Mark Dayton proposes $117 million in tax cuts, $581 million in new spending

March 16--In releasing his budget requests for this year, DFL Gov. Mark Dayton on Tuesday repeatedly used watchwords that more commonly spring from Republican lawmakers: "fiscal integrity."

"I'm flexible on all of this. I'm not flexible on the principle. We have to be very cautious," Dayton said.

But Dayton's supplemental budget proposals, which would make adjustments to the current two-year budget the state approved last year, would still spend nearly $600 million on new, mostly one-time programs. The new spending would range from $100 million in broadband grants to $2.8 million to help tribal nations receive "culturally responsive" social services to a $500,000 study to compare "universal/single-payer health care system versus a free market insurance-based approach."

If Dayton's budget plan were fully approved, it would increase total state spending from $41.5 billion to $42.2 billion.

But the governor knows well that with a Republican-controlled House and a DFL-controlled Senate, his budget will not become law just as he outlined it Tuesday. Legislators have their own ideas about how the state should spend, save or tax cut through the expected $900 million budget surplus.

House Republican leaders, who may not lay out their proposed spending details until April, said Dayton's plan to cut taxes by $117 million and spend nearly $600 million has it exactly backwards.

"This is exactly the kind of thing that would cause the kind of slowdown that we've seen (since November)," House Speaker Kurt Daudt, R-Stanford Township said.

Dayton's supplemental budget also included his 2015 transportation plan, based around a 6.5 percent excise tax on gasoline and several other fee and tax increases. But Republicans have refused to consider a gas tax increase, and negotiations between DFLers and Republicans this year are focusing on funding sources besides the gas tax increase.

Here are key parts of the governor's proposal and the reactions:

EDUCATION

Cost: $133 million

What It Buys: Includes $25 million to expand public preschool programs, $22 million for teacher training, evaluation and recruitment, $9 million for student support services, $21 million for college affordability.

Why? Dayton's latest preschool proposal is smaller than the $175 million a year universal program he wants, but distributing the new money across high-need communities could help the governor illustrate the demand for public preschool. Other spending would address Minnesota's growing teacher shortage and help close the state's achievement gap by supporting at-risk students.

Reaction: Many preschool advocates would rather see new spending put into the state's scholarship programs for low-income families. Universal preschool supporters say it's an incremental step forward. Republicans say they are willing to discuss his proposals but question the need to yet spend more on early learning after significant new spending allocated last year.

TAXES

Cost: $117 million

What It Buys: Tax breaks for 400,000 residents by expanding tax credit eligibility for child care and education expenses and a larger "Working Family" tax cut.

Why? After February's economic outlook showed a smaller budget surplus, Dayton has urged lawmakers to show restraint when cutting taxes. He says his proposal is focused on helping middle income residents.

Reaction: While Republicans may support Dayton's proposed tax cuts, they want far larger tax cuts. Among the Republican plans: partial tax exemption for Social Security income for higher income seniors, a new personal or dependent tax exemption and tax breaks for student loan payments.

BROADBAND

Cost: $100 million

What It Buys: A multi-year grant program to expand high-speed Internet access in rural Minnesota. Grants would require matching funds from local governments and private firms.

Why? A task force estimated it could take $3 billion to ensure every Minnesotan has access to high-speed Internet. The task force recommended $200 million in new investment for the current two-year budget that currently includes just $10 million in new spending.

Reaction: Margaret Anderson Kelliher, CEO of the Minnesota High Tech Association and a former DFL House Speaker, praised the governor for the spending but House Majority Leader Joyce Peppin, R-Maple Grove, and other Republicans said the governor's proposal is too spendy. "The governor's number is larger than it needs to be -- significantly," Peppin said.

PUBLIC SAFETY

Cost: $100 million

What It buys: $13 million for corrections officers' pay, $45 million for cyber security improvements, $20 million grant to improve local courthouse safety, $11 million improved physical and mental health care for prisoners.

Why? Corrections officers face layoffs without added state aid to cover labor and benefit costs. State websites and computer systems are in need of upgrades and security improvements.

Reaction: "Thousands of Minnesotans enter their local courthouse every day to seek justice, protect their rights, access government services, and fulfill their duties as citizens and taxpayers," said Minnesota Supreme Court Chief Justice Lorie Gildea, who applauded Dayton's support of the courthouse safety initiative.

HUMAN SERVICES

Cost: $149 million

What It buys: $32 million to add beds and improve care at state mental health hospitals, $32 million funding increase for child care assistance and welfare-to-work programs, $19 million to increase pay for public physical and mental health providers.

Why? Residents with mental illnesses are being transitioned from jails to mental health facilities requiring increased capacity and improved security. State welfare assistance has not increased since 1986 and early childhood advocates see providing high-quality child care as an important way to improve school readiness for low-income students.

Reaction: Advocates for low-income residents applauded the increases in welfare and child care aid. Sue Abderholden, executive director of the National Alliance on Mental Illness, said it was important to make investments in identifying and treating mental illness through state programs, which are just a small piece of the overall mental health system.

RACIAL DISPARITIES

Cost: $100 million

What It buys? $20 million in grants to increase college completion, $25 million to support workforce programs, $7 million to close the home-ownership gap, $33 million in spending to be stipulated by the Legislature.

Why? Minnesotans of color routinely lag their white neighbors in income, academic achievement and home ownership. Since fall, Dayton has wanted new state spending to help close these gaps; he also wants to hear new ideas from state lawmakers.

Reaction: Sen. Bobby Joe Champion, DFL-Minneapolis, was thankful Dayton made addressing racial disparities a priority, but he was disappointed to see much of the proposed spending go to state agencies that have not had a good track record closing these gaps. Republicans said they expect to find some common ground with the governor, but would also favor policy proposals that give families more choices to escape low-performing schools.

WHAT'S NOT IN DAYTON'S PLAN

The governor's plan does not set aside any money for the implementation of the federal Real ID standards, which require Minnesota to add more security measures to its driver's licenses and other identification cards by 2018. Minnesota currently has a law that bans the state's Public Safety Department from planning for Real ID implementation, which lawmakers plan to rescind this year, and Dayton said this law meant he didn't know what it would cost to implement Real ID.

Dayton's proposal invests in education, but is missing some new spending school advocates wanted. They hoped for another increase in the general funding formula and more money to cover the growing cost of providing mandated special education services.

While the governor included some money for various group home and community-based services for elderly and disabled people, he notably did not fund the $94 million request for funding to give caregivers a 5 percent raise. The raise, which would lift the salaries of nearly 100,000 Minnesota service providers, has bipartisan support.

"I'm always disappointed but not surprised, and the guv is a good man and he really does care about these people," said Bruce Nelson, CEO of AARM, which advocates for services for people with disabilities. "We will keep the conversation going, and we hope that there will be some money on the table."

David Montgomery contributed to this report.

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