The “all-star” budget group formed by former Vice President Walter Mondale and ex-Gov. Arne Carlson announced Thursday how its bipartisan members would solve Minnesota’s budget deficit — and Republicans won’t be happy with the result.
The “Minnesota Plan Committee,” [PDF] as Carlson dubbed it on Tuesday, would bridge Minnesota’s $5 billion shortfall through a combination of 70 percent spending cuts and 30 percent revenue increases.
The group’s budget framework [PDF] would cut $3.6 billion in projected spending and raise revenue through a variety of taxes and surcharges. They include a $250 million Health and Human Services surcharge, a $330 million tobacco tax increase, an inflationary increase in the alcohol tax and an across-the-board 4 percent income tax hike on all Minnesotans that would raise about $700 million and “sunset” in three years.
But, the committee’s plan is also much further reaching than Dayton’s would-be deals. It adds an additional 29 cent tax to cigarettes than the one the governor proposed (equaling Wisconsin’s) and would increase taxes on all state residents instead of only the richest.
The proposal “is not only geared at the rich. It’s geared at everybody,” said committee member Jay Kiedrowski, a senior fellow at the Humphrey Institute of Public Affairs and a former state finance commissioner.
Dayton, who said in a statement that he’s pleased with the work of the “very distinguished committee,” did take issue with the proposed across-the-board income tax increase.
“I respectfully differ with the Committee on their recommendation of a 4 percent temporary income tax surcharge on all Minnesota taxpayers,” he said. “My goal has consistently been to protect most Minnesotans from either an income tax increase or a property tax increase, by raising state income taxes on only the wealthiest 2 percent of Minnesotans.”
Republicans didn’t immediately respond to the proposal but will likely disagree.
Senate Majority Leader Amy Koch previously expressed skepticism over the necessity of the group, and the GOP leaders strongly rejected Dayton’s proposal Wednesday to increase cigarette taxes. They called the offer “incredibly disappointing” and “a giant step back.”
Dayton, in turn, blasted legislative Republicans for not accepting any of the compromises he’s proposed in the last few days and called for them to bring their own counter-offer to the table.
Either way, the committee’s proposal broadly overreaches anything the GOP majorities would agree to. Because it doesn’t include a $1 billion extension of payment delays to K-12 schools, the committee proposed far more taxes than even the governor. It also spends $35.4 billion, a huge step up from the $34.2 billion that the GOP says it’s willing to spend.
In outlining their “framework for a budget solution,” Kiedrowski said one of the main focuses is that all Minnesotans should contribute to the effort.
He served on the committee with Minnetonka City Manager and a former Minnesota finance commissioner John Gunyou, former Rep. Wayne Simoneau, former Sen. Steve Dille, former Wells Fargo Chairman and CEO Jim Campbell and Affinity Capital Management President Kris Johnson..
The committee’s report also says “shifts and gimmicks” shouldn’t be used to plug a shortfall and that both spending cuts and revenues should be part of the equation.
The beginning of the group’s report states: “The budget impasse is unprecedented and must be addressed as soon as possible. Minnesotans are suffering, our reputation has been hurt, and our credit rating is endangered.”
The budget framework came out minutes before Minnesota Management and Budget Commissioner Jim Schowalter announced that a bond rating agency downgraded the state’s status from AAA to AA+.
Schowalter said in a statement that Fitch Rating, one of three agencies that reviews Minnesota’s finances, cited the same “shifts and gimmicks” as a reason for downgrading Minnesota’s rating.
“This downgrade is a sad statement for those who have worked to deliver quality public services and took our high ratings extremely seriously. The best we can do now is to resolve the budget debate in a timely fashion and in a manner that addresses our long-term financial stability,” Schowalter said.