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Legislators seek tax meeting with Pawlenty

ST. PAUL - State budget talks broke down Tuesday night, and Democratic legislative leaders immediately began sending the governor bills he opposes before offering him a new olive branch.

Late Tuesday, legislative leaders asked Republican Gov. Tim Pawlenty to meet with them today about property taxes. No time was immediately set, but Pawlenty's spokesman earlier said the governor was willing to meet again.

Today's meeting, if it is held, will include legislative complaints about a Pawlenty property tax proposal.

"A majority of Minnesota communities and property tax payers will suffer under this plan," House Speaker Margaret Anderson Kelliher and Senate Majority Leader Larry Pogemiller, both Minneapolis Democrats, said in a letter to Pawlenty.

In the letter, they told the governor they freed up their schedules so they can negotiate all day today.

"While we are all frustrated with the lack of progress this evening, we remain optimistic than a final agreement can be reached," the pair wrote.

The letter brightened an otherwise dark night. Within minutes of the negotiations' collapse, the House and Senate were passing bills Pawlenty does not like.

"You can assume that bills that head our way without our input or agreement don't stand a very good chance," said Republican Gov. Tim Pawlenty's spokesman, Brian McClung.

The talks ended amid a disagreement over the use of $50 million in health-plan funds to help balance the state budget.

"We were at an impasse," House Majority Leader Tony Sertich, DFL-Chisholm, said. "There was just no further we could go this evening."

Negotiators were trying to fill a $935 million state budget deficit and find a way to reduce at least some Minnesotans' property taxes.

An hour after talks broke down, the House approved an education funding package, upping state finances by $51 per student. The Senate followed minutes later.

Republican leaders said Pawlenty would veto the bill. An attempt to override a veto is likely.

The bill adds $49 million in state aid to schools, a 1 percent increase for next year.

Rep. Brita Sailer, DFL-Park Rapids, said the bill would help school districts now struggling with finances.

House Minority Leader Marty Seifert, R-Marshall, said the end of negotiations was bad news.

"You will absolutely accomplish nothing," he said. "You will take a walk through vetoland. ... The theme for tonight apparently is no compromise, not working together."

Pogemiller said Democrats and Pawlenty were not far apart on resolving the budget deficit, which is less than $1 billion out of a $34 billion, two-year budget.

They agree on about $300 million in program cuts, Pogemiller said, and are close in how much money to expect from closing loopholes that allow multi-national corporations to avoid Minnesota taxes, something more than $100 million. And the two sides agree on using about $450 million from the state's reserves to help fix the budget problem, Pogemiller added.

"If you add that all up, we are pretty much done," Pogemiller said. "But for some reason, we are unable to finish that."

Kelliher told reporters that talks centered on tax issues.

Leaders of the Legislature and Pawlenty grappled with how to control property taxes, which have risen 82 percent since 2002 and will rise another $559 million next year if lawmakers do nothing.

Negotiators said some of Tuesday's discussion was about state aid to local governments, considered a property tax issue. Pawlenty prepared a list of complaints about tax provisions, which included a comment that local aid spending in the bill was far too high.

The key issue, Kelliher said, was how the state should limit property tax increases.

The governor wants a strict limit on how much local governments may raise property taxes. Legislative Democrats want a looser cap.

Kelliher said legislative tax experts worked throughout Tuesday figuring out the impact Pawlenty's stricter limit would have on communities and late in the day discovered it was bad news. However, those numbers were not made public.

"We were alarmed at the impact on our communities," Sertich said.

Property tax limits are "absolutely the big thing" in negotiations, Kelliher said.

Also being discussed was a proposal to get rid of the state's income tax deduction for property tax payments and, instead, sending that money to people who pay high property taxes in relation to their incomes.

That deduction provision is a killer, Rep. Morrie Lanning, R-Moorhead said. The tax bill House-Senate negotiators worked out does not have enough votes - especially among Republicans -- to become law, Lanning added.

"If they don't want to listen to our concerns, the bill isn't going to go anywhere," said Lanning, a House Taxes Committee member.

A major difference in taxes was over Pawlenty's call to limit how much local governments can increase property tax rates. He wanted a firm cap. Democrats were ready to allow property taxes to rise more than the governor wanted.

The state constitution sets Monday as the last day lawmakers can meet in regular session this year, but Pawlenty has said that he is looking at the possibility of calling legislators back into special session if they can't finish the budget by the deadline.