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DFL takes income-tax hike off table; seeks to kill gambling expansion
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House Speaker Steve Sviggum, R-Kenyon, heads for another round of negotiations at the Governor's Residence. (MPR Photo/Michael Khoo)
Despite concessions on both sides of an ongoing budget debate, legislative leaders say a final solution remains elusive. Senate Democrats say they're willing to back off their proposal for an income tax increase on the state's wealthiest households, and House Republicans say they're ready to preserve health care for thousands who would have lost coverage under earlier budget offers. The state is two days away from a partial state government shutdown that could trigger lay-off notices to almost one-in-three state workers.

St. Paul, Minn. — Lawmakers and Gov. Tim Pawlenty met for roughly seven hours on Tuesday dissecting a GOP budget plan meant to bridge the final divisions in a months-long stalemate.

Without a budget in place by Friday morning, many popular state services and facilities could be closed. Republican House Speaker Steve Sviggum says the latest offer from his side provides historic increases for K-12 schools. He says it also meets most of the DFL-controlled Senate's concerns about preserving state-subsidized health care for low-income workers, and actually reinstates protections lost in previous years of budget-balancing.

"We've put everything we can on the table, absolutely everything. I don't know an issue that has been raised by Democrats since the beginning of the session that we have not offered or taken care of. I don't know of an issue that exists," Sviggum said.

Sviggum says he's shocked that Democrats haven't rushed to embrace the most recent GOP offer, funded in large part by a proposed 75-cents-per-pack cigarette tax first offered by Gov. Tim Pawlenty more than a month ago.

DFL Senate Majority Leader Dean Johnson says he's encouraged by the spending for education and health care. And he says Democrats are willing to compromise by abandoning a proposed income-tax hike for 42,000 of the state's highest-income households.

In return, Johnson says he doesn't want to hear further mention of a Republican plan to install slot machines for a "racino" at the Canterbury Park Racetrack in Shakopee.

"I would simply declare that the fourth tier of income tax is off the table and racino is off the table. Let's get over it. It's not part of these discussions any more," Johnson said.

The racino plan is a key component of the Republican offer, expected to raise $218 million over the next two years for a string of programs, including public transit, state aid payments for city services and a clean water initiative. But steadfast DFL opposition to a state-operated casino is not the only complication.

Lobbyist Bill Haas, who represents the White Earth Band of Ojibwe, says he was surprised to learn the latest gambling proposal did not include a separate metro-area casino for the tribe as it had in the past.

"We weren't too excited about it. But, like I said, we've had ongoing discussions with the governor's office, and in legislation you can be in one day and out the next day and back in the next day in another version," Haas, a former legislator, said.

Originally Pawlenty had hoped to include three northern Indian tribes in his gaming plan. Two backed out when the proposal was merged with the Canterbury racino. In a written statement, a Pawlenty spokesman says the governor is still committed to keeping White Earth in the deal, but Republican Senate Minority Leader Dick Day of Owatonna says the tribe would not get a separate casino. That condition is unlikely to be accepted by tribal officials.

Meanwhile, state workers are calling on Pawlenty and lawmakers to find a quick resolution to the budget impasse. Nearly 16,000 state workers could be idled by a strike, affecting their paychecks and eventually their medical benefits.

"Most of us live from paycheck to paycheck," said Kevin Tucker, who works for the Highway Helper program. "Especially with this in the last three or four years my, personally, my savings is diminished. And with medical costs what it is, out-of-pocket costs, these kinds of things are hurtful to the worker."

Lawmakers say with less than 48 hours left on the clock, it will be impossible to strike a deal, process the necessary legislation, and sign it into law before the shutdown deadline.

To prevent a shutdown, Senate Democrats their only option is to vote to extend the current budget as a temporary solution. House Republicans say they'll consider such a stopgap measure only if a there's first a general agreement a new, two-year budget. Without that, they say a temporary extension would only prolong the gridlock.