Legislature challenges Governor's unallotment decisions

On Thursday afternoon (June 18, 2009), Tom Hanson, Commissioner of Minnesota Management and Budget (MMB), presented the Governor’s unallotment plan to the Legislative Advisory Committee (LAC). This is a required step in the unallotment process. Legislators were prepared with plenty of questions…and lots of challenges (you can watch the video online). But remember, the LAC does not have any authority to reject or change the Governor’s unallotment decisions.

Here are a few of the more informative issues that were discussed:

How many job losses will result from proposed unallotments? Jim Schowalter, the state budget director, estimates that the Governor’s unallotment proposal will result in the loss of about 3,100 jobs in the public and private sector (this estimate assumes the shift in education spending will not impact any jobs). Legislators felt those numbers underestimate the impact.

Will these unallotments jeopardize any federal dollars? After some confusion, Pawlenty’s representatives acknowledged that the state will lose some federal funding by reducing state spending on Medical Assistance (MA) programs. The federal government normally matches every dollar in state MA spending with a dollar in federal funding. The federal stimulus package increased that “matching rate” to $1.50 in federal dollars for every state dollar. Representative Huntley listed more than a dozen items in the Governor’s unallotment proposal that would reduce state MA spending, resulting in a loss of these federal matching funds. Commissioner Hanson said they attempted to minimize any loss of federal dollars.

Does the Governor have the authority to enact the school aid payment shift? The $1.8 billion proposal to shift aid payments to schools really has two components – a payment deferral ($1.2 billion) and a change in when property tax receipts are recognized ($600 million). Pogemiller strongly asserted that the Governor does not have the authority to enact the property tax recogniztion component of his plan, leaving a $600 million gap in his unallotment proposal. Pogemiller threatened legal action if the Governor continued to pursue this part of his unallotment plan.

Senator Pogemiller and other legislators also argued that while the Governor may have the authority to carry out the delay in payments to school districts (the $1.2 billion part), he does not have the authority to pay the shift back to schools in the future. So, he argued, the Governor’s proposed school payment shift is really a $1.2 billion cut to school districts unless the legislature authorizes the payment to schools in the future. However, pointed out Pogemiller, since the Governor vetoed the tax bill, there will be no additional revenue available to make schools whole again.

Commissioner Hanson and the staff from the Department of Education insisted that the Governor has the necessary authority to carry out everything he proposes.

What is the size of the deficit facing the state in FY 2012-13? This answer has several layers. MMB reported that the state’s budget deficit after unallotment is projected to be $3.1 billion in FY 2012-13. But then there are several factors which could further increase that deficit:

  • If General Assistance Medical Care (GAMC), which the Governor line-item vetoed, comes back at current law levels, that would add nearly $900 million to the deficit. This could happen because the program automatically comes back in FY 2012-13 because the eligibility language is still in statute (the Governor disputes this interpretation) or because the legislature reenacts the program. The legislature might also make some reforms to the program, which could reduce the cost to $400 million.
  • If the school payment shift is “bought back,” that would add an additional $1.8 billion to the deficit.
  • If the impact of inflation is included, that would add an additional $1.4 billion to the deficit.

Altogether, Senate Fiscal Staff estimated that the state’s budget deficit could grow to $7.3 billion in FY 2012-13.

Does that sound like a lot? Well, remember that the FY 2010-11 deficit is being resolved largely through the use of one-time measures. We started with a $6.4 billion deficit – then used $2.5 billion in one-time federal stimulus resources and $2.7 in one-time unallotment measures. That adds up to about 80% in one-time fixes (plus the legislature also included some one-time measures in the bills they passed that aren’t included in this calculation).

Is the Governor making policy changes in health and human services? Senator Berglin raised several questions about the Governor’s unallotment proposal:

  • She does not believe the Governor can decide to pay for Transitional MinnesotaCare out of the Health Care Access Fund instead of the general fund. She believes the Governor’s unallotment proposal would effectively end this program.
  • She also questioned whether the Governor had the authority to make policy changes, like limiting the number of hours Personal Care Attendants can work in a month or changing asset limit policies in health care programs.
  • Senator Berglin also raised questions about the consequences of some of the Governor’s unallotment proposals, like whether any group residential housing facilities will be forced to close or whether thousands of very low-income people with disabilities will be forced into homelessness before they can access emergency assistance.

The Governor’s representatives remained firm throughout the hearing that the Governor is not exceeding his unallotment authority and defended the various components of his proposal. The Legislative Advisory Commission plans to meet again in the next week or two to ask additional questions.

-Christina Wessel

About Christina Wessel

Christina served as the Minnesota Budget Project's deputy director until January 2014.
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3 Responses to Legislature challenges Governor's unallotment decisions

  1. Daniel E Fall says:

    OK, so I’m no constitutional lawyer and my bias would be against a Governor deciding carte blanche what programs get axed in a shortfall, but here are my thoughts for whomever wishes to read.

    My read of the law is that he is allowed to ‘reduce’ allotments; not cancel them altogether. Now, that said, there is certainly ambiguity in the language of this statute. How much reduction is a reasonable prudent reduction? Can anyone involved say ‘prudent’ man standard? Pawlenty might argue prudence is dropping a costly program that has increased too much like GAMC. I don’t buy it.. Reducing allotments doesn’t mean canceling them; otherwise, why have the legislature involved in budget at all? This is a question the court must ask itself. Is the intent of the statute to allow the governor to establish the entire budget in a shortfall? Ha, that is funny.

    From my limited knowledge of the law, Pawlenty overstepped by dropping any programs fully. This was not the intent of the law. I think Pawlenty ought to be worried about the appeal because I think the lower court erred and didn’t provide the clearly needed legal scolding.

    Further, Pawlenty’s budget did not have one page dedicated to the revenue side of the budget; not one. I don’t see how this is prudent either. I do see how it was ideologically convenient in an economic downturn known long before the November, 2008 forecasts. Have I got my dates wrong? No way. By November, of 2008, we had lost about 50% of our IRA to the downturn/crash, and I bought a house for the value of the land in January, 2009. To suggest the shortfall was unmanageable without fully cutting some programs is preposterous.

    I think the court must step in and do a couple of things here. It must stop a governor from being the sole decisionmaker in budget downturns. Now, where Pawlenty didn’t want to raise taxes, he could have well ‘reduced’ allotments as the statute allows if the legislature would take no action. Canceling them does not seem within his authority. Most of the time, when a business is in a down cycle, the CFO asks the budget managers to cut or reduce a certain percentage of their budgets before he does anything else. There is that word again ‘reduce’. The statute doesn’t say cancel.

    While the research done suggests the word remainder is not defined, I frankly don’t think a genius is required to understand remainder means after a budget has been established. Pawlenty didn’t face an interim budget problem, he faced a budget problem within the budget cycle. This is also something businesses handle far differently than did King Tim.

    I expect the court to admonish the legislature for a very poorly written law and the governor for usurping the clear intent of that law.

  2. Steve V says:

    If the legislature is serious about challenging unallotment, they should put forth new legislation that strictly defines it and set up clear prohibitions in the law. As it is “emergency” is in the eye of the beholder making the provision a political club to be wielded by anyone who would use it that way. Tighten the provision or get rid of it and do it when the legislature is strong enough to override any possible veto. That is what a real legislative challenge should undertake.

  3. John Groos says:

    A quick read of the unallotment plan presented June 18 to the Legislative Advisory Committee leaves me gasping for breath. Who is qualified to comment?
    That aside, it would appear likely that valuable state programs have been placed in jeopardy, the relationship between Governor and Legislature possibly scrambled, and only hostility will prevail. Has the Governor generated much more than general chaos from these decisions?

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