'There are no easy answers' for budget

There just aren't any "easy magic wand" solutions to the deficit that Minnesota now finds itself facing, Mark Dayton told the Herald's editorial board.

Dayton, one of three DFL gubernatorial candidates, was in East Grand Forks on Wednesday for a press conference about his "Serve Our Seniors" five-point plan to help the state's senior citizens.

Minnesota faces a projected $5.8 billion budget shortfall in the next biennium, a two-year period that begins July 1, 2011. Dayton outlined his proposal to increase taxes on the state's wealthiest residents and make spending cuts to achieve a balanced budget -- something the Legislature is constitutionally obligated to pass.

"I say this is going to be an unpopular election," he said. "It's going to be an even more unpopular first year of governing because there aren't any simple or easy magic wand answers."

Matt Entenza and Margaret Anderson Kelliher, the DFL's endorsed candidate for governor, will join Dayton on the Aug. 10 primary ballot when voters choose the DFL candidate for the November election.

Republican candidate Tom Emmer and Independence Party candidate Tom Horner are also in the running to become the state's next governor when incumbent Republican Tim Pawlenty steps down after two terms in office.

Budget plan

Dayton's plan to tackle the deficit is largely built on raising taxes -- something he admitted "nobody" likes to do.

"But the question is, what is the alternative?" he asked.

The tax increases would target the wealthiest 10 percent of residents, a segment of the population that Dayton said proportionately is taxed less than the other 90 percent of people in the state.

He pointed out that in 1994, a time when the state was led by Republican Gov. Arne Carlson, the wealthiest 10 percent of residents paid 12.6 percent of their income in state and local taxes.

That's a figure that now has slipped to about 9.8 percent, Dayton said.

His proposal would raise that rate to 12.5 percent, taking in more than $4 billion of additional revenue in the next biennium.

Dayton said he would increase state revenue by another $685 million by eliminating some "corporate throwbacks" in the tax system.

He also outlined $670 million in spending cuts, including cutting in half the outsourcing or private sector contracting and eliminating some top-level management positions in state agencies.

Despite the unpopularity of raising taxes, Dayton said residents have already paid higher taxes the past eight years. Property taxes have more than doubled statewide in the past decade because of less state funding for education, he said, and many program budgets have been cut as well.

'A huge challenge'

The budget shortfall is something like putting a frog in hot water only to watch it jump out immediately, Dayton said.

"If you put it in lukewarm water and gradually heat it up, it falls asleep and dies unknowingly," he said.

Tax reductions that began at the end of then-Gov. Carlson's first term started the process that brought the state to this point, he said. More tax cuts under the leadership of Jesse Ventura and Tim Pawlenty added to the imbalance of revenue and spending.

Dayton said those tax reductions led to reduced quality in public services, education and infrastructure.

But when asked if the wealthy would feel like they're getting value from the higher taxes proposed by Dayton, he said there just isn't a good other option.

"The alternative is going to be draconian cuts," he said. "We've taken a very unbalanced approach in the last decade or even two decades."

The other side of the spectrum is Republican candidate Emmer's pledge to not raise taxes at the state level -- a move that Dayton said would push property taxes up even more.

"Part of our problem, I think, is the messaging more than the reality of the situation," said Yvonne Prettner Solon, Dayton's lieutenant governor running mate. "When we were a high-tax state, we were a thriving state. We had a better economy."

Johnson reports on local politics. Reach him at (701) 780-1105; (800) 477-6572, ext. 105; or send e-mail to rjohnson@gfherald.com .