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Dogged by allegations of politically motivated cuts - and beset by criticisms and questions about some of its funding mechanisms - the House State Government Finance bill has become a controversial and complex affair.

House government bill retrenches on cut levels

Peter Bartz-Gallagher)

Rep. Morrie Lanning, chairman of the State Government Finance Committee, defends a $602 million bill that represents a cumulative 32 percent cut to the ranks of state agencies. The Lanning budget is drawing accusations of political payback. (Staff photo: Peter Bartz-Gallagher)

Spending target is raised, but controversy over cuts, funding mechanisms and other issues remain

Dogged by allegations of politically motivated cuts – and beset by criticisms and questions about some of its funding mechanisms – the House State Government Finance bill has become a controversial and complex affair.

House State Government Finance Chairman Morrie Lanning, R-Moorhead, is defending a $602 million bill that represents a cumulative 32 percent cut to the ranks of state agencies, which include the Departments of Revenue and Management and Budget.

Lanning brushed off criticism of the depth of state agency cuts that the House is contemplating, noting that more than $250 million of the cuts in his budget bill are identical to ones suggested by DFL Gov. Mark Dayton in his February budget proposal.

“You can’t characterize this as a bill that goes totally in the opposite direction from the governor,” Lanning said. “The governor has moved in the same direction with many of the things we have in our bill. We’ve just gone further.”

Although the House proposal isn’t as controversial as the Senate’s state government bill is expected to be (the Senate bill was scheduled for a Wednesday afternoon hearing as this edition of Capitol Report went to press; visit for the latest), Lanning’s budget is drawing accusations of political payback for some of its cuts, most notably to the office of DFL State Auditor Rebecca Otto. And at the same time, a $158 million net increase in the committee’s spending target is drawing fire as DFLers scramble to analyze the spending and cuts components.

As revised, the House state government targets call for $602 million in spending; the previous target had called for $443 million.

House Ways and Means Chairwoman Mary Liz Holberg, R-Lakeville, said the proposed savings from state government reforms proved to be less than previously anticipated. House budget leaders made a series of complicated and controversial maneuvers to find $158 million extra for the committee’s target.

In a move that has drawn the loudest outcry, GOP leaders made a series of transportation-related shifts to free up $78 million more for the state government budget. At the center of the maneuver is the Counties Transit Improvement Board, or CTIB, a body created by the 2008 transportation finance bill that allowed metropolitan counties to increase local sales taxes to pay for transit. Under the House GOP proposal, some $70 million would be moved from CTIB to fund the Metropolitan Council.

Metro-area county officials and transit advocates are not happy.

“[The counties] levied the money for a very specific purpose from their taxpayers,” said Rep. Frank Hornstein, DFL-Minneapolis. “For the state to swoop in and take it for a completely different purpose is a horrible precedent. This is a local sales tax. The only connection to the Legislature is that we enabled them to [levy the local tax].”

The other significant pot of money that’s been tapped to free up the $158 million boost for State Government is $69.9 million of a projected $75 million that was initially projected to be left over on the state’s bottom line. The amended budget resolution now shows $5 million on the bottom line.

Rep. Lyndon Carlson, the lead DFLer on Ways and Means, said that the $75 million originally left on the bottom line was intended as a likely source of flood relief funding later this spring.

“That’s one of the few positive numbers that remain for spending,” Carlson said. “And we all know that there’s going to be flooding.”

Finally, the House State Government package takes $10 million from the capital investment budget to help it meet its revised spending target.

Politics-first budgeting?

Accusations of partisan retribution flew over the state auditor’s budget cut in the House bill. The bill, which cuts $2.3 million, or 12 percent, from the auditor’s budget, allows counties to do their own audits.

“This seems like an all-out attack on the auditor’s office and then its public workers,” said Rep. Kerry Gauthier, DFL-Duluth. “That’s OK,” he said to Republicans on the committee, “because you’re rallying our base.”

Lanning countered that some counties already do their own audits and that the auditor’s office would still set accounting standards.

“We are not picking on the auditor,” Lanning said.

Even though the reform proposals in the bill didn’t yield as much in savings as House GOP leaders had hoped, Lanning still believes that the state can book substantial reductions without harming essential services.

One significant proposal, for which the House bill anticipates $209 million in new revenue, would allow the state to contract with an outside vendor to adopt a software system that identifies taxpayers who need to be audited. The state would pay the vendor an unspecified share of the recovered revenue to identify businesses and individuals who are skipping out on taxes.

“We believe that our Revenue Department needs some help from outside experts in being able to better where might find people who aren’t paying what they are supposed to be paying,” Lanning said. DFLers, meanwhile, expressed doubt that the new tax compliance system would meet the revenue expectations outlined in the GOP budget.

Workforce cuts

The highest profile items in the State Government Finance bill revolve around public employees. The months of drama across the border in Wisconsin over collective bargaining have galvanized Democrats and labor unions in their opposition to the level of cuts to the state workforce proposed by the House and Senate Republican majorities.

While Dayton’s budget would cut state employee rolls by 6 percent, Lanning’s bill makes 12 percent reductions to the workforce in the next biennium for a $230 million savings. The bill also proposes to save $64 million over two years through a wage freeze for state employees. A pitch to eliminate deputy and assistant commissioner positions would save the state another $11 million, according to Lanning.

“Right now we cannot afford to give raises,” he said. “We need to look at a two-year freeze. We are not going to throw the collective bargaining process out the window.”

While the bill doesn’t go as far as Wisconsin Gov. Scott Walker’s move to end collective bargaining between public workers and the state, the wage freeze provision would have an impact on this year’s contract negotiations.

“Right now,” Lanning said, “I don’t think there’s any way either the House or Senate would support raises, because we don’t have the money to do that. And so allowing the negotiating process to go along and result in proposed increases like they have in the past about every time – that is heading for stalemate. It’s heading for a problem where the Legislature would not be willing to fund that. Rather than circumventing the collective bargaining process, I think this is just clearer up front.”

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