Dayton sees no easy solution to budget feud with Republicans

Dayton delivers his State of the State
Gov. Mark Dayton delivered his 2015 State of the State address at the House Chamber, April 9, 2015. House Speaker Kurt Daudt stood behind him.
Glen Stubbe | Star Tribune via AP

With less than a month to go in the legislative session, Gov. Mark Dayton and House Republicans remain far apart on spending issues.

The differences are so striking that Dayton said Tuesday that he is not optimistic about an easy resolution to the differences between his budget proposal and the Republican plan.

Dayton criticized House Republicans for proposing $2 billion in tax cuts and a Health and Human Services budget plan that cuts $1.1 billion in spending. The governor said Republicans appear bent on tearing down gains made by Democrats the past two years.

"If they're going to use this as an opportunity to take a wrecking ball to everything we have built up in this state for health care," Dayton said, "and similarly for everything we built up through our budget over the last couple of years for fiscal integrity and responsibility, it's just a complete nonstarter."

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Criticizing the Republican budget for "phony savings and fictitious financing," he suggested GOP leaders scale back their plans for a tax cut and add more money to state budget reserves.

Dayton said he is willing to consider some form of middle income tax cuts, but he criticized the Republican tax bill for its future costs. He said the Republican plan for income tax cuts for individuals would only last two years. But plans to eliminate the statewide property tax, repeal the estate tax and exempt Social Security benefits would be permanent, he said.

The state Department of Revenue estimates that the tax bill would cost $2 billion this year but double to $4 billion in six years. Dayton warned the tax bill would put the state back in perpetual budget deficits.

"Why would we want to put Minnesota back on the same ledge as it was 15 years ago knowing what we know now about what the experience was over that period of time after the economy flattened out and then turned down?" he asked. "They want to set us up for the same."

Despite Dayton's criticism, the House Tax Committee moved forward with its bill. Rep. Greg Davids, chair of the House Tax Committee, joked earlier this week that he's only $2 billion away from Dayton. But he also acknowledged that his proposal will not become law.

"Although I love these numbers, and I love this bill, we realize that this is going to be somewhere between the House and the Senate and governor," said Davids, R-Preston. "We'll work together to make this thing go."

Other Republicans said it's unfair for Dayton to suggest their tax cuts would bust the budget without acknowledging that his plan for permanent spending increases would also impact the budget over the long-term.

When asked during a news conference about the difference, Dayton proposed both sides sock away more money into the state's budget reserve. For every dollar House Republicans take off of their tax plan, Dayton said he'd take a dollar away from his spending proposals.

House Speaker Kurt Daudt wasn't swayed by Dayton's offer.

"So let me get this right; if I take a dollar and put it in reserves where he can spend it next year, he'll reduce his spending by $1 this year?" asked Daudt, R-Crown. "That sounds like a good deal for the governor."

While Dayton is pessimistic about his differences with Republicans over most areas of the budget, there may be one area they can reach an agreement.

When asked about his thoughts on reaching a deal on a long-term transportation funding package, Dayton said it's "less impossible" than other budget items.