Lawmakers pass tax bill, borrowing on tobacco payments

The Minnesota Legislature has passed a package of changes to state tax law that maintains state aid to cities and counties at levels from last year.

The House passed the bill late Tuesday and the Senate early Wednesday, which sends the bill to Democratic Gov. Mark Dayton. The bill passed both chambers on party-line votes with Republicans in favor and Democrats opposed.

House Republicans had previously voted to eliminate state aid to Minneapolis, St. Paul and Duluth but gave up that plan as part of a budget compromise with Dayton aimed at ending the state government shutdown.

The tax bill also includes the provision to let the state borrow against future tobacco settlement payments, which is a key piece of new revenue that allowed the compromise between Dayton and Republicans.

A bill to fund public safety was the first of nine budget bills to pass the House and Senate Tuesday night. The GOP-controlled Legislature continues to vote on the remaining bills in what is becoming a late night for lawmakers.

Gov. Mark Dayton called the special session Tuesday to vote on the budget agreement that would end a 19-day state government shutdown. The DFL governor and Republican legislative leaders said they reached agreement on the details of all nine budget bills earlier Tuesday.

The budget compromise relies on spending cuts, a payment delay to K-12 schools and borrowing against future tobacco payments to balance the state's budget.

Some Democrats object to the financing plan. During debate on a transportation bill Tuesday night, Rep. Frank Hornstein, DFL-Minneapolis, said the budget plan was irresponsible.

"We need to be honest. It's the first of nine budget bills that simply differs important budget decisions into the future," he said. "Now is the time to address these issues, not procrastinate and not put them off into the future."

Dayton says he intends to sign the budget bills all at once after the Legislature sends them to him. The shutdown will end after he signs the bills into law.

But the public has yet to see major parts of the budget that Gov. Mark Dayton and Republican lawmakers say they've finalized. The budget bills for health and human services and K-12 education were released last, at 9:30p Tuesday and around 1a Wednesday, respectively.

The special session began Tuesday at 3 p.m. Both the House and Senate began with a moment of silence for DFL Sen. Linda Scheid, who died of cancer in June. A recess was then called in both chambers so that lawmakers could continue to prepare the budget bills.

The Senate reconvened shortly after 6 p.m. and quickly voted 57-7 to pass a public safety finance bill. The House returned to session a few minutes later and passed the bill.

The Senate then voted 43-22 to pass the budget bill for environment, energy, and commerce. House Speaker Kurt Zellers said the Legislature will move "as quickly as possible" to pass the bills. He said there will be no amendments to the legislation.

The Legislature will be dealing with 12 bills total. In addition to the budget bills, they will vote on a bill funding capital improvements, the Legacy Amendment funding bill and a pensions bill.

Once the bills are passed and signed by Dayton, the longest government shutdown in state history will end. Dayton said earlier today he's hopeful some agencies can start operating by tomorrow.

Dayton's chief of staff Tina Smith told reporters that the governor will wait until all the bills are passed before he signs them.

"The governor has said very consistently during the course of this session that we need one budget for one Minnesota," Smith said. "And it is important for him to know that the whole thing is going to hang together before the whole thing is signed into law."

Smith said the governor has no doubt that the budget agreement with Republican lawmakers will hold up.

BUDGET DETAILS EMERGE

Dayton ordered the State Capitol to reopen on Tuesday to allow for greater transparency, although work on the details of the individual bills happened behind closed doors.

Details on six of the budget bills — environment, higher education, jobs, pensions, public safety/judiciary and transportation — plus the Legacy bill had been posted online Tuesday. Lawmakers are also expected to take up a bill during the special session that would fund capital projects through bonding.

The bill agreements came five days after Dayton and GOP leaders agreed to solve the state's two-year $5 billion budget deficit through a combination of budget cuts, delaying payments to school districts and borrowing against the state's future tobacco settlement payments.

The University of Minnesota and the Minnesota State Colleges and University System will endure 9 percent cut from current levels, but the colleges will get more money than they would have under a Republican-backing proposal that was vetoed by Dayton earlier this year.

The bill adds in $60 million over the GOP proposal. It includes $50 million for the University of Minnesota and $10 million for the Minnesota State Colleges and Universities System.

MnSCU spokeswoman Linda Kohl said the extra money won't make much of a difference.

"If you take that, divide it into our 31 institutions, it's not a whole lot of money for any one institution," she said.

The higher education bill also establishes new performance benchmarks that both systems must meet to receive a portion of state funding.

Tuition increases for community and technical colleges only are capped at 4 percent. A controversial measure Republicans added to restrict human cloning at the University of Minnesota was removed from the bill as part of a compromise with Dayton.

The transportation finance bill includes a $51 million cut for transit programs — less than half the amount that Republicans proposed cutting.

The public safety and judiciary finance bill contains a 5 percent cut to the Department of Human Rights, cuts to civil legal services and the Bureau of Criminal Apprehension. There is a funding increase for the state's public defenders.

The public safety budget bill also takes money from special accounts, like training for police officers and firefighters, to balance the state's budget.

The Minnesota Department of Natural Resources and the Pollution Control Agency both face cuts as part of the environment budget bill. Environmental advocates say the cuts are deep enough that they go against a constitutional requirement that the Legislature not substitute the Legacy Amendment and the Environmental Trust Fund for general fund expenditures.

The Legacy bill designates about $450 million in special sales tax revenues to go toward the outdoors, clean water, parks and the arts in the next two years. The final bill does not include a controversial provision that would have loosened open meetings rules for the Lessard Sams Outdoor Heritage Council.

The open meetings provision had derailed the Legacy bill during the final hours of the regular legislative session.

GOP lawmakers said they've also finished work on the health and human services budget. The bill was posted online Tuesday night. The bill allows the expansion of Medical Assistance to continue, but makes changes to MinnesotaCare.

The bill's release was being watched closely, and for good reason. Health and human services is the largest section of the budget and has been the source of sharp partisan disagreement.

Republican lawmakers discussed the bill at a news conference Tuesday afternoon.

Rep. Steve Gottwalt, R-St. Cloud, responded to concerns that the public doesn't have enough time to review the bill before it comes up for a vote.

"There are not dramatically new things that will be seen in the bill," Gottwalt said.

NO VIKINGS STADIUM

Dayton said public funds for a new Minnesota Vikings stadium would not be part of the special session to balance the budget. Dayton also expressed doubt that he would call another special session.

That may mean the team has no prospect for a new home after the Vikings' lease for the Metrodome ends this season.

Ramsey County commissioner Tony Bennett, who struck a deal with the team to build a new stadium in Arden Hills, said he was sorry the deal never got a hearing at the Capitol.

"I'm disappointed, but like I say, as long as the Vikings are with us, we're with them. And if there's a way to resurrect it, I'd love to have the opportunity," Bennett said.

In the meantime, Hennepin County Board Chairman Mike Opat said he is watching the situation with the Vikings and Ramsey County. Backers of a plan to build a stadium at the site of the Minneapolis Farmers Market say they're hoping to renew a push for a stadium.

POST-SHUTDOWN PLANNING

It will likely take some time for everything to return to normal. The Minnesota Department of Revenue advised cities and counties on Tuesday that aid payments expected to go out Wednesday will not be made until July 27 at the earliest, to reflect changes to the budget.

Gary Larson of the League of Minnesota Cities said the department needs time to compute the new amounts based on the tax bill that has not yet been passed.

Larson anticipates that the amounts will reflect those included in a GOP bill vetoed by Dayton earlier this year. That would mean most cities would receive less then they were promised for 2011.

A pension bill before lawmakers includes an important item that the city of Minneapolis was pushing for -- an agreement to merge the city's police officer retirement fund with the state fund. City officials have said the move will save Minneapolis millions of dollars, which could be used to reduce property taxes. However, those property tax savings could be diminished if the Legislature cuts aid to the city.

The two biggest unions for state employees are waiting to hear if lawmakers will approve back pay for members who were laid off during the shutdown.

Dayton has said he supports back pay for workers, but union leaders say Dayton hasn't made any back pay proposals to them.

It remains unclear how soon state workers could be back on the job. Smith, Dayton's chief of staff, said state employees will receive 24 hours notice to report back to work once the budget is resolved.

(MPR reporters Tim Pugmire, Madeleine Baran, Tim Nelson, Dan Olson, Tim Post, Brandt Williams and Stephanie Hemphill contributed to this report.)

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