The state House passed a tax bill Wednesday that comes close to the worst-case scenario budget plans Austin had laid out earlier this year.

The bill, which passed by a 70-63 vote, combines cuts to Local Government Aid (LGA) with a new formula for distributing that aid and would drop Austin's LGA share by $933,000 for the remainder of 2003 and over $1.3 million for 2004.

"It's going to have a large impact on Austin if it stays as it is," Rep. Jeff Anderson (R-Austin) said.

Anderson and Rep. Dan Dorman (R-Albert Lea) went against many of their Republican colleagues in voting against the bill.

"Both Dan Dorman and Jeff Anderson were really supporting their areas and helping not only Austin and Albert Lea, but all outstate areas," Mayor Bonnie Rietz said.

Dorman had proposed an amendment that would have lessened the blow to Greater Minnesota.

His amendment eased the LGA cuts and made up for it with money from the transit fund, which mainly benefits the suburbs.

The amendment was defeated 71-62.

Anderson said that amendment was Greater Minnesota's best hope.

"When that was defeated, I just couldn't vote for the bill because of what it reduced for our city," he said.

Cuts of this magnitude create a difficult situation for the Austin City Council. The council presented a budget to the city recently to cope with the worst-case scenario for 2003 and 2004.

The cuts would come in under that budget, but it does not leave as much room for movement as council members had hoped. That scenario had the city losing $933,000 this year and $1.8 million next year.

"It's going to be a tough one coming into June, trying to figure out next year's budget," Council Member Dick Pacholl said.

Council Member Tracey Chamberlain said the city planned well for the problem and should be able to absorb the $933,000 within the budget plan.

Some Republican outstate legislators voted for the bill. Anderson said those members saw the economic opportunity zones, a part of the bill that creates tax-free areas to entice businesses to outstate communities, as a big enough positive to justify their vote to pass it.

Anderson said he too is optimistic that the tax-free zones can benefit Austin, but he did not think it was worth voting for such deep LGA cuts.

The DFL-controlled Senate will probably not go along with the bill, but local officials are worried that a compromise by the conference committee will still leave Austin in a difficult position.

"I have a feeling that what we see now is pretty much what we're going to get because I don't think the Senate is very strong in that committee," Rietz said.

The legislative session will close on May 19, so if there is no compromise by that time, Pawlenty would have to call a special session extending into June.

Some officials think that scenario is likely.

"I think it's going to be a long, hot summer for some of those guys," Chamberlain said.

Matt Merritt can be reached at 434-2214 or by e-mail at matt.merritt@austindailyherald.com