This is one in a series of articles funded by a grant from the Northwest Area Foundation.
To suspend, or not to suspend — that’s the question facing future Minnesota governors and their administrations. Should the state’s minimum wage automatically adjust to inflation each year?
Under the DFL deal to raise the state’s minimum wage to $9.50 per hour with an inflation index starting in 2018, Minnesota’s Commissioner of the Department Labor and Industry can suspend indexing the wage for up to 12 months — if leading economic indicators point to a “substantial downturn in the state’s economy.”
At least three Republican gubernatorial candidates — Kurt Zellers, Dave Thompson, and Jeff Johnson — assert they have near-absolute power to stop indexing annually, if elected. One economist says forecasting is uncertain enough to make that possible. If so, indexing would effectively disappear during GOP administrations.
The bill delegates indexing’s annual fate to the labor commissioner, but Gov. Mark Dayton notes that appointee “works for the governor and serves as an at-will position. The bottom line is the governor has the prerogative to make that decision.”
None of the other 11 states in the nation that index their minimum wage to inflation give the executive branch authority over its fate. In all but one of those states, voters approved indexing at the ballot. An experienced constitutional lawyer says the legislature delegating away minimum-wage decisions invites a court challenge.
Dayton will sign the minimum-wage bill Monday.
Open for interpretation?
Indexing supporters hoped automatic inflation raises would finally take the politics out of the minimum wage debate.
Negotiators inserted the suspension provision at the end, hoping to quell rural and suburban DFL senators’ concerns that a $3.35-an-hour wage hike plus indexing would hurt their Main Street businesses.
DFL Rep. Ryan Winkler, who led the indexing charge, said the language was drafted to make any suspension decision more objective. Before suspending the wage, the commissioner must:
- Consult with the commissioner of the Department of Management and Budget.
- Survey “leading economic indicators,” including but not limited to projections of gross domestic product (from the U.S. Department of Commerce), the Consumer Confidence Index (from the Bureau of Economic Analysis) and seasonally adjusted Minnesota unemployment rates.
- From that data, find the “potential for a substantial downturn in the state’s economy.”
- Hold a public hearing with proper meeting notification at least 10 days prior.
- Allow interested persons to submit written comments to the commissioner before the public hearing and for 20 days after the public hearing.
“They would have to go through the process we laid out in the bill,” Winkler said. “They would have to actually make some findings related to economic conditions and I think it’s pretty clear that it’s only permissible if the economic circumstances warrant it, not political desire.”
But University of Minnesota labor economist Aaron Sojourner says basic economic forecasting is “inherently uncertain” and there’s a lot of judgment that goes into interpreting the data.
The bill is “not setting a bright-line standard, that is, everyone can look at it and say ‘yes’ or ‘no,’” Sojourner said. “This is empowering a government official to make that discretionary judgment. Hopefully it’s an informed and intelligent decision, but it’s still at their discretion.”
Sojurner, however, is not a lawyer. Attorney Charles Nauen, who regularly represents the DFL Party, said Republican candidates for governor should be wary of the 2010 unallotment case. That year, the state Supreme Court found it was unlawful for Gov. Tim Pawlenty to make unilateral cuts to the state’s budget.
“The lesson of unallotment is: if you are going to do something you better follow the rules, you better follow the procedures in place,” Nauen said. “These procedures in the minimum wage statues are pretty specific. They do give some judgment to the commissioner, but only after they set up public notice and allow a public hearing and rely on the features of the statute.”
Still, the provision may itself not be constitutional. Attorney Erick Kaardal says there are questions about delegating legislative duties without specific enough guidance.
“It seems to be something that raises constitutional questions on first impression. The Legislature has never actually delegated minimum wage or even indexing to the department,” said Kaardal, who has made a career out of litigation over state government issues. “Here you have a definite shift, a new thing that’s never been done before.”
GOPers would suspend
A handful of Republicans running for governor also say there’s a lot of room for interpretation in the soon-to-be law.
Zellers, a Maple Grove state representative, said he thinks indexing is bad policy and he would get rid of it if he ran the state. “You can consult your commissioners all you want, I think that’s what they are there for, to be your experts in that particular field, but the authority and the responsibility rests with the governor, not some nameless, faceless commissioner,” he said.
If he had to jump through the bill’s hoops, Zellers says, “You could bring in an economist from the University of Minnesota or from St. Thomas. It’s just like lawyers when it comes to economists — you can get a lot of different opinions based on either their philosophies or their teaching experience.”
Lakeville Sen. Dave Thompson, also a Republican gubernatorial candidate, agrees that the bill’s language is vague and interpretable. “There’s the old saying: ‘A recession is when your neighbor is out of work and a depression is when you’re out of work,’” Thompson said. “What’s a significant economic downturn?”
He doesn’t believe legislators should give that power to the executive branch, but if the law granted him the privilege, Thompson said he would suspend indexing for the entirety of his stay in the governor’s mansion.
“I think the governor would have to have some justification and obviously they are going to call for public testimony and witnesses,” he added, “But ultimately it ends up being within the discretion of the governor, and I don’t believe that’s discretion the governor should have.”
As governor, GOP candidate and Hennepin County Commissioner Jeff Johnson said he would try to eliminate indexing legislatively first, but he wouldn’t hesitate to use authority legally designated to his administration .
“It sounds like there’s tremendous latitude, which is not good policy,” Johnson said, adding pay raises “shouldn’t be automatic and it shouldn’t be left up the political whims of a governor.”
(GOP gubernatorial candidates Marty Seifert and Scott Honour did not return requests for comment.)
Nauen contends this sort of campaign rhetoric could cost a GOP governor in court. “The increases can’t be suspended for a political reason and political reasons alone. That would be arbitrary. You have to follow the rules — that’s the lesson of the unallotment decision.”
A backup plan
Winkler said he went back-and-forth with minimum wage negotiators over possible ways to tighten up requirements for the commissioner, but each time they tried to specify certain data points or put in specific numbers to trigger an action, the proposal got too complicated.
“We did leave some discretion in there,” he said.
That’s why Winkler also included an “accelerator” in the bill — allowing governors to not only reinstate indexing after a suspension, but also catch the wage back up to where it would have been had inflation adjustments been made the whole time.
“If you’re that Republican so committed to not giving people a wage increase,” Winkler said, “a future Democratic administration can just make it up.”