“Alternative” revenue proposals have been floating at the fringe of budget discussions since session began, often disregarded as unlikely considering the GOP’s insistence on tackling state spending and blocking tax hikes.
But, now, 11 days into Minnesota’s government shutdown, it’s become likely that revenue increases in some form will have to factor into a solution to the state’s $5 billion budget deficit.
The first serious offers rolled in the day before the shutdown began.
There was a plan first suggested by the Republican legislative leadership to move up payments from Minnesota’s tobacco settlement through bonds to bridge the gap with Gov. Mark Dayton,
Then, Dayton offered a revised plan that would have limited an increase in income taxes to only the extremely wealthy. He also proposed raising the tax on individual packs of cigarettes by $1, but the GOP quickly rejected both ideas.
Several seem open to non-income tax revenue boosts
And, while the GOP caucus’s commitment to oppose any tax increase might not truly be lessening, there are at least some Republicans who have expressed openness to using some new revenue to reach a deal with Dayton.
The revenue ideas have ranged from increased gambling (racinos at the metro area’s two horse tracks or a casino in the Minneapolis Block E complex) to expanding the state sales tax to online purchases to capping HMO profits.
It’s difficult for the proposals to make headway publicly, because individual Republicans are being careful not to contradict the leadership’s public stand on budget negotiations.
But at least some Republicans — in contrast with their “not a penny more” colleagues — are open to increased revenue to win a deal and put 23,000 state employees back to work.
The patchwork of individuals isn’t unified in the way those wearing penny pins are, but they could play an equally important role in solving Minnesota’s budget crisis.
“I think there’s some support for additional revenue,” said Sen. Doug Magnus of Slayton, the author of a proposal to install a casino in Block E. “It just depends where the revenue goes.”
Gambling funds still could be in play
Rep. Bob Gunther of Fairmont, who sponsored racino legislation this session, said he would consider anything that will allow a compromise and get Minnesota’s government running again.
“I don’t care what they do if it helps end this thing,” Gunther said of modest revenue increases. He has also discussed with DFL Rep. Terry Morrow of St. Peter tax increases on Minnesotans who purchase a second home.
Gambling groups estimate that allowing racinos could net the state up to $250 million each budget cycle. Although Gunther’s proposal centers on job creation initiatives (he’s the House Jobs and Economic Development chairman), the lawmaker said he’s flexible with how the money is spent.
He also thinks the proposal is a good bargaining chip to span the roughly $1.4 billion divide between Dayton and the Republican leadership.
“It’s there as something that both sides have mentioned,” Gunther said. “It’s there as something to potentially end this logjam we’re having.”
Dayton said last week that he’s had about four meetings related to expanded gaming. The governor has previously expressed more support for racinos and a Minneapolis casino than for a proposal allowing slot machines in bars.
Magnus, who presented the Block E legislation, reacted similarly to Gunther.
Although Magnus fervently supports putting the projected $250 million biennial state tax revenue from the Block E project into a transportation infrastructure program that leverages local, state and private funds, he said he was open to a one-time diversion of the funds as part of budget negotiations with Dayton. That’s as long as the money doesn’t go into entitlement programs or welfare.
Magnus wants to create “tens of thousands of jobs” with the proposal, he said. “I don’ t want to see it create more social worker jobs to pay out entitlements.”
Alternative plans floating out there, too
Other plans, such as expanding the state sales tax to online purchases, are also under consideration. Sen. Julianne Ortman of Chanhassen, chairwoman of the Senate Taxes Committee, began discussing the new $30 million to $50 million revenue stream earlier this session.
Ortman confirmed that the measure has been part of budget negotiations but remained tight-lipped on whether she would support it.
“It certainly is something that has been heard in both houses,” Ortman said, adding that it’s now up to the collective caucuses to decide if they’ll support the increase.
Rep. Greg Davids of Preston, chairman of the House Taxes Committee, previously proposed capping HMO profits on state business at 6 percent and earning the state $300 million in the process.
“What I’m looking at is balancing the budget without increasing taxes,” Davids, who was unavailable for comment, told the Star Tribune in March
All these proposals, however, are relatively small, compared with roughly $700 million in revenue that Dayton’s income tax would raise. It’s still unclear where they’ll fall into the negotiations, and with no budget discussions scheduled, pressure will continue to build for lawmakers to reach a resolution.
“It’s amazing nobody’s been yelling at me yet,” Gunther said, referring to his constituents during a telephone interview from his home.