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State Auditor Rebecca Otto has asked the Minnesota Supreme Court to overturn a Court of Appeals ruling that found the audit-privatization provisions in a 2015 omnibus state government operations bill were constitutional. (File photo)

Supreme Court hears Rebecca Otto’s challenge

At one level, Otto v. Wright County, et al. — the case heard by the Minnesota Supreme Court Wednesday — is simple. Should counties be able to hire private firms to audit their finances, or should that decision be the state auditor’s?

One layer below that, State Auditor Rebecca Otto’s appeal is more challenging. It surfaces long-simmering separation-of-powers struggles between state government’s executive and legislative branches. And it challenges lawmakers’ habit of rolling massive stacks of legislation into giant omnibus — or “garbage” — bills.

Through attorney Joe Dixon, Otto asked the court Wednesday to overturn a May 30 Court of Appeals ruling, which found the audit-privatization provisions in a 2015 omnibus state government operations bill were constitutional.

The bill allows counties — which collectively spend $6 billion in state funds — either to contract with Otto’s office to audit their finances or hire private auditors. Otto over the years has allowed upwards of 20 counties annually to hire private auditors, albeit with state oversight.

She argues that the 2015 bill violated both the Minnesota Constitution’s separation-of-powers clause and its single-subject clause that orders lawmakers to avoid legislative logrolling.

That bill and some subsequent 2017 legislation, Dixon contends, combine to incentivize counties to contract for “cheap audits” performed by companies beholden to counties. That usurps Otto’s inherent authority, he argued.

Further, the 2015 bill was the product of last-minute legislative maneuvering that stirred the audit provisions into a massive “garbage bill,” he said. Both actions, Dixon said, violate the constitution.

“The legislation brought about a structural change to one of our constitution’s checks and balances and usurped [Otto’s] executive authority without a constitutional amendment,” Dixon told justices.

Mulling Mattson

Justices expressed more interest in the separation-of-powers case. The 1986 Minnesota Supreme Court case State ex. rel. Mattson v. Kiedrowski, perhaps the Otto case’s closest analog, was closely scrutinized.

In Mattson, the court found lawmakers acted unconstitutionally when they stripped away most of the state treasurer’s budget authority, leaving the office “an empty shell.” Ultimately that office was abolished in a 1998 constitutional amendment.

Chief Justice Lorie Gildea noted that Otto’s brief argued the 2015 bill impinged the auditor’s “core function” and “inherent authority.”

“What we’re getting at is the powers and duties that the entity came into the government with, at the time that the government was created,” Gildea said. “Does that fit with your notion of what we are talking about here?”

“It does, your honor,” Dixon replied. Gildea said that the constitution says an auditor’s duties are “prescribed by law.”

“That suggests to me that the constitution gives the Legislature the authority to define, in some way, the duties of that constitutional office — within the limits of what we said in Mattson,” she said.

Later, in response to Associate Justice Natalie Hudson, Dixon said the auditor’s core function — auditing counties — cannot be altered from its original constitutional framework. Only “further duties” added after ratification are open to legislative change, he said.

Associate Justice G. Barry Anderson questioned whether Mattson provides firm grounding for Otto’s challenge.

“It seems to me in Mattson a switch was turned and the treasurer’s office had functions transferred,” he said. But the 2015 legislation merely introduces competition by allowing counties to choose whom to do business with, he said.

“That’s a competitive choice,” he said. “I am wondering if that matters here.”

“I think it does, because it actually makes this case worse than Mattson,” Dixon replied. Citizens’ interests do not always mesh with counties’, he said, because counties “always want the cheapest audits possible.”

“Cheap is not necessarily what the people of Minnesota want to ensure that $6 billion each year are expended properly.” Authorizing private competition with a constitutional office was not constitutional, Dixon suggested.

“But there is no specific language to that effect in the constitution,” Anderson replied.

Discussion of the single-subject clause was relegated to the closing moments of Dixon’s opening argument. Hudson said she agreed that the 2015 omnibus package looks like a “garbage bill.” But Dixon has a steep hill to climb to prove that the bill is unconstitutional based on that clause, she said.

“When you look at the great weight of the authority out there, we have been quite lax and quite deferential,” Hudson said of the courts. “We just kind of say, ‘Well that’s the process. That’s how it works.’”

‘A broad category’

The single-subject rule was the first topic addressed when attorney Scott Anderson spoke. He represented Wright and Becker counties, two of the three counties Otto sued to challenge the 2015 statute. Robert Roche, representing Ramsey County, did not speak.

In his brief, Anderson argued the legislation did not violate the clause because all of the bills rolled into it can be described as “state government operations.”

“Can you think of a bill that would not fall under the broad category of ‘government operations?’” Associate Justice Anne McKeig asked.

“I am not going to contest that that is a broad category,” Anderson answered.

The individual components of omnibus bills are best challenged based on germaneness, he suggested. Otherwise, the court consistently applies a “liberal construction” to the single-subject clause. “The framers did not put limits on what a subject could be,” he said.

The topic shifted back to separation of powers. Associate Justice Margaret Chutich noted that before the 2015 bill passed, the Legislature shifted the auditor’s appropriation from the general fund to a separate fund created with fees collected through audits. By later allowing counties to contract privately, that fund — and therefore Otto’s budget — was substantially cut, she said.

“I am worried about a slow-motion Mattson here,” she said.

Anderson said that there is no evidence that Otto’s office does lack or will lack adequate funding.

“Let’s not forget,” he said. “This state auditor has chosen to prioritize her office to doing audits, physical examinations of 87 Minnesota counties.” They are not her sole source of fees, he said: Otto has almost 3,000 political subdivisions under her jurisdiction.

The final test of a violation under Mattson, Anderson said, is not whether Otto’s office lost some core functions, but whether it lost all core functions. It did not, he said.

“My reading is that you can transfer some core functions as long as you don’t transfer them all,” Anderson said.

But Mattson was an extreme case, Chutich countered. She suggested it would be impermissible for the Legislature to order the Attorney General to stop bringing legal actions but keep issuing legal advice, even though that would not “gut” the office.

“I don’t think Mattson stands for the proposition that unless you gut an office, it’s permissible to alter it,” Chutich said.

In his rebuttal, Dixon evoked former GOP Gov. Tim Pawlenty. Shortly after the ruling in the Associated Builders and Contractors v. Ventura case, in which a single provision of an omnibus bill as extracted for lacking germaneness, Pawlenty published an op-ed. It urged lawmakers to quit passing massive omnibus bills.

“He acknowledged that this court might need to give the Legislature a firmer nudge; I think those were the words that he used,” Dixon said. “That is what I think is required here.”

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About Kevin Featherly

Kevin Featherly, who joined BridgeTower Media in mid-2016, is a journalist and former freelance writer who has covered politics, law, business, technology and popular culture for publications and websites in the Twin Cities and nationally since the mid-1990s.

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