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Committee Gives Minnesota Leaders a Third Option in Solution to Shutdown

While the ad hoc committee came forward with a framework that included more than $2 billion in cuts, an unpopular tax increase was also part of its recommendation.

A whopping $2.2 billion in permanent cuts, $1.4 billion in accounting shifts and $1.4 billion in new revenue — including a temporary, across-the-board 4 percent tax increase on personal incomes.

Those are the key proposed recommendations from the independent panel of Republicans, Democrats and policy experts who came together to solve Minnesota’s budget impasse.

The bipartisan committee tasked with creating a so-called third alternative issued its recommendations Thursday afternoon to Gov. Mark Dayton and Republican lawmakers.

In a two-page document, the committee outlines a framework for closing the $5 billion deficit by balancing 70 percent of it through spending cuts and the remaining 30 percent by increasing revenue.

The committee based its recommendations on three strategies:
• Cut state spending $3.6 billion from projections, which results in a biennial budget increase of 3 percent (or 1.5 percent increase per year).
• Raise income taxes 4 percent for everyone during the two years of this budget (an expected $700 million).
• Increase state revenues from a Human Services surcharge ($250 million), a tobacco tax increase of $1.29 per pack (an expected $330 million) and an alcohol tax inflation increase ($140 million).

Over the long term, the committee recommended, sales taxes should be broadened and lowered.

“I note that most of the committee’s recommendations parallel my own proposals,” Dayton wrote in a statement to the media.

Dayton cited that the $2.2 billion in recommended permanent spending cuts is close to the nearly $2.1 billion he has proposed. The recommend $700 million from raised alcohol and tobacco taxes, along with a human service surcharge, also seems drawn to the letter of Dayton’s latest proposals.

Still, Dayton wasn’t ready to wholeheartedly endorse the recommendations. Specifically, he said, the governor does “respectfully differ” with the recommended 4 percent temporary income tax hike for all Minnesota taxpayers.

“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,” he wrote.

Minnetonka City Manager John Gunyou, a member of the committee, told Patch “there was a surprising commonality of thinking in the room” during the process of devising this budget resolution.

“We were all pretty pragmatic. We didn’t look at it from a real political standpoint,” Gunyou said. “But we’re also realists, so we talked through a lot of the options. The framework just made sense.”

Committee members knew there would be little happiness over the proposal to raise taxes on Minnesotans, Gunyou said.

“We had a nice long talk about that,” he said with a laugh. “Interestingly, everyone was pretty much in agreement. The feeling was that this needs to be shared by everyone. We’re hoping that might be a way to address this disagreement about who is paying what share, or a fair share.”

Dayton turned the pressure on Republicans in the legislature, calling this framework the third “compromise proposal (the Republicans) have received in the past 24 hours.”

At the time of publishing, there was no official response from Republican lawmakers. Sen. Amy Koch (R-Buffalo) said she had hoped the result of the advisory committee would come through with a "fiscally responsible" solution. Given her comments about the governor's proposed tax increase on the state's richest residents, she's certain to turn down any notion of an across-the-board increase. 

Koch's spokesman through the negotiations process, Michael Brodkorb, who represents the senate GOP, sarcastically tweeted he was "shocked" there was a tax increase included in the recommendation. 

The committee was created by former Minnesota politicians Vice President Walter Mondale, Gov. Arne Carlson and U.S. Sen. Dave Durenberger. Along with Gunyou, members included former Republican senator Steve Dille, former DFL legislator Wayne Simoneau, former state Finance Commissioner Jay Kiedrowski, former Wells Fargo CEO Jim Campbell, former Medtronic vice-president Kris Johnson and current Minnesota Management and Budget commissioner Jim Schowalter.

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