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The unallotment case: The Supreme Court’s options, and what the rulings would mean

The Minnesota Supreme Court can go three ways with the unallotment case. Depending on which option the justices settle on, the impact on the state budget crisis could range from very little to the full monty.

When will the Minnesota Supreme Court decide the unallotment case? How will they rule? And what impact will that have on the state’s budget crisis?

If I knew the answers to those questions, I’d tell ya (probably). But as an official member of the unallotment-obsessed community, here’s what I can figure out, in the aftermath of Monday’s oral arguments in the case, about the range of possibilities.

Timing
“With all deliberate speed,” the classic U.S. Supreme Court term for be-quick-but-not-hasty, probably applies here. The Supremes acknowledged the need for (deliberate) speed when they accepted the parties’ request for an expedited appeal process (that amounted to skipping the Minnesota Court of Appeals) then moved the case into the earliest available slot for oral arguments (a less-urgent case arriving at the court might have spent months waiting for an oral argument date).

The Legislature is in session, due (and required) to adjourn by May 17 (that’s less than nine weeks off). In a better world, the governor and the Legislature would be working toward that date with a goal of having the state budget in balance, at least according to the latest projections. The size of the gap, depending on how the unallotment case turns out, could vary from $1 billion (the current understanding, based on the latest revenue forecast and assuming that all of the unallotments stay unallotted) to $3.7 billion (if all of the unallotments are un-unallotted by the Supremes). That’s a big spread, and even the quest for a mutually agreeable $1 billion fix hasn’t exactly been a lovefest. Every week that goes by is one less week for the Leg and the guv to come together to fill the hole.

Also, if the guv and the Legislature don’t come to terms, Gov. Tim Pawlenty is counting on his unallotment powers to bring the budget closer to balance after the Legislature adjourns. But this case will determine whether he still has those powers and how they can be constitutionally used.

On the other hand, the court is the court and no one gets to give them a deadline. They have a process for producing a decision that at least a majority — and preferably all seven justices — can sign. We generally don’t find out they’ve decided a case until they publish the opinion. In the most recent highly visible and somewhat urgent case that landed in their laps — the final appeal of the Franken-Coleman recount — they heard oral arguments on June 1 and ruled — with absolutely not a whisper of advance warning that the ruling was coming until a few minutes before it was published — on June 30. That cost Minnesota half of its voice in the U.S. Senate for an extra month, but they did end up with a unanimous ruling, which helped a lot. The time urgency seems greater here.

There is some precedent, in time-urgent situations, for the court issuing an order before its decision is fully written. Personally, I would be shocked if the court doesn’t give the guv and the Leg some guidance before the session ends.

The ruling
The court can go three ways with the unallotment case (or a fourth way that I can’t picture, but the three obvious categories are):

1. Overturn the lower-court ruling by Ramsey County Chief Judge Kathleen Gearin. Declare that Pawlenty abided by the unallotment statute and that the statute is constitutional. The entire $2.7 billion unallotment remains in effect and Pawlenty, plus future governors of Minnesota, would possess the unallotment power to use at least as broadly as Pawlenty used it in 2009.

2. Find the unallotment statute constitutional, but rule that Pawlenty violated the statute. If they do this, they will likely decide that there was no “unanticipated” shortfall in revenue as required by the statute, or that the statutory language about “the remainder of the biennium” does not empower the governor to decide on unallotments before the biennium even begins. This is essentially what Gearin’s ruling did. Within this category of rulings it’s possible to imagine that some, but not necessarily all, of the unallotments would be reinstated. An outcome from this category would leave the unallotment power on the books but with new guidance as to its limitations for future use, whether by Pawlenty in his last nine months in office or by future governors.

3. Strike down the unallotment statute as unconstitutional. The constitutionality of the statute was challenged once before, and the statute was ruled to be constitutional. But it has never been used before the way Pawlenty used it in 2009. And the previous case didn’t reach the Supreme Court (it was decided by the Court of Appeals). So the Supremes could strike it down without overturning themselves. Gearin basically didn’t have the constitutional option because a higher court had already held the law to be constitutional.

Before Monday’s oral arguments, odds of a constitutional ruling were deemed long. William Mitchell Law Professor Peter Knapp, perhaps the closest watcher of the Minnesota Supreme Court, told me before the oral arguments that this was a court very drawn to deciding cases by statutory construction, and highly averse to striking down laws as unconstitutional. But I was surprised — and Knapp told me he was too — at the portion of Monday’s questions that suggested the justices were weighing constitutionality.

Impact on the budget
If the decision comes from category 1 — uphold the unallotments — then the guv and the Leg are looking at a $1 billion gap between current projected revenues for the rest of the biennium, which has generally been described as tough but manageable. Pawlenty has put out a package to address the gap that relies on cuts and federal stimulus dollars. The Legislature is considering its options.

If the decision is No. 3, to strike down the law and invalidate all $2.7 billion worth of the unallotments, then the hole jumps to something like $3.7 billion. Furthermore, the governor could not use his no-longer-existent unallotment powers to deal with the gap unilaterally. The time has passed for the guv to reduce spending through the line-item veto, since the appropriation bills were passed and signed in 2009 and Pawlenty line-itemed all he can out of them. The guv and the Leg would either have to come up with a not-recently-common ability to compromise on their differences, or the Legislature has to come up with the (also not-recently-experienced) votes to override Pawlenty’s vetoes or the budget gap could just sit there, growing larger or smaller with the latest downturn or upturn in revenue collections.

Bear in mind, the constitutional requirement is that the state balance its budget by the end of the biennium, which occurs on June 30, 2011. In January of 2011, a new governor and a new Legislature will take office. Even if 2011 brings a new DFL governor (the race is universally rated as a toss-up from where we stand now) who would presumably be willing to add new tax revenues to the solution, there would be little time to respond legislatively before the end of the current biennium.

Another possibility would be a government shutdown (or partial shutdown). I’m not currently up to speed on what it takes to trigger the shutdown option. One of the arguments that Pawlenty’s side made in the unallotment case is that it is preferable to have the governor act unilaterally to cut spending than to just keep spending money the state doesn’t have until a shutdown is triggered.

That leaves option No. 2 above, in which the court finds the unallotment statute is constitutional but that Pawlenty violated it in 2009. There is a lot of room within this option for the budget impact to vary between very little and the full monty.

Bear in mind, the plaintiff in this lawsuit is a group of six poor, ill Minnesotans who get a small state subsidy that enables them to afford special diets that their doctors say is necessary for their health. Pawlenty zeroed out that small subsidy, effective last November. The savings to the state were just $3.3 milllion — chump change in the context of the big budget picture. (And the program has already been reinstated, based on Gearin’s ruling and pending the appeal.)

It’s conceivable that the Supremes could tailor a very narrow ruling that settles only the question of that one small unallotment. (I could imagine, for example, but I am completely making this up, that the court would focus on the fact that Pawlenty zeroed out the dietary subsidy program, and leave open the question of whether an unallotment is an overreach if it merely reduces, but doesn’t completely eliminate, funding for a program.)

A narrow ruling like that would have a minimal direct effect on the current state budget deficit but could leave open the possibility that other parties who lost funds through unallotments could sue (and potentially add to the deficit, if they won their cases) without making clear that they would win.

If so, the impact of the ruling on the size of the deficit would be very small, at least until it became clear which of the other potential plaintiffs were going to sue.

Even if the Supremes embraced Gearin’s ruling that Pawlenty exceeded his power in the entire use of the unallotment (based on the argument that the unallotment power was not created to give the governor extra leverage in a budget battle with the Legislature), such a ruling would not necessarily invalidate the rest of the 2009 unallotments. But the broader logic would constitute a more open invitation for the other unallottees to sue with a near guarantee of winning and without having to go through a whole new trial.

But bear in mind that none of the other unallottees have yet been willing to sue, at least in part because of the knowledge that the state doesn’t have the funds to make good on all the allotments currently on the books.

Also, under an option No. 2 scenario, the unallotment power would still be on the books. Pawlenty would probably not be empowered to reinstate the same $2.7 billion worth of unallotments from 2009. But he likely would have the power unallot up to the amount of the new, genuinely unforeseen, $1 billion deficit. Some of the unallottees have been reluctant to sue for fear that Pawlenty would retaliate on the next round.

If the court made a ruling like the one described just above, affirming Gearin and making clear that the entire 2009 unallotment was improper but limiting its direct order to the diet-aid program, Pawlenty could also, if he wanted to respect the spirit of such a ruling, go back to the state of play as of the end of the 2009 legislative session and figure out, preferably with the cooperation of the Legislature, how to move forward from there.

But given Pawlenty’s past history, this seems unlikely, unless the court explicitly orders him to reallot the entire $2.7 billion.

(This past history bit is a reference to Pawlenty’s statements in the late stages of the Franken-Coleman recount case. When the case reached the Supreme Court, Pawlenty often said that he would sign a certificate of election for Al Franken if the court ordered him to, but would never quite clarify what he would do if the court simply ruled that Franken had won the election, but didn’t explicitly order the governor to sign the certificate. In the end, the court did not order the governor to sign, but Norm Coleman ended the crisis by conceding the election. The point here is that one could imagine that under this scenario, Pawlenty could take a decision that basically says all of the unallotments were improper and still refuse to reverse them on the grounds that the court didn’t put it in the form of a direct order.)