Fiscal notes, gov consolidation top auditor’s list

Audit Commission picks seven investigations for Nobles’ office

A year ago, the Legislative Audit Commission passed over a proposal to evaluate the way state agencies prepare the fiscal notes that have long served as the basis for doing state budgets. One year later, amid a session punctuated by public disputes about their accuracy, the commission made an investigation of fiscal notes one of the highest priorities for Legislative Auditor James Nobles and his staff.

The commission’s co-chairman, Sen. Roger Reinert, DFL-Duluth, said the topics chosen by the commission reflect the budget pressures that the state has faced in recent years.

“When you take a look at the top four, I think the theme that runs through all of them is tight resources,” Reinert said.

In total, the commission has tasked Nobles’ staff with seven areas to probe. The roster of reports offers a wide spectrum of policy areas ranging from child protective services to the use of dedicated funds from the Legacy amendment. The reports range in scope from the narrow and technical – like the examination of truck weight restrictions – to the sprawling (the mammoth issue of consolidating local governments).

The bulk of the auditor’s reports will be unveiled during the first months of the 2012 legislative session.

The issues they will take on:

Fiscal note process

Sen. Mike Parry, R-Waseca, has been embroiled in the fiscal note issue this session as chairman of the State Government Innovation Committee. He crafted a budget bill that called for government reforms that booked savings for the state budget based on estimates from private companies. The savings projected in the bill exceeded the amount that state Department of Management and Budget (MMB) analysts calculated. Parry is smarting over comments by Gov. Mark Dayton and DFLers in the Legislature who have said that his numbers are flimsy and that he should hew closely to the traditional fiscal note protocol.

As a member of the Legislative Audit Commission, Parry supported an evaluation to shed light on the reliability of state fiscal notes.

“What I’m looking for is, number one, what are the parameters, how are they scoring fiscal notes? How accurate have these fiscal notes been in the past?” Parry said.

One of the troublesome aspects about fiscal notes is that they are prepared by state agencies like MMB that are part of the governor’s administration. In times like the present – and recent past – a partisan divide in control of the Legislature and the governor’s office has led to increased criticism, Reinert said.

“We all acknowledged that this continues to be an issue no matter who’s in charge,” Reinert said. “When we were in charge of the Legislature and Republicans had the governor’s office, it was often us crying foul around fiscal notes. Now it’s completely reversed. The fact that the fiscal note process belongs to the executive branch and there isn’t either a counterbalance or an alternative that belongs to the legislative branch is really what’s at the heart of this discussion.”

One point observers will be watching: whether Nobles recommends a legislative budget office that prepares fiscal notes like the Congressional Budget Office at the federal level.

Rep. King Banaian, R-St. Cloud, has proposed legislation that would make the Legislative Commission on Planning and Fiscal Policy into a budgeting entity within the Legislature.

Consolidation of local governments

As state and local budgets have drowned in red ink in recent years, lawmakers have considered refashioning local governments from counties to watershed districts in hopes of wringing savings and improving the efficiency with which they provide services.

This issue will get a thorough look in what is regarded as the most ambitious evaluation for the auditor.

“Between layers of local government as well as in local governments, how do cities work together?” Reinert said. “Do we look at merging counties? Do we look at merging a city and a county like Duluth that would be South St. Louis County? These are the types of conversations local officials are having. I think the Legislature needs to be more engaged in that conversation with local governments. Because often what we do is constrain them from being more innovative in how they want deliver services. That’s probably the biggest topic [the auditor] will take on.”

Rep. Rick Hansen, DFL-South St. Paul, who championed the report on consolidation, said the auditor can provide a full examination of instances of consolidation in other states.

“All the states are in the same boat,” Hansen said, “so what can we learn from what they’re doing.”

Accountability for Legacy funds

Voters in the 2008 election passed the Legacy amendment that increased the state sales tax by three-eighths of 1 percent to pay for cultural and environmental projects. They approved the first set of projects the following year. All told, the Legacy will distribute money to a variety of public and nonprofit groups for 25 years. In the 2012-13 biennium, its proceeds will provide $540 million in funding.

As the legislative auditor is preparing its first round of financial audits for Legacy funds, Hansen said it’s wise to analyze the policies that ensure the money is used as intended.

“We’re dealing with outdoor heritage to arts and culture. Is there accountability?” Hansen said.

Child protection screening

Several years ago, the auditor’s office reported on the state of child protective services. Legislators are looking for an update on services for vulnerable children. While the report isn’t in response to a specific incident, Reinert said, he added that legislators receive questions about whether child protective services can be done more effectively.

Helping communities recover from disasters

In 2007, lawmakers met in special session to pass relief money for flooding in southeastern Minnesota. The legislation that was passed in special session has been a framework for subsequent special sessions such as last year’s gathering to deal with flooding in a larger area across southern Minnesota.

Hansen wants the auditor to examine whether it’s effective to have special sessions in the wake of a disaster.  “We seem to be dealing with a disaster either with a special session or special legislation every year,” he noted. “Are these responses to disasters effective? Should there be a permanent disaster fund? And what is a disaster – where is the threshold?”

In the case of the 2010 special session, Gov. Tim Pawlenty waited to call the session until the federal government declared certain counties disaster areas. Hansen said the report will look at the interaction between the state and federal government in responding to disasters.

Enforcement of vehicle size and weight

The need to examine truck weight limits hasn’t been as visible this year as fiscal notes or local government consolidation. But to Parry and other legislators, it’s a huge problem.

“I don’t think the average citizen truly realizes the impact that overweight loads have on roads,” Parry said.

Parry thinks that lawmakers face a conundrum when it comes to regulating the heavy trucks that lumber along highways bringing goods to market. He hopes the evaluation will make the problem clear.

“I think what will happen is folks in transportation will sit there and see there is a need to re-evaluate whether we need to rebuild the roads to handle heavier loads or we just leave the roads at a certain level because of the cost and lower the weight [limit],” Parry said.

Rep. Michael Beard, R-Shakopee, who is House Transportation Committee chairman and a co-chairman of the commission along with Reinert, said the Legislature has gotten in the habit of granting too many exemptions.

“Every year, someone is given an exemption – garbage trucks, milk trucks,” Beard noted. “This year it was aggregates. …Every time you turn around somebody wants an exemption. Somebody’s got to draw the line somewhere. It makes you a pretty unpopular chair when you say you won’t hear that bill, I don’t want to raise the weights.

“But here’s the deal: Is there a way we can actually do bigger truck weights and pay for the damage so that it comes out revenue neutral? Then we’re all ears.”

Beard said the report will also look at weight-limit enforcement issues.

University of Minnesota facilities management

Although the University of Minnesota isn’t part of state government in the eyes of state law, lawmakers who have awarded large amounts of money in the form of bonding projects over the years to the university want Nobles to take a look under the hood.

“The university is a huge asset manager, and we give them a lot of money to build their assets,” Reinert said.

Parry said he wants to inquire about whether the university gets commitments from contractors to insure repair work done on the physical plant.

“They’re always asking for money for roofs,” Parry said. “But do we have a consistent outlined maintenance program for the roofs of all of these buildings? … I’m hoping that’s what we’ll get out of the audit.”