The essential trade-off appears to be this: DFLers will say yes to 80-85 percent of Gov. Tim Pawlenty‘s unallotment actions, including a ratification of his ad hoc $1.8 billion school payment shift, if the governor agrees to $433 million in new taxes.
The new tax proceeds would be derived mainly from a fourth income tax bracket that would raise the rate on households making over $200,000 in taxable income from 7.85 percent to 9.15 percent. (Senate Taxes Committee chair Tom Bakk, DFL-Cook, added the new bracket contains a click-off mechanism that could take effect as early as the February 2013 state economic forecast.) The DFL tax proposal would also move up by a year the phase-out of Bush-era temporary tax cuts.
Senate Majority Leader Larry Pogemiller and House Speaker Margaret Anderson Kelliher both objected to a characterization of the proposal as a quid pro quo involving a trade of new taxes (enough to pay for roughly $1 of every $6 in current deficits) for ratification of the K-12 school shift that constitutes two-thirds of the governor’s $2.7 billion in now-invalidated budget cuts.
But a partisan Senate staffer has told PIM that “no revenue, no shift” is indeed the Senate DFL position. The House, by contrast, has seemed less intent on driving a hard bargain. Their omnibus K-12 finance bill contained a codification of Pawlenty’s 2009 shift even before the Minnesota Supreme Court ruling against Pawlenty came down last week.
House Finance Committee chair Lyndon Carlson, DFL-Crystal, said the DFL budget plan delivers $680 million in cuts in addition to the schools shift. He noted that the figure includes a $74 million health and human services cut that will only take effect if $408 million in eventually expected federal FMAP dollars fail to arrive by June 15. If the FMAP money does arrive on time, added Pogemiller, roughly $200 million of it will flow to the bottom line to help defray the school shift costs.
With respect to the absolute certainty of Republican opposition to the plan, Pogemiller added that GOP legislative leaders have already had the chance to vote for Pawlenty’s cuts-only approach to solving the deficit, and they have rejected it.
Pogemiller said that he expects both chambers to vote on the DFL budget-balancing proposals later today.