected $5 billion budget deficit.
Senate Majority Leader Amy Koch, R-Buffalo, said Republican will now follow a two-pronged strategy for the remaining days of the session.
"Depending on these negotiations, we have to send bills and a balanced budget to the desk of the governor by May 23," Koch said. "That's our job. So, we're fulfilling that at the same time continuing to discuss with the governor, trying to get the governor and his commissioners to the table for negotiations."
Dayton said Republicans refuse to compromise on spending and taxes. He said he is pessimistic about a timely end of the session.
Dayton scaled back his proposed tax increase Monday, in hopes of reaching out to Republicans legislative leaders. But the offer was quickly rejected.
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Dayton's revised plan increases the beginning threshold for the new income tax rate of 10.95 percent to $250,000 in taxable income for married couples, up from an earlier threshold of $150,000. His new threshold for single filers is $150,000, up from $85,000.
Under the governor's plan, Minnesotans with such adjusted incomes would have to pay the higher tax rate only on the money they earn above those thresholds. The governor also dropped a proposed property tax increase on homes valued at $1 million or more.
Dayton said his revised plan would raise income taxes on less than 2 percent of Minnesotans. His previous plan covered about 5 percent of the highest earners.
But Republicans remain firmly opposed to any tax increases and flatly rejected Dayton's new offer. They also repeated their contention that the budget must be balanced through spending cuts alone.
Dayton, however, said he's ready to compromise, and he expects Republicans to do the same.
"[Our chamber] stands shoulder to shoulder with our governor, because he is our last line of defense on this ill-conceived initiative."
Lawmakers must reach a budget deal that erases a projected $5 billion deficit. Dayton and Republican leaders have already agreed in principle to continue delaying $1.4 billion in payments to school districts, which cuts the deficit by that amount.
Dayton said his new proposal would erase half of the remaining $3.6 billion shortfall with new tax revenue and half by cutting spending. He said the Republicans' proposal to balance the books through spending cuts alone is unreasonable and extreme.
"The all-cuts budget has just a terrible effect on Minnesotans all over this state, on our quality of life, on our future, and I'm not going to agree to it," the governor said. "I've offered to meet them halfway, and I'm not going to do any more than that. It's their responsibility to meet me halfway, and then we'll have a resolution, and we'll all go home next Monday."
Dayton's revised proposal followed a weekend newspaper poll that showed a majority of Minnesotans support a balance of cuts and taxes.
Republican House and Senate leaders rejected both the governor's plan and the poll results. House Speaker Kurt Zellers of Maple Grove said Minnesota must stay competitive with its neighboring states in attracting businesses and jobs.
He also criticized the governor for making a final offer with a week left in the session.
"There's plenty of room for negotiations. There are many things that we can agree on. We are close in a lot of stuff," said Zellers. "But to throw the baby with the bathwater out the window and say, 'I'm done right now,' to throw your sucker in the dirt and quit is a bad idea and it's not leadership."
Senate Majority Leader Amy Koch of Buffalo said she will continue to talk to Dayton to seek compromise on the nine individual budget bills that are nearly complete. But Koch said Republicans insist on balancing the budget with available revenue.
"Historic majorities in both the House and the Senate were elected on holding the line on taxes and spending in the state of Minnesota," Koch said. "That's what we came here to do and we intend to do that."
The Republican leaders argue that Minnesota business owners will be less likely to hire people if income taxes go up.
The heads of several local chambers of commerce disagreed. Duluth Chamber of Commerce President David Ross says the Republican plan would drive up property taxes for homeowners and businesses by cutting aid to cities.
"The Duluth Area Chamber stands shoulder to shoulder with our governor, because he is our last line of defense on this ill-conceived initiative," said Ross. "We stand with the governor. We applaud him. We hope that he will veto any initiative that is so lopsided and is so parochial."
Koch and Zellers claim there is no support in the Legislature for a tax increase, even among Democrats. But DFL leaders disagree.
Senate Minority Leader Tom Bakk of Cook and House Minority Leader Paul Thissen of Minneapolis predicted their caucuses will line up behind Dayton. Bakk said the public needs to speak up.
"Public opinion should drive this process, and I do hope that Minnesotans over the next week weigh in and try to pound some sense into these people that are so incredibly inflexible that they need to compromise," Bakk said. ""Clearly the public is already there well ahead of them."
If the tax issue isn't resolved by next Monday's scheduled adjournment, lawmakers will need a special session to finish the budget. A partial government shutdown looms if the impasse drags on until July 1.