Power struggle: Rebecca Otto goes to court over state auditor duties

MinnPost photo by Briana Bierschbach
State Auditor Rebecca Otto: “I took an oath to defend the Minnesota Constitution, and that’s exactly what I’m doing with this lawsuit.”

A rare thing in Minnesota politics happened in a St. Paul courtroom Thursday: all three branches of government collided. 

The clash was over the matter of whether the Minnesota Legislature encroached on the state’s executive branch in the final hours of the 2015 legislative session, when legislators passed a law allowing Minnesota counties to bypass the state auditor in hiring private accounting firms to perform financial audits. At the time, Rebecca Otto, the DFL state auditor, said the move rendered her office — which conduct audits on most counties in the state — effectively null.  

Otto has filed suit over the law, arguing it’s an unconstitutional violation of the separation of powers in state government. It’s the first time in 30 years the state has grappled with the question, one that has the potential to dramatically change the role of Minnesota’s state auditor. 

As Joe Dixon, Otto’s attorney, said at the hearing before Ramsey County Judge Lezlie Marek: “This case presents one of the most serious affronts to the balance of power in the history of the state.”

Separation of powers

There’s some precedent for Otto’s case. In 1985, legislators passed a law that transferred most of the responsibilities of the state treasurer, then a constitutional officer, to the Commissioner of Finance.

Minnesota’s treasurer at the time, Robert Mattson, challenged the law as unconstitutional because it effectively abolished the duties of his office. The Minnesota Supreme Court sided with Mattson in that case, a ruling that’s now the foundation of Otto’s argument.

The role of the state auditor has existed since before statehood, but it wasn’t always the job of the auditor to examine the books of the counties. That changed in 1972, when legislators directed the office to take on the task.

Otto’s argument is that the job of auditing counties has always been a function of the executive branch, first as part of the governor’s examiner office. Constitutionally, it’s considered a core function of the executive, which means it can’t be taken away by the Legislature, Dixon said Tuesday. “This is a major departure from our history.” 

Dixon also argued the law violates the single subject rule in Minnesota, which is supposed to stop unrelated law changes from being tucked inside so-called omnibus bills. The change to the auditor’s office, which has been brewing in St. Paul for several years, was tacked on to a state government finance bill. “If this doesn’t constitute a violation of single subject, I don’t know what does,” Dixon said. 

Otto filed the lawsuit in February against the state of Minnesota, as well Becker, Ramsey and Wright counties. The state was later dropped as a defendant to the lawsuit, leaving the counties as the ones to defend the change made by the Legislature.

Scott Anderson
MinnPost photo by Briana Bierschbach
Scott Anderson

Scott Anderson, an attorney representing Wright and Becker counties, argued lawmakers are allowed to move some duties of executive officers, just not core functions. That’s how the state auditor took over county audits in the first place, back in the 1970s — through a legislative change. And the office of the state auditor has many duties besides performing financial audits of counties, including auditing smaller local government entities, firefighter pensions and any organization using federal funds.

“Otto could audit other entities, but because she chooses to focus on counties, it makes it a core function?” he asked.

Anderson also said Otto has overblown the potential impact to her office, as some counties, like Hennepin, are already specifically allowed to use outside auditors — and do. “It does not really change in any meaningful way of what’s been done by the state auditor for the last 13 years.” 

Tight timeline

Ramsey County Judge Lezlie Marek has a big decision and a short timeline ahead of her. By Aug. 1, counties need to let Otto’s office know whether or not they plan use private firms for the 2018 auditing year, which would cover most of 2017. 

Marek dismissed a request from the counties not to take up the case at all, and has moved quickly on the case so far. Most expect her to rule before the changes go into effect.

“We’re bound by timelines in statute right now that we have to respond to, and until this case is decided we’re not exactly sure what we are responsible to do,” said Julie Ring, executive director of the Association of Minnesota Counties, who attended the hearing Thursday.

The case is Otto’s last option. After the law was passed last year, Gov. Mark Dayton tried to repeal it as part of a special session of the Legislature, but he couldn’t find enough support among lawmakers. Dayton, a former state auditor, filed an affidavit supporting Otto’s case. Anticipating lawmakers weren’t going to take up the issue in 2016, Otto filed her lawsuit in February, one month before the legislative session convened. 

“I took an oath to defend the Minnesota Constitution, and that’s exactly what I’m doing with this lawsuit,” Otto said after the hearing. “Allowing the counties to choose their auditor is not only bad policy, it’s unconstitutional, and the taxpayers deserve better in this state….the founders understood the importance of independent oversight on behalf of the taxpayers to make our system work.”

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Comments (8)

  1. Submitted by David Markle on 06/24/2016 - 12:30 pm.

    A worthy cause

    Aside from the legal technicalities of this case, it’s simply good government to have the State Auditor’s office audit county and local governments, and troubling to let private firms handle that job. Besides, the office has long enjoyed quite a good reputation under such respected leaders as Stafford King, Arne Carlson and Rebecca Otto.

    • Submitted by Edward Blaise on 06/24/2016 - 02:21 pm.

      But…

      Are not you missing another State Auditor who went on to greater glory in service to his state?

      • Submitted by David Markle on 06/25/2016 - 05:29 pm.

        Some missing names

        Yes, Mark Dayton seemed to be a good Auditor, as did Judy Dutcher–and probably several others–but I’m not an expert on the history of the office..

  2. Submitted by Greg Kapphahn on 06/24/2016 - 07:06 pm.

    Over the Course of My Life

    my work meant I moved around a lot.

    I’ve lived in nine rural counties (and a couple of urban ones) and came to know the local authorities fairly well in many of them.

    In at least three of the rural ones, the practices in non-financial areas that were in place when I lived there would clearly have meant,…

    that allowing the county to choose and use their OWN auditing firm would far too easily have meant the audits produced would have covered up an increasing number of sweetheart deals and accounting irregularities,…

    (to the benefit of certain well-placed individuals as well as friends and family members of County Officials).

    There’s a reason why the Minnesota Constitution put in place a State Auditor who would be in the position to prevent such insider benefits from being put in place across the state of Minnesota.

    Clearly our state’s founders were wiser than we sometimes are, ourselves.

    The State Auditor was, and IS a primary firewall preventing counties across the State of Minnesota from becoming the personal fiefdoms of a single family or small group of families,…

    who maintain their power by handing out favors to gain the support of those who will help keep them in power.

    We need a State Auditor with strong powers to help keep the financial dealings and record keeping of ALL the counties of Minnesota in good, strong, financial and fiduciary line.

    I strongly suspect the true motives of those trying to dismantle that constitutional office have far more to do with enabling themselves to more freely use local government to serve their own purposes,…

    than any desire to reduce the costs of yearly audits.

  3. Submitted by Jon Kingstad on 06/25/2016 - 04:33 pm.

    Why just counties?

    Mr. Kapphan makes a good point. But the questions then is: why are the State Auditor’s duties limited to counties? What about cities, towns, watershed districts and the like?

    Minnesota has a law called “Truth in Taxation” which really doesn’t begin to make clear how taxes are being raised and spent. Any visit to a local government website will soon disabuse any taxpayer of the illusion that there’s “transparency in government.” The idea of a “State Auditor” I would think would be that there’s an independent and neutral authority who examines the books and records of local governments according to uniform standards so that self-dealing and sweetheart deals will be exposed and these governments will not not be living beyond the means of their constituents.

  4. Submitted by Conrad Soderholm on 06/25/2016 - 05:26 pm.

    Don’t forget Otto’s mining vote

    Many knowledgeable observers believe that the stripping of duties from the auditor’s office was payback for Ms. Otto’s vote against the mining leases proposed for land near the BWCA. She was the only member of the cabinet-level group who voted against rushing ahead with approving the mining leases, and the legislature made her pay the price.

  5. Submitted by Jim Million on 06/26/2016 - 07:31 am.

    Begging the Question?

    ‘Anderson also said Otto has overblown the potential impact to her office, as some counties, like Hennepin, are already specifically allowed to use outside auditors — and do. “It does not really change in any meaningful way of what’s been done by the state auditor for the last 13 years.” ‘

    As I recall, one fairly important reason for State audits of Counties was the tendency for many County Commissioners to be effectively elected in perpetuity, sometimes creating rather dysfunctional outcomes.

    Given the ever-increasing presence of much pass-through funding, what average citizen would object to a State audit of his/her county?

    As for Hennepin Co., well….one State audit every 10 years likely wouldn’t hurt.

  6. Submitted by Stan Deneui on 09/09/2016 - 07:52 am.

    She has not lost the power to audit, only exclusively.

    Rebecca Otto still can conduct audits of any state funded entity, the trouble is that counties struggle with the speed of the audits so choose to streamline the process with outside sources. Rebecca wants exclusive rights to audit, and former auditor Mark Dayton signed the law allowing the bypass!

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