Dayton adjusts proposal as budget picture improves by $1.2 billion

State economist Tom Stinson’s new budget forecast, released Monday, shows Minnesota’s budget deficit shrinking by $1.2 billion, leaving a $5 billion deficit. Citing the improved figures, Gov. Mark Dayton took off the table his proposals for a 3 percent tax on those making $500,000 and for cuts to long-term care for seniors. He says the removal of the tax increase will keep Minnesota’s tax rate below the nation’s highest.

According to a press release from the Governor’s Office, Dayton will eliminate the 3 percent surcharge on those making more than $500,000 but will maintain his tax increases on high earners: “Dayton’s revised budget will eliminate his proposed surcharge, thus fulfilling his promise to keep Minnesota’s top tax rate below the nation’s highest, while improving progressivity.”

His proposal also restores funding for senior care. “Dayton’s revised budget, to be presented formally in the coming weeks, will: significantly reduce approximately $200 million in proposed cuts to the Department of Human Services for seniors’ long –term care including nursing homes and home health care, Minnesota Care, and community action grants,” the statement read.

Dayton’s proposal also restores funding for transit to help stave off fare increases.

Stinson said the improved forecast is due in part to the tax cut compromise signed by President Obama earlier this year.

Stinson also said that a cuts-only approach would cause “slightly more problems” than tax hikes, but he added, “They’ll probably both have a deleterious impact on the state’s economy.”

Republicans responded by saying it won’t change their plans to oppose tax increases on the wealthy.

Senate Majority Leader Amy Koch told reporters, “There’s some good news here. It seems the economy is going in the right direction. Our priorities remain the same: Private sector job growth and reining in government spending. That message is what we have to continue talking about going forward.”

DFLers criticized the GOP for planning an all-cuts budget.

“The clock is taking for the GOP to propose their all-cuts budget,” said House Minority Leader Paul Thissen. “We still face a $5 billion deficit and if we continue using Pawlenty’s economic plan, we will have a deficit for years to come.”

He added, “What we know for certain Gov. Pawlenty’s failed policy is only going to cause the economy to stall.”