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Pawlenty's budget plan includes state sales tax reduction Tuesday, March 11, 2008
ST. PAUL (AP) -- The budget fix offered Friday by Gov. Tim Pawlenty includes potential pain for health and welfare programs, colleges and Twin Cities bus riders -- but also a sweetener everyone would get at the cash register starting this summer.
His proposal to cut the state sales tax by 1/8th of a percent would actually deepen Minnesota's anticipated deficit of $935 million. But the GOP governor said the state treasury's $77 million loss would be consumers' gain and an answer to pending sales tax hikes approved by the Democratic-controlled Legislature.
Consumers would save 2 cents on a $20 purchase.
"It will soften or mitigate the effects of the DFL's tax increases," he said at a Capitol news conference. "Number two, it will provide a modest stimulus for the economy."
The Legislature last week overruled Pawlenty to enact a transportation plan that will allow metropolitan counties to raise their sales taxes for transit later this year. And in November, voters will decide whether the state sales tax should go up 3/8ths of a percent for environmental and arts programs in July 2009.
Key Democrats didn't have too much to say about Pawlenty's deficit fix because they hadn't seen details yet. That will happen next week as committees pore over the fine print. Still, they were clearly underwhelmed by the governor's twist of a sales tax reduction.
"A lot of his proposals don't make it past the press release," said House Majority Leader Tony Sertich, DFL-Chisholm.
Minnesota's 6.5 percent sales tax would go down to 6.375 on July 1 under the proposal, not counting local sales taxes that vary from community to community. Finance Commissioner Tom Hanson couldn't say exactly how much such a cut would help the state's economy.
"Every little bit helps," he said.
To fill in the budget gap, Pawlenty looked to a combination of cuts, savings and dedicated accounts. Cuts added up to more than $340 million -- including $187 million for health and welfare programs and $54 million for public colleges. Pawlenty said many of the cuts were reductions in planned increases in state aid.
"Nobody will be removed" from government health programs, he said. But a planned expansion of coverage would be canceled, affecting almost 1,000 adults expected to become eligible for the programs and reducing coverage for an average of 20,000 children transitioning between programs each month by mid-2010.
He's also seeking 4 percent reductions to most state agency budgets. He said the departments of Veterans Affairs, Military Affairs, Transportation, Public Safety and Corrections are either exempt from cuts or would see minimal reductions. Most cuts could be done without layoffs, he added.
Pawlenty looks to cut costs in places large and small.
He would eliminate a state security coordinator for the Republican National Convention, saving the state $28,000. He also would trim $653,000 from crime victim service grants. The city of Minneapolis would lose $750,000 in annual payments it uses to cover bills for the Target Center arena.
The Metropolitan Council, which runs Twin Cities buses and light rail, would lose $30 million in the upcoming fiscal year -- wiping out a budget fix it stood to get from the metro area transit tax.
Pawlenty's plan would use $250 million from the state budget reserve and shift another $250 million from a health care fund to cover subsidized care for disadvantaged Minnesotans.
Two big pots of money were declared off-limits as state leaders seek to erase the deficit by the middle of next year: allowances to schools and local governments.
There are a few fee increases attached to the plan. Fish hatcheries would pay more to cover the costs of state inspections. And industrial users of water would be assessed for the environmental review process before they get permits. People who have had their license revoked for controlled substance violations would pay an extra $30 to get it back.
Tax collectors would pull in $102 million more by doing away with an exemption some corporations used to shield income from overseas operations.
But Pawlenty also adds to the budget.
A smattering of veterans assistance programs get a boost. The state's 150th anniversary committee, now strapped for cash, would receive more money so it can stay afloat. Research on a rare form of lung cancer among Iron Range miners would get state dollars.
The budget plan also provides up to $40 million for a special compensation fund for victims of the Interstate 35W bridge collapse, although the governor said the final package could be smaller.
The governor also included a $14 million guarantee for local organizers raising cash for the Republican National Convention in September. It would back them up if they fall short of their fundraising goals.
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Associated Press Writer Brian Bakst contributed to this report.
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On the Net:
Governor's 2008 Supplemental Budget:
http://www.budget.state.mn.us/budget/operating/200809/supplemental/d etail--08 0308.pdf
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