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Big Problems Expected If Gov, Legislature Can't Agree On Taxes, Experts Say

ST. PAUL, Minn. (AP) — With time winding down in the legislative session, Gov. Mark Dayton and Republican leaders were searching Friday for a compromise on a tax bill that averts a complex 2019 tax filing season and Dayton's push for additional school funding.

The Legislature has until midnight Sunday to pass bills. But nearly their entire to-do list remains unfinished, from a so-called tax conformity bill to Dayton's request for $138 million to help schools in a budget crunch and additional money for school safety improvements.

Dayton and Republican legislative leaders have spent weeks trading jabs and staking out their positions publicly, highlighted by Dayton's veto of a GOP-backed tax bill during a public ceremony with elementary school students on Thursday. The bill would have modestly cut income tax rates for most Minnesotans — by .1 percent and .2 percent in the lowest two income tax brackets — while syncing the state's tax code with recent federal tax breaks.

Dayton insisted that lawmakers first provide emergency funding for 59 school districts struggling with budget shortfalls.

Republicans initially refused, saying Dayton's request came too late and pointing to a $1.3 billion school funding increase approved in last year's budget. But those battle lines showed signs of beginning to thaw later Thursday, when Senate Majority Leader Paul Gazelka said lawmakers were exploring ways to fund schools in need and break a legislative logjam.

Sen. Carla Nelson, the GOP Education Committee Chair, said she's working on at least four different proposals. But as is customary in end-of-session negotiations, top lawmakers were keeping their plans under wraps.

"I'm not at liberty to discuss it," Nelson said.

The two sides resumed negotiations Friday afternoon and were expected to continue talking over much of the weekend.

The stakes for a tax bill are high. Failure to pass a bill would leave state regulators with the daunting task of matching Minnesota residents' tax returns with a drastically different federal tax framework. St. Paul tax attorney Eric Johnson told the Star Tribune that if there's no agreement, the complexity for Minnesota residents filing state returns next year "will be mind-boggling."

But other legislation is still in flux, including a mammoth budget bill that tweaks government spending set by last year's two-year budget. Among that spending is an additional $28 million for school districts to improve security at their facilities — again in the spotlight after the latest fatal school shooting in Texas on Friday.

Dayton gave lawmakers a list of more than 100 objections to that bill on Friday morning, from the inclusion of a provision that would increase penalties on protesters who block highways or transit lines to changes to who must pay an annual fee for selling plant seeds. He called on lawmakers to send him a bill funding school security enhancements separately — and lawmakers signaled they may be willing to send him separate legislation as soon as Friday evening.

"This shooting underscores the imperative that the Minnesota Legislature pass my school safety proposals immediately and send them to me in a clean, stand-alone bill that I can sign, today," he said in a statement.

The school safety money is one of several additions Republicans are planning to stuff in a budget bill in hopes of gaining Dayton's signature. The bill is also expected to include funding to curb opioid abuse and strengthened oversight for senior care facilities. Dayton had said both were top priorities for the year.

Even with signs of inching toward compromise, lawmakers have precious little time left. Dayton reiterated he would not call a special session, as he has in years past.

"They're running out of time. They have no one to blame but themselves," the governor said.

(© Copyright 2018 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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