Politics

ST. PAUL (AP) ― Gov. Tim Pawlenty vetoed his first bill of this session on Thursday, bringing down an economic development package that would have forgiven nearly $33 million of the state loan for St. Paul's Xcel Energy Center.

Meanwhile, Democrats who control the Legislature brought forward a revamped package of tax increases linked to spending on schools, nursing homes and hospitals. The plan would raise nearly $1 billion through a new income tax increase on the best-paid Minnesotans, higher alcohol taxes and a surcharge on high consumer interest rates.

The package is headed for floor votes as soon as Friday. It's designed to replace Pawlenty's $1 billion proposal to borrow against 20 years worth of tobacco settlement payments, a plan that has fallen flat in the Legislature.

"The people of Minnesota are looking for some leadership, and I just don't believe there's any leadership in borrowing from the future to solve a short-term problem today," said Senate Taxes Committee Chairman Tom Bakk, DFL-Cook.

With just 10 days left in the session, a hastily arranged House-Senate conference committee approved the package early Friday. It earmarks the tax increases directly for education and health care. The panel's sole Republican, Rep. Keith Downey of Edina, was the only no vote.

"All it does for me is raise a lot of questions," he said.

Pawlenty signed bills to pay for the Transportation Department, State Patrol and environment and natural resource programs, but he used the line-item veto to remove $15 million for water monitoring from the environment bill.

In his veto message on the economic development bill, Pawlenty criticized St. Paul city leaders for planning to build a new ice sheet across the street from the Xcel while complaining about shrinking state aid payments. St. Paul aimed to use the money saved on the forgiven loan payments to finance the project.

"The city of Saint Paul should not threaten to reduce police and fire services while requesting that a loan be forgiven in order to build an ice rink," the Republican governor said in his veto message.

Pawlenty also singled out as objectionable a provision that would have allowed workers compensation payments to cover alternative medicine treatments. But he said the majority of the bill was acceptable and he hoped for a compromise.

Rep. Tom Rukavina, the bill's House author, said he hoped St. Paul and Pawlenty could negotiate a compromise in time for a second economic development bill. The Iron Range Democrat said he was disappointed that the veto hit programs to help the unemployed -- including the construction workers who could build the ice rink.

"This was a way to put people to work," said Rukavina, of Virginia.

Other negotiating committees continued meeting even as lawmakers resigned themselves to missing a self-imposed deadline for finalizing budget bills. They lack agreement on items as large as classroom spending and as small as court document filing fees, but House DFL staff said negotiators on a public safety bill finished their work.

Most elements of a two-year, $33 billion state budget remained in flux amid negotiations between legislative Democrats and Pawlenty.

Pawlenty said it's not just taxes where no compromise has happened, but also spending on health and welfare programs where Democrats don't want to bend. Still, he said final bills were close on agriculture and veterans programs and differences aren't that large on packages for K-12 schools and higher education.

"If they want to, those bills are all within striking distance, but they've got to be willing to come to agreement," he said.

The session must close by May 18, although a special session is a possibility. The hardest deadline is June 30, when the government's spending authority expires.

The task is complicated by a budget deficit estimated at $4.6 billion, a hole that would be deeper if not for federal stimulus dollars.

Republicans are greatly outnumbered in the Legislature, but they have enough strength to uphold Pawlenty vetoes if they stick together. The governor has promised to block any tax increase.

The budget proposals from Pawlenty, the Senate and the House all impose significant spending cuts to most areas of government. Pawlenty takes a harder whack at health and welfare services while the legislative plans target spending to run state agencies, from the state Corrections Department to the Agriculture Department.

More than half the money from the new Democratic proposal would come from a new 9 percent income tax rate that would kick in at $250,000 for married couples. Higher taxes on beer, wine and liquor would bring in nearly a quarter billion dollars, while more than $200 million would come from a 30 percent surtax on companies that charge more than 15 percent interest on consumer credit.

The bill also would bring in $18 million by tightening enforcement of tax laws.

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On Tuesday, the Minnesota House spent a fractious hour debating warning signs where cocoa mulch is sold, alerting dog owners of potential hazards.

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