MINNEAPOLIS (Reuters) - Minnesota Republican legislative leaders and Democratic Governor Mark Dayton remained defiant on Thursday and far from a budget deal needed to avert a state government shutdown on July 1.
Republicans offered to give up $200 million of proposed tax cuts, but only if Dayton backs away from $1.8 billion of tax increases the governor believes would help close a $5 billion budget deficit without compromising state programs.
Dayton said the Republican proposal modified parts of prior budget offers, but made no overall improvements and he did not know what the next step would be.
"This is the most discouraged I have been because the time is short," Dayton told reporters. "We have two weeks left."
Dayton said he had agreed to meet Republicans halfway by cutting his $37 billion budget proposal by $1.8 billion, but they were unwilling to match his changes. Republicans control both the House and Senate.
Republicans said the offer would expire at 5 p.m. Monday local time.
"We are asking the governor to make us an offer," Senate Majority Leader Amy Koch told reporters. "That is what needs to happen. The shutdown can be averted. We believe it is completely unnecessary."
The original proposal called for income tax reductions and property tax cuts for small businesses and individuals, House Speaker Kurt Zellers said. Thursday's proposal would put back some spending on education, public safety and other areas.
On Wednesday, Dayton asked a state court to appoint a mediator to help end the impasse and filed his recommendations for state services that should continue during a shutdown, including state police patrols and some healthcare programs.
Dayton vetoed budget bills passed by the Legislature in May and layoff notices were sent last week to 36,000 state workers in anticipation of the shut down.
A budget impasse last shut down part of Minnesota state government for nine days in 2005. A former justice was tapped to mediate that dispute.
(Reporting by David Bailey in Minneapolis and Karen Pierog in Chicago; Editing by Greg McCune)