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DFL proposes cuts, tax hikes

ST. PAUL - The richest Minnesotans would pay more taxes and schools would lose $1 billion under a Democratic-Farmer-Laborite plan.

Democratic senators Thursday proposed chopping state budgets 7 percent across the board, including education, which Gov. Tim Pawlenty spared in his budget proposal.

However, the DFL plan does not include $2 billion in federal economic stimulus money that lawmakers still do not know just how they can use.

The Thursday announcement brought the first public acknowledgment that Democrats would increase taxes to help balance the budget.

Senate Tax Chairman Tom Bakk, DFL-Cook, said a "lion's share" of the

$2 billion in new revenue would come from higher taxes on the rich, apparently via the income tax.

The plan calls for cutting every segment of state government, for a total of $2.4 billion.

While the Democratic leaders say they would take roughly equal amounts of new taxes and program cuts to balance the budget, they have yet to figure out where to put about $2 billion in federal economic stimulus money. Given that, Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said education cuts may end up being moderated once details of how the state can spend the federal money are unraveled.

The state's $33 billion two-year budget would be $6.4 billion short without cuts, new taxes and federal money. Pawlenty figures the federal money into his budget and calls the deficit $4.6 billion.

He is to announce changes to his budget in the next week to 10 days, taking into account recent economic changes.