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House, Senate far apart on 'phase two' budget fix
By Michael Khoo
Minnesota Public Radio
March 12, 2002
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House Republicans have unveiled their plans for clearing up the remaining $439 million deficit projected for the current budget cycle. The package relies on more cuts to state programs and siphoning off dollars from the state's tobacco endowments. The plan diverges significantly from a first stab made by Senate DFLers last week. And Gov. Jesse Ventura's administration say both plans are politically motivated and leave long-term problems unaddressed.

House and Senate leaders worked at a lightning pace to piece together, approve, and override a gubernatorial veto on the so-called "phase one" budget package. That plan erased a nearly $2 billion deficit in the current budget period, but a new economic forecast projects lawmakers didn't go far enough.

House Republicans say their "phase two" proposal plugs the final hole in the 2002-2003 budget. Speaker Steve Sviggum says the package follows the same philosohpy used to reach agreement in the first stage of budget-balancing.

"No tax increases, no reductions to local schools and classrooms, no reductions to nursing homes, no stealing of the road money, and looking to reductions basically in the area of state government itself," Sviggum said.

The plan cuts another $100 million from state government, mainly from health and human services. But Sviggum says those reductions will be structured to spare nursing home workers.

The GOP proposal would also grab $310 million from a state smoking cessation endowment set up with proceeds from Minnesota's tobacco lawsuit settlement. Those elements are drawing fire from DFL lawmakers.

Senate Democrats' Phase Two fixes the gap by delaying certain payments to school districts and by borrowing money for road projects initially slated to be paid for in cash. The plan also restores some cuts made in Phase One, a move that Senate leaders say will require tax hikes to balance the budget in future years.

Assistant Senate Majority Leader John Hottinger defended the proposal against GOP warnings of a "tax bomb."

"If we suggest some temporary tax increases to put us on fiscal footing that can protect education and actually do something in transportation, most Minnesotans are supportive of that. I hear a lot of people in my district say, 'You know, why did you send a rebate last year when everybody knew we were in recession?'" Hottinger said.

Senate Democrats are expected to begin discussing tax increases later this week, and could consider a temporary income-tax surcharge. That's likely to put them at odds with House Republicans and possibly with Gov. Ventura.

The governor has encouraged certain tax hikes to provide a long-term solution that restores the state reserves used to lessen the short-term pain. But spokesman John Wodele says Ventura may not appreciate an income-tax increase.

Wodele says the competing House and Senate plans show early legislative unity is fading. And he says both plans, so far, fall short of Ventura's call for long-range planning.

"They are trying to achieve a quick and temporary fix to the current budget cycle so that they can go home and campaign. And if anybody sees this any different, I'd like to know who," Wodele said.

Both bodies, however, say they're serious about continuing the work into a Phase Three, at which point they'll attempt to correct anticipated ongoing deficits through 2005 and replenish depleted rainy-day funds.

Senate DFLers say their tax proposals will address those issues. And House Republicans say they haven't ruled out some form of tax increases as part of a long-term fix. But leaders say producing a House plan and Senate plan are one thing. Producing a single plan that both sides agree on is another.

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