Big Tobacco helped seal Minn. budget deal

July 15, 2011 at 2:08 AM
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ST. PAUL, Minn., July 15 (UPI) -- The deal to end Minnesota's government shutdown includes high-interest borrowing of $700 million against future payments from tobacco companies, officials said.

The $35.5 billion two-year budget deal, expected to be voted on Monday or Tuesday, also includes delaying making $700 million in payments to primary and secondary public schools, but then owing a record $2.1 billion to the schools with no method laid out yet for paying that money back, the Star Tribune of Minneapolis reported.

Gov. Mark Dayton and Republican lawmakers reached the tentative deal late Thursday after Dayton, of Minnesota's Democratic-Farmer-Labor Party, said he would "agree to something I do not agree with" -- a budget plan Republicans proposed June 30 to help close a projected $5 billion shortfall over two years.

In an open letter to state House and Senate leaders, Dayton said voters "strongly prefer my proposed solution to that of the Republican legislature." But he said, "more than anything, they want this government shutdown to end. Now."

The sides met for about 3 hours and announced the deal framework.

In announcing the tentative deal, Dayton said he gave up his push to raise income taxes on residents earning more than $1 million a year. Republicans, who took control this year of both chambers in St. Paul for the first time in almost four decades, said they agreed to drop their plan to cut the state workforce 15 percent.

They also agreed to a $500 million bonding proposal that is intended to kick-start private-sector jobs but adds to the state's mounting debt. And they agreed to eliminate controversial social policies from spending bills.

"This is an agreement that is difficult for both sides," Republican Senate Majority Leader Amy Koch said in a news conference.

"No one is going to be happy with this," Dayton said.

The agreement makes Minnesota the latest state to address its budget woes without raising taxes.

The expected future payments from the tobacco industry result from the tobacco Master Settlement Agreement, worked out in 1998 among the four largest U.S. tobacco companies and the attorneys general of 46 states.

The agreement said in part that states would drop lawsuits against the tobacco companies to get Medicaid reimbursements for tobacco-related healthcare costs. In return, the agreement said the tobacco companies would pay more than $8 billion a year to the states every year -- adding up to at least $206 billion over the first 25 years of the deal but continuing in perpetuity -- to compensate them for smoking-related medical costs.

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