Tags: MN | XGR | Minnesota | Budget

Pawlenty Veto Leaves Budget Void As Session Erodes

Tuesday, 11 May 2010 02:15 PM

Gov. Tim Pawlenty made good Tuesday on his threat to veto a Democratic plan to repair Minnesota's budget because the bill includes a tax increase.

The veto, which came less than a day after the Legislature passed the bill with only Democratic votes, is likely to stand because they were well shy of the votes for an override. The plan would have created a new income tax bracket for some Minnesota residents who make more than six figures.

Pawlenty's letter accompanying the veto said the new tax would send a bad signal to Minnesota business owners because some use the personal income tax to report their earnings.

"It is nonsensical to increase taxes on job providers merely weeks after I signed a bill to provide tax incentives for Minnesota businesses to grow jobs," Pawlenty wrote to lawmakers. "This behavior sends a confusing and mixed message to companies looking to produce jobs in Minnesota."

He said he still hopes to work toward a deal with lawmakers.

State leaders now have just six days to fix a $2.9 billion deficit if they want to avoid a special session. While that figure seems daunting, only about one-sixth of a solution is truly in dispute.

"I'm still hopeful there can be a solution by Monday. That is still the goal here," said House Speaker Margaret Anderson Kelliher, a Democrat running for governor.

The legislation also contained spending cuts and payment deferrals similar to those tried before by Pawlenty.

House Minority Leader Kurt Zellers, R-Maple Grove, said Monday that he hoped the veto will cause all sides to get serious about finding a solution.

"The `who wins, who loses' arguments are now done," Zellers said. "The public wants us to get our work done and get out of here."

Democrats have argued that their plan, which would have raised more than $430 million from a new tax, was a fair fix to the latest in a series of budget deficits.

More than 122,000 high-income taxpayers would pay the new 9.1 percent tax, which would go away if the state started running a surplus. Democrats said it would stave off additional cuts to state services for vulnerable residents and ease financial pressure on schools.

"The question is: Are we going to be leaders who stand up and protect people who don't need our protection," said Rep. Ryan Winkler, a Golden Valley Democrat, "or are we going to make the choice to be leaders who stand up and vote to protect people who need us?"

It's not the first time Democrats have tried to impose higher taxes on six-figure incomes as part of a budget fix. Pawlenty has blocked previous efforts, too.

This bill passed 71-63 in the House and 34-33 in the Senate. Twenty-eight Democrats sided with all Republicans in opposition.

Lawmakers appear likely to accept many parts of a previous Pawlenty budget fix, which was undone last week by the state Supreme Court because of the way the governor imposed it. His plan delayed payments to schools and made an array of temporary spending cuts.

There's also $400 million in federal aid that could arrive from Washington, albeit not in time for the adjournment deadline.

Zellers said his Republican members could agree to a set of cuts that would take effect only if the federal money doesn't show up. "This is an insurance policy so if the money doesn't come in, at least you have something in place," he said.

Kelliher told reporters Tuesday that assuring schools of a repayment plan for money borrowed from them in the past is key.

"It's pretty clear the Legislature is willing to vote for deeper cuts. They're willing to vote for a school shift and borrowing that gets paid back, but it does have to have some form of revenue that pays it back," she said. "The question is does the governor have the courage to sign that plan?"

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