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Minnesota Gov. Mark Dayton announces Thursday that he will accept a budget offer earlier presented by Republicans that does not include an income tax increase he wanted. The announcement spurred a new negotiating session within a couple hours.

UPDATE: Lillie says announcement has 'potential for breakthrough'

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MINNEAP0LIS -- Gov. Mark Dayton says ending the state government shutdown is so important that he is willing to drop his long-held demand to increase taxes on Minnesota's top earners.

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His announcement this morning was convincing enough to Republicans who control the Legislature to agree to meet with him this afternoon. Dayton, House Speaker Kurt Zellers, R-Maple Grove, and Senate Majority Leader Amy Koch, R-Buffalo, have met less than two hours since the shutdown began on July 1.

In a surprise announcement, Dayton said he would accept a legislative Republican offer made on June 30, the day before state government shut down. But he tacked three of his own requirements onto the proposal: all policy issues would be stripped from budget bills, a GOP plan to cut the state workforce 15 percent would disappear and the Legislature must approve at least $500 million in public works construction.

Republican legislative leaders offered no immediate response, but their staff members, who for weeks on Twitter have been constantly critical of Dayton, were quiet after the Democratic governor's announcement.

One of the legislators involved in early budget negotiations, Sen. Ted Lillie, said the development has "potential for breakthrough."

"We would like nothing more than a budget that allows us to live within our means and gets the state going again," the Lake Elmo Republican said Thursday afternoon.

When it came to Dayton's stipulations contained in the letter, however, Lillie was mum, saying only that the governor's move was "encouraging."

"I would look at this as a counter offer," Lillie said of the conditions. "These are things that need to be worked through."

Lillie was among a select group of Republicans chosen to negotiate a budget deal prior to the shutdown. Since then, he has been working behind the scenes "planning," he said.

As to whether Republicans might find the Dayton offer palatable, Lillie said the "overall package" must be considered.

"I don't know the details behind it," he said.

The basis of the June 30 GOP offer was increasing spending $1.4 billion in the next two years. Half would come from delaying state payments to schools, a tactic legislators and governors have used before. The other half of the new revenue would be borrowing against Minnesota's future payments from a lawsuit the state won against big tobacco companies.

If Republicans accept the offer, Dayton said that he could call a special session to pass the state budget within three days.

In a letter to Zellers and Koch, he said that if they accept his offer, "my commissioners, staff and I are available to meet around the clock with you, your members and your staff to complete it."

Dayton said all nine remaining budget bills would have to be completed, and his commissions sign off on them, before he calls legislators back to work. Only a governor can call a special legislative session.

The session is needed because before the Legislature adjourned on May 23, only a bill funding agriculture programs was passed and signed. Dayton vetoed other Republican-written budget bills on May 24.

The argument has been about how much the state should spend. Dayton originally wanted to spend $37 billion in the next two years, but lowered that to $35.8 billion. Republicans said they would not spend more than $34 billion, the most in state history.

Dayton wanted to increase income taxes on the state's top earners to spend more money than Republicans wanted.

In the strongly worded letter, Dayton said he has heard from many Minnesotans urging an end to the shutdown.

Lillie and Rep. Andrea Kieffer, R-Woodbury, met Thursday morning with constituents at Keys Café in Woodbury.

Much of that time was spent explaining how the path to the shutdown was paved, Lillie said. Afterward, lawmakers fielded questions from attendees.

"We had a spirited conversation," Lillie said.

Don Davis reports for Forum Communications Co.

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