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UPDATED: Dayton mixes cuts with tax hikes in Minnesota budget plan

ST. PAUL - Gov. Mark Dayton wants to preserve state aid to local communities while raising taxes on the richest Minnesotans and increasing education spending in a budget proposal he released this morning.

ST. PAUL - Gov. Mark Dayton wants to preserve state aid to local communities while raising taxes on the richest Minnesotans and increasing education spending in a budget proposal he released this morning.

The Democrat's total budget plan for the next two years would be $37 billion, up from just over $30 billion in the budget that ends June 30. At the same time, he makes cuts to help balance a $6.2 billion budget deficit.

There were few surprises, since he talked extensively about the budget during a year he campaigned for governor. Republicans already have said they would limit spending to $32 billion and said his plan to increase taxes on the rich a non-starter.

Dayton would pay for his increased spending in part by increasing taxes on what he considers wealthy Minnesotans to 10.95 percent. It would apply to joint filers earning more than $150,000.

He also would apply a 3 percent surcharge on those earning more than $500,000.


"It makes Minnesota's tax fairer by raising taxes only, I emphasize only on the wealthiest 5.5 percent of Minnesota taxpayers," Dayton said this morning in unveiling the budget plan.

His total revenue increase would be $2.4 billion, in higher income taxes and eliminating some tax breaks for businesses and individuals.

Dayton's plan would cut $1 billion from what agencies had expected to receive. And increases funding for early childhood-through-high school education, a key campaign promise.

The $14.2 billion he proposes to spend in education would target funding to allow all-day kindergarten to be an option for students in low-income families and he said the increase also allows funding to remain stable in uncertain economic times.

Specifically, Dayton proposes $33 million more for all-day kindergarten program in the next two years, $11.9 million to launch an "excellence in education award" to encourage better student achievement, $5.1 million to close an achievement gap among students with better technology use and $2 million for better early-childhood education.

While Dayton wants to raise taxes on the richest Minnesotans, he proposes help for those in lower income brackets who have trouble affording property taxes.

The Dayton plan is to keep state payments to local government stable for at least two years after more than seven years of uncertainly with frequent actual cuts in funding. He said that will relief pressure to raise local property taxes.

"Accountability for increased property taxes will rest squarely with local officials," a Dayton budget document said.


City leaders were happy to hear about Dayton's plan.

"He recognizes the challenges cities face due to the fact that local budgets for 2011 were just finalized in December, leaving cities with few immediate options -- other than cuts in city services such as libraries, community centers, police and fire services, streets, bridges, and others -- in the event of another round of state reductions," said Jim Miller, Minnesota League of Cities executive director.

Cities have taken state aid cuts of more than $300 million in the past three years, Miller said.

For months, Dayton has said that part of a balanced budget plan would be getting more value for taxpayers' dollars, and he said his proposal follows through.

Government reforms he proposes includes speeding up business-related decisions in many state agencies. He also wants more regular reviews of how agencies make progress toward better results.

Dayton seeks to force agencies to share services in an attempt to save money, as well as working more with private businesses.

Providing health care to the poor and disabled is one of the fastest-growing state expenses, and Dayton would reduce by $383 million the amount spent in that area below expectations. The $12 billion proposed to be spent would be the same as in the current budget.

However, the governor said, his budget would "protect core safety net services for those most in need."


About 7,200 adults would lose health-care services under the governor's proposal. All who would be cut earn twice the federal poverty level.

Dayton would add a surcharge to health-care providers to help fund his plans to provide health care for the needy.

Don Davis reports for Forum Communications Co.

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