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Beyond budget cuts

Published (4/8/2011)
By Nick Busse
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Rep. Morrie Lanning responds to a question on the House floor during the April 6 debate on the omnibus state government finance bill. (Photo by Andrew VonBank)The House’s new Republican majority began the session promising fundamental reforms to state government. On April 6, the House voted 72-61 to deliver on that promise.

HF577/ SF1047* is the omnibus state government finance bill. Sponsored by Rep. Morrie Lanning (R-Moorhead) and Sen. Mike Parry (R-Waseca), it would cut spending on state government by more than one-third, downsize the state’s workforce and enact a package of wide-ranging reforms to change the way the state does business.

Not everyone supports the overhaul of state government proposed in the bill. Many DFLers say the bill ignores fiscal realities and unfairly targets state employees for draconian cuts. But Lanning said it’s not enough to cut spending; the state needs to make fundamental changes in order to be successful in the future.

“I believe this bill has more government reform proposals than we’ve probably seen in any other bill in a long time,” he said.

Passed by the House, the bill now returns to the Senate, where a different version passed 36-29 on March 30. A conference committee is expected to work out the differences.

The bill would fund core state government operations for the 2012-2013 fiscal biennium. This includes agencies like the Revenue and Administration departments, Minnesota Management & Budget, the Legislature and the state’s constitutional offices. It also covers the Military Affairs and Veterans Affairs departments, which are the only two agencies that would receive a budget increase.

In addition to cutting most agencies’ operating budgets by 8 to 15 percent, the bill includes plans for $169.6 million in new revenues. It would also ask MMB to cut $94.8 million from executive branch spending by implementing a variety of reforms specified in the bill — everything from reducing the number of state workers to loosening restrictions on outsourcing.

During nearly six hours of floor debate, members sparred over whether the reforms would save as much money as supporters claim. Rep. Nora Slawik (DFL-Maplewood) said Republicans are deliberately ignoring fiscal notes from MMB that show much smaller savings than what the bill anticipates.

Slawik specifically challenged the assumption of $169.6 million in new revenues. Officials from the Revenue Department testified in committee hearings that the bill’s provisions are unlikely to generate anywhere near that level of savings. Slawik said the bill is “structured around a fantasy.”

“I thought you came here to make cuts. Now you’re booking revenue that doesn’t exist,” Slawik said.

But supporters said state agencies are often biased in favor of the status quo. They said MMB’s fiscal notes focus only on the cost of implementing reforms, and ignore the savings they would achieve.

“A lot of these reforms, if you’re a state employee, you might not want them to occur… and you might have some bias,” said Rep. Mary Liz Holberg (R-Lakeville).

Lanning added that officials still haven’t produced a fiscal note on a key provision in the bill: a tax analytics program that is expected to generate $133 million.

“There comes a point where we have to make some judgments ourselves… and my best judgment says that this bill is in balance,” Lanning said.

The St. Paul Fire Department Honor Guard leads an April 4 march of groups representing the labor, faith, nonprofit, rural, environmental and progressive community from the Cathedral of St. Paul to a rally at the State Capitol to call for an end to attacks on working people and focus on passing a budget that protects middle-class families. (Photo by Tom Olmscheid)A smaller workforce

The bill would impact state workers in several ways. A 15 percent reduction is called for in the total number of state employees by 2015 — 12 percent in the next biennium and another 3 percent in the following one.

Rep. Keith Downey (R-Edina), who sponsored the provision, said the reduction in the workforce combined with other changes would lead to a more productive, more efficient executive branch.

“We can fund our priorities and not the bureaucracy,” Downey said.

A 15 percent reduction would translate into approximately 5,000 fewer state jobs. Downey said most of the reductions would likely be achieved through regular attrition and early retirement incentives rather than layoffs.

Other provisions would freeze state workers’ pay for two years and create various incentives for employees to look for cost savings. The bill would also lift restrictions on outsourcing, and require agencies to contract out with private vendors if they can provide a service at a lower cost than state workers. State employee unions could compete with private companies to bid for the work.

“There’s no reason that our state workforce, if properly challenged and properly empowered, can’t achieve the productivity gains achieved in the private sector,” Downey said.

Opponents said the bill amounts to a thinly veiled attack on state workers and their collective bargaining rights. They also questioned whether the 15 percent reduction would leave agencies with enough staff to fulfill their missions.

“This bill clearly is unfair to state employees,” said Rep. Kerry Gauthier (DFL-Duluth).

Rep. Ryan Winkler (DFL-Golden Valley) said state employee compensation accounts for only 8 percent of the state’s total budget. He argued the bill would harm state services while only creating minimal savings.

“You’re making government less effective, and you’re not managing to save any meaningful money,” Winkler said.

The workforce reduction would apply collectively to all state agencies, but would not necessarily entail across-the-board reductions. Some agencies might receive smaller reductions than others.

Despite all the controversy, Rep. King Banaian (R-St. Cloud) urged his colleagues to support the bill. He said the fiscal uncertainties inherent in some of the provisions shouldn’t prevent lawmakers from following through on their promise to reform government.

“We’re trying to do something new. We’re trying to do something different here,” Banaian said..

Selected policy provisions in the bill:

• a “sunset commission” to find and eliminate duplicative state services and agencies;

• zero-based budgeting, allowing legislators to prioritize state spending based on measurable goals and performance indicators;

• a pilot program using revenue bonds to pay nonprofits for social work based on measurable return on investment to the state;

• consolidating all state agencies’ information technology services under the Office of Enterprise Technology;

• a reduction in the total number of deputy and assistant commissioners in the executive branch;

• allowing counties to use private accounting firms for their audits instead of the Office of the State Auditor; and

• a plan to simplify and reduce the number of job classifications in state agencies.

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