By David Bailey
MINNEAPOLIS (Reuters) - Minnesota's Democratic Governor Mark Dayton and Republican legislative leaders met on Tuesday but failed to break a budget impasse five days into a state government shutdown.
Trying to bridge the divide, former Vice President Walter Mondale and former Minnesota Republican Governor Arne Carlson stepped in to announce an unofficial bipartisan panel they hope will come up with an acceptable budget plan by Friday.
Dayton and the leaders of the Republican-controlled legislature failed to reach a deal to close a $5 billion two-year budget deficit by the start of the new fiscal year on July 1, leading to the first government shutdown since 2005.
More than 20,000 of Minnesota's 36,000 state employees have been furloughed in the shutdown, leaving numerous departments at bare-bones staffing. Prisons, state police patrols and nursing and veterans homes have been maintained.
Dayton met with Republican House Speaker Kurt Zellers and Republican Senate Majority Leader Amy Koch in the governor's office on Tuesday in a meeting he described as constructive.
But he said there were still major policy differences, singling out education. He also said he was looking at second- and third-tier revenue options after his proposal to raise income taxes on the wealthiest residents met heavy opposition.
"I think we have got the same gulf between us that we have had all along, without good ways of generating additional revenues which I think have to be part of a compromise agreement," Dayton told reporters.
Another meeting was planned for Wednesday afternoon.
Republican leaders asked Dayton to focus on bills where the sides were near agreement on funding and to allow a temporary spending bill to end the shutdown, Koch told reporters.
"There is no reason for any of this shutdown, quite frankly," she said, adding that education reforms and other policy issues could be completed while leaders work on the health and human services bill where the biggest gaps remain.
The health and human services department has the broadest growth in spending as well as areas where Republican believe the most reform is needed.
REVENUE AND SPENDING GULF
Dayton's last proposed budget was $35.7 billion, while the Republican proposal stands at $34.2 billion. Dayton has refused temporary funding plans to end the shutdown.
The shutdown, far wider in scope than a nine-day partial closure six years ago, has origins in the November election. Voters elected a Democratic governor and Republican legislative majorities not big enough to override his vetoes.
Dayton had proposed income tax increases on the wealthiest of state residents and an expansion in overall spending from the previous two-year budget. Republican leaders proposed to halt spending increases.
Zellers said Republicans were "quite comfortable" with their budget plan and were not looking for new revenue, while Dayton said he was gauging whether there was bipartisan support for alternatives to his proposed income tax increase.
On Tuesday, Mondale called the impasse a "severe crisis" and Carlson said Minnesota needed a budget plan "slightly distasteful to both sides" to end the standoff.
Dozens of road construction projects have been suspended for the shutdown as was the state lottery, state parks and historical sites and numerous other programs. Horse racing tracks were also closed because the state racing commission budget has not been approved.
Dayton has asked a state judge to include state special education aid, chemical dependency and mental health services, and services for victims of domestic violence, sexual assault and other crimes among critical programs funded and kept open.
(Additional reporting by Todd Melby in Minneapolis and Karen Pierog in Chicago; Editing by Jerry Norton and Cynthia Johnston)