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State budget battle revolves around a basic question: How much should it cost to run Minnesota's government?

MinnPost photo by Briana Bierschbach
The state budget forecast projects it will cost over $1 billion in the next two years to pay for administering the state government. Gov. Mark Dayton wants to up that to nearly $1.2 billion in 2018 and 2019.

With nearly 40,000 workers, state government is one of the largest employers in Minnesota, and Mark Dayton is essentially the state’s CEO.

So it’s not surprising that the second-term DFL governor has drawn battle lines around what he sees as major cutbacks to state agency operations in the budget bills being proposed by legislative Republicans. Over the last several weeks, Dayton has trotted out a handful of high-level commissioners to lambaste those proposals, saying they would add up to hundreds of millions of dollars in cuts and would result in “thousands” of layoffs of state workers. Dayton’s commissioners have also sent a whopping 55 letters to Republican leaders and committee chairs listing their concerns.

At the center of the debate is the state’s $1.5 billion budget surplus. Republicans say the state is collecting more in tax revenue than it needs, and to make way for tax cuts, they’ve proposed trimming government across the board. Dayton, however, sees it as a more prudent investment to spend the surplus on the rising cost of government programs — not on permanent tax cuts. “In a [time] of a $1.5 billion budget surplus,” Dayton said. “They’re cutting state agencies as if there’s no consequence of them doing so.” 

But the debate goes beyond the surplus. Republicans’ budget proposals also represent a desire to halt what they've called “stunning” increases in the growth of several state agencies over the last decade. All of which means that in order to finish the session by the Legislature's May 22 deadline, Dayton and Republican leaders will have to reconcile their diametrically opposed views on a core issue: the role of the state's bureaucracy.

Dayton wants specifics

Minnesota state government is a big operation, providing more than $40 billion worth of services each year and employing more than 38,000 workers between the judicial, legislative and executive branches. The executive branch makes up the bulk of those employees, who are spread among more than 20 different state agencies.

The state budget forecast projects it will cost over $1 billion in the next two years to pay for administering the state government. Dayton wants to up that to nearly $1.2 billion in 2018 and 2019, an increase that would go into staffing and wages for state employees and new cybersecurity initiatives, including $51 million for computer system upgrades and $74 million to boost security.

Republicans in the Legislature want to go in another direction. The House is currently proposing to spend about $943 million over two years on running the state government, while the Senate proposing about $996 million during the same time period.

State Rep. Sarah Anderson
State Rep. Sarah Anderson

Rep. Sarah Anderson, R-Plymouth, the chair of the House’s State Government Finance Committee, said the state bureaucracy has grown by about 1,000 employees over the last decade, far beyond what’s required to administer state government services. In particular, she points to three agencies as evidence of the growth of government under Dayton: the Department of Revenue, Minnesota Management and Budget (MMB) and the Department of Administration. Under her proposal, those agencies would take all the House's proposed cuts, with MMB taking the biggest share: a 23 percent reduction to its budget.

“It's more than inflation when you look at some of these agency budgets,” Anderson said. “Here you have a governor who is handing out golden parachutes to people who work in his administration. He is handing out severance packages like they are candy.” 

To try and cut back on what she sees as administrative bloat, Anderson’s proposal would put a cap on how many full-time employees the executive branch can hire to the levels they had in 2013 and 2014. Anderson said the bill gives the state the “flexibility” to meet that cap through attrition, early retirement or staff cutbacks if necessary, she said. She also limits how much salaries can be increased for employees. “We are capping the growth of government to make it lean, smart and efficient for the taxpayers,” Anderson said. “Minnesotans are not looking for the surplus to be spent on growing government.”

In response, MMB Commissioner Myron Frans — who's been Dayton’s point person in the budget battle — has accused legislators of trying to micromanaging state government agencies. “We have been told regularly that the state should run more like a private-sector company,” Frans wrote in a letter to Anderson. “No private company that I know of, and I have run one, arbitrarily places a number on how many employees it requires. This micro-management hinders recruiting and retaining high-talent individuals that the state relies on for specialized services.” 

What’s more, commissioners say, both citizens and the Legislature are demanding more from many of those same agencies. Department of Revenue Commissioner Cynthia Bauerly recently pointed out that the House budget bill would require her department to set up a new free online filing system for tax returns, which would cost about $22 million, at the same time it was proposing to cut $12 million from her budget.

“Everything the agencies do has been prescribed for them to do in statute by previous legislatures. If this Legislature and the majority want those agencies to have their budgets reduced, then they need to be explicit about what they want those agencies not to do,” Dayton said. “What services do they want them not to provide to the state of Minnesota?” 

‘It wasn’t easy’

Sen. Mary Kiffmeyer, R-Big Lake, said she knows what it’s like to head an agency facing cuts. Now the chair of the Senate's State Government Finance Committee, she was Minnesota’s Secretary of State from 1999 until 2007, during which time she once had to reduce her office’s budget by 15 percent. She couldn’t cut from the state’s election operations, so she had to make cuts to everything else across the board, including eliminating her own executive assistant. “It wasn’t easy to take that cut,” Kiffmeyer said. “But I think that is a sky is falling attitude is kind of blown out of proportion.”

State Sen. Mary Kiffmeyer
State Sen. Mary Kiffmeyer

Like many other budget bills this year, the Senate’s state government finance proposal falls somewhere between the House’s proposal and what Dayton wants. Kiffmeyer’s bill doesn’t cut state agencies' operations as deeply as the House, and she puts about $14 million into cybersecurity, much less than Dayton but more than the House proposal.

Part of the challenge in talking about the budget for running the state government is basic math. The three sides must first come to an agreement on the numbers before they can get down to specifics, a task that is harder than one might expect. Dayton thinks inflationary costs should be automatically worked into the budget when talking about state agencies, while Republicans are working off numbers from the last two-year budget period.

“When your kids get a $10 allowance and they ask for a $2 increase but you only give them $1, would you call that a cut?” Kiffmeyer said. “I think the governor does recognize that he is going to have to compromise. He’s going to come down. I think you see the House at a much deeper number than the Senate. I think we are a very sensible middle approach.”

For his part, Republican House Speaker Kurt Daudt said the agency budgets aren’t as far apart as they may seem, and is confident something can be worked out before the end of the session. “If you look at our budget bills versus the governor’s proposed budget,” he said. “We probably agree on 90 percent of state spending, certainly north of 80 percent.”

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Comments (22)

What is the return on the 40 BILLION spent?

With 38,000 employees and 40B going to "services" there should be an unbelievable track record of success. Who is looking at the redundancy of programs (Governments biggest fault). What is the process in determining who gets these services? How many of these services are set up to get recipients off the program (a must for most services) after a certain time? Government is best at growing Government, it is up to the voters to make sure our tax dollars are being used wisely. I know in Minnesota there is a large percentage of the population that thinks questioning how Govt spends money is somehow anti-American... As one who questions Government on every issue, I think it is our duty to hold elected official responsible for spending tax dollars effectively.

Remember Government is best at growing Government. For us to think either party is interested in limiting their power is naive. Only through voters questioning every new program and every new service do we stand a chance at efficiency. Folks spending other folks hard earned money without demanding success and transparency is one step closer to total Government control.... A disaster for us all!!!

ALL CAPS!!!!

If 40 BILLION is too much, just what is the right number? And how do you arrive at that number?

To start with, the state budget should be stated as a percentage of Gross State Product, a measure of a state's economy.

Second, some citizens require more state spending than other. Senior citizens add nothing to GSP once they leave the productive work force, but they do begin to require more services. This all gets into the controversial realm of science, something that conservatives often seem suspicious of. But it's pretty well understood that the number of seniors will be rising for a couple more decades. Should we cap spending on seniors as a group, regardless of their growing numbers?

Recall when GOP Sen. Grassley talked about grand ma going before the mythical "death panels" of Obamacare. Just what services should we deny grand ma? Oh, wouldn't that be rich? To portray the GOP legislature as a "death panel", intent on denying grand ma food and health care. Too bad there isn't a liberal echo chamber.

MMB's a great resource

You may already be using Minnesota Management and Budget's web site to examine the state's books, see where the money's being spent, etc., but if, by chance, you haven't been, you'd probably find the info they make available to the public (in their efforts to provide "transparency") interesting and useful.

https://mn.gov/mmb/

Among other things the site has to offer, if you click on the "Menu" icon in the upper left corner you'll have access to the main and sub topics and data related to MN's Accounting, Budget, Forecasts & Updates, Employee Relations and Debt Management.

It might make it easier to do your ROI calculations and put together your answers to Frank's (pretty good) questions.

Mostly propaganda

“…With 38,000 employees and 40B going to "services" there should be an unbelievable track record of success.”

Please point to specifics that demonstrate otherwise.

“…Who is looking at the redundancy of programs (Governments biggest fault). What is the process in determining who gets these services? How many of these services are set up to get recipients off the program (a must for most services) after a certain time?”

What programs are redundant? Are there specific flaws in determining who gets those services? Why is “getting off the program” a “must” for most services after a certain time? I have a 50+-year-old brother who’s handicapped and autistic. At what point should he lose the help he gets from state agencies? At what point should MNDoT stop paving Mr. Smith’s street, and since repaving is usually necessary, is that an example of “redundancy?” Specifics, please.

“…Government is best at growing Government…” Aside from its dubious value as a propaganda phrase, what does that mean? Has the state gained population in the past decade? If it has, it should come as no surprise that programs and services might cost more if they are dealing with more people. Has inflation had any effect on the cost of goods and services that the state purchases from the private sector? If so, how will budget reductions aid the state in providing services that legislation already on the books calls for the state to provide?

“…I think it is our duty to hold elected official responsible for spending tax dollars effectively. ”

I absolutely agree.

That said, however, budget reductions do not automatically result in more efficient or more effective delivery of legislatively-mandated goods and services by state agencies to the state’s citizens.

It’s the duty of the citizenry to monitor how their tax dollars are being spent, and transparency is generally a requirement of state agencies, but Mr. Smith provides no definition of “success,” or examples of a lack of either “success” or transparency. Mostly, he provides propaganda phrases.

Let's see, 2014 budget 31.9B

2017 40B..... Government is best at growing government, propaganda or fact?? Please show results in better public education, better job training, more folks getting off Government services by improving their ability to earn more, better roads, less folks addicted to opioids, betters cheaper healthcare (Gov Dayton said it was broken) .... Please show with the 8+ BILLION how Minnesota is better off than in 2014 in areas that affect regular folks. Try not to use "talking points" that could be confused with propaganda.

Since you've raised the issues

…please show that public education is failing FOR EVERYONE. Please show that job training isn't working (What does "better job training" mean?). Please show how government is somehow responsible for "people" (a generic term — who do you mean, specifically?) not "getting off government services by improving their ability to earn more." Please show how "better roads" can be provided without cost. Please show how government is somehow responsible for the number of people addicted to opioids. Please explain — I think there might be some genuine prize money in this one — how better, cheaper health care can be provided. My guess is that a genuine solution would get the attention of Republicans and Democrats alike across the country. Hint: It cannot rely on individual savings, since most people don't have an amount that's in any way meaningful, given current health care costs.

As to your last point, I'd say, offhand, that a 1.6 billion-dollar surplus suggests that the state as a whole is better off than it was in 2014, and WAY better off than it was when I arrived in 2009. Since the surplus is likely temporary, tax cuts are not in order. Now would be the time to sock some of that money away in the state's emergency fund, in preparation for the next economic downturn, and to spend some of it on one-time projects like major road and bridge renovations, or better yet, startup funding for universal Pre-K, which would provide the state with the most bang for its educational buck.

Just in case:

You haven noticed: Unemployment rate 3.7% US 5.4%
You don't read the WSJ: Quality of life #2
http://247wallst.com/special-report/2014/10/06/the-10-states-with-the-be...
You don't understand median income #9
https://en.wikipedia.org/wiki/List_of_U.S._states_by_income
You can't use google #18 in health care costs
http://www.huffingtonpost.com/gobankingrates/10-best-and-worst-states_b_...
etc. etc. etc.
Better off means? Guess your preference is a cold Mississippi!
Yes dudes like me are "regular folks" worked average 45-50 a week since 1965! Folks like "Trump" and cabinet, are not regular folks, spending millions on weekend golf retreats at of course Taxpayer expense!
You got a rant, and a lot of questions, but as Ray explained, its all propaganda, now do your own research and please prove us wrong!

Blacks and Hispanics have a 60% graduation rate.

I know more money is your answer but Minnesota already outspends most states. Individuals who actually pay for their own insurance have seen the choices go down, premiums and deductibles skyrocket. Less folks are going from lower class to middle and middle class to upper class than ever. I guess more money by the State will help that?

As I stated, most here feel that more spending by the State is the answer. I don't see it helping in 2 areas that eat up most of our money, healthcare and education. Add into that not enough folks doing better and moving up in class or getting off of welfare.

Insurance before ACA

Hey Joe...weren't you paying attention to the horrible insurance costs and how they were skyrocketing before ACA or ObamaCares? Most insurance that was available was close to worthless...and the plan by the repubs in the US congress...its worse. Most of the free world has affordable healthcare, but not us...the wealthiest nation in the world, Why not? Everyone gets sick. Affordable healthcare SHOULD be affordable for all...including prescriptions and college...but repubs oppose these. Why?
Interesting tho, they ALWAYS support tax cuts for their wealthy benefactors...with close to zilch for us. Why?
Again...unsure why repubs like you oppose spending on education...and again...note that most of the very worst K-12 educational systems and poverty are in red states? Why?
Healthcare and education should be thevalues of education...but they don't seem to be for repubs.

Making a More Effeciant Goverment

I am all for making our government more efficient and holding government accountable, but I don't feel like that is the goal of Republicans in the legislature. State rep. Sarah Anderson said her goal was "capping the growth of government to make it lean, smart and efficient for the taxpayers”. How does capping the number of new employees make government smart and efficient? How is the government supposed to attract talent when salaries are capped? The government isn't going to be very efficient when they are scrapping the bottom of the barrel for talent. How is cutting budgets for the sake of cutting budgets going to help make government smarter?

I am just not convinced they are doing anything but cutting for cutting sake. They are ideologues that want to cut government at all costs. They don't have any ideas for making government or peoples lives better. The sad thing is, most of the people who vote for these ideologues will end up being the ones most hurt by their ideas in the long run.

Exactly

"I am just not convinced they are doing anything but cutting for cutting sake. They are ideologues that want to cut government at all costs. They don't have any ideas for making government or peoples lives better. The sad thing is, most of the people who vote for these ideologues will end up being the ones most hurt by their ideas in the long run."

Derek Thompson nails it! Ideologically, the Republicans are incapable of admitting government is the right size or needs to be expanded, although it can be argued that Democrats never think Government is large enough. Even after years of cuts under Tim Pawlenty, the Republican candidates for governor were all about more cuts and more imagined efficiency. One has to wonder at what point is government lean enough?

You're Half Right

Mr. Thompson is half correct. It's true low wages will not attract the best talent, and that is one of the goals. Economics don't stop at the door to city hall or a state agency. Cut the pay, lower the skill level, and then complain about inefficient public employees.

That's the playbook in Wisconsin, where teachers are leaving the profession, and the best future would be teachers are getting into other professions where they can make more. Soon it will get louder and louder over there, "Public schools are failing! We must have private for profit charters!" Only they'll leave out the part about "for profit".

Kiffmeyer's Math

If it takes $10 to fill a pothole in 2015-2017 and the cost of asphalt, labor, etc, increases 20% in 2017-2019, and the legislature increases funding 10% per pothole in 2017-2019, is that a cut?

Yes, Senator, it is a cut. Because it doesn't help to fill 90% of a pothole.

Anyone care to have 90% of a bridge inspected? How about 90% of a restaurant kitchen?

We could cut back on the number of legislators.

Kiffmeyer

My problem with Kiffmeyer is that she is probably the biggest supporter of ALEC. Because of this I don't believe or trust anything she does or says.

Marvin, or Andersen?

Kiffmeyer is a window into the minds of the Kochs. As is Pat Garofalo.

Senate

Minnesota has the largest state Senate in the nation. One never hears either party talk about streamlining that body and saving money by making reductions in membership.

This may be why nobody talks about it

Minnesota's population is about 5,400,000.

Just under 4,000,000 of those people are registered voters.

Those people are voting for Senators and House members to represent them, their views, their wishes, their interests in our "representational democracy."

There are 67 MN Senators.

Four million voters divided by 67 Senators comes out to 59,701 voters being represented by each Senator. (Imagine the emails!)

"Streamlining" the Senate by reducing the number of Senators would mean an increase in the number of voters each Senator represented.

If legislator pay of $45,000, plus per-diem, is figured at an approximate average of, say, $70,000 per Senator per year, that breaks down to each of those 59,700 voters paying $1.17 of "their" Senator's pay.

The state budget is $42+ billion per biennium, or $21+ billion per year.

At $70,000, that means each Senator's pay amounts to .0003% of the budget.

It would take a LOT of "streamlining" (like getting rid of all 67 Senators and all 134 House members) to even begin to make a dent.

Size of MN congress

Agree. We could cut half of our congress if repubs want to cut govt, but as stated...that is never proposed by these repub legislators.

Totally incorrect statement

"In response, MMB Commissioner Myron Frans — who's been Dayton’s point person in the budget battle — has accused legislators of trying to micromanaging state government agencies. “We have been told regularly that the state should run more like a private-sector company,” Frans wrote in a letter to Anderson. “No private company that I know of, and I have run one, arbitrarily places a number on how many employees it requires. This micro-management hinders recruiting and retaining high-talent individuals that the state relies on for specialized services.” I worked as a Human Resources as an executive for several companies and head count, the number of employees we had was always a big issue, and each department had a maximum headcount. To exceed that the VP or head of the department had to show an ROI on any increase in headcount. I would think MR. Frans does not know very much about Human Resources and ROI on headcount. You don't just keep adding because it seems like a good thing to do. Cutting head count is the one of the first things that happens to bring a company back to profitability.

Repubs are wrong

We have a surplus that is needed to fund our infrastructure, to help make college more affordable...to invest in K-12 education...but repubs oppose all of those preferring tax cuts for their wealthy financial benefactors who don't need them.
Two years ago the House repub budget basically cut taxes for the wealthy landlords in the Twin Cities, while they effectively cut education.
Look around the country and see the deficits and underfunded K-12 educational systems in red states, with some of the worst poverty issues.
Don't listen to today's repub nonsense. They do not care about us...not at all..and they want to roll back water protections in the ag areas...where the majority of lakes and rivers are polluted. Don't let them give us more Flint, MI type water issues

A top ten kind of place...

We have 50 states, we have countless measures of the quality of life across those 50 states. Take away weather and we have controllable measures of educational quality, educational level, employment opportunities, business climate, transportation infrastructure, civic amenities like parks, arts venues, arenas and stadiums, and the talent that fills those venues. The list is very long and priorities vary through the list.

One state will be the best at number 1 and another will be the worst at number 50. My expectation is that we should always strive to be in the top ten, especially in critical areas like jobs, education, transportation. And guess what? You get what you pay for. There is no free lunch. It cost's money to drink whiskey. And Governor Dayton's record shows two things: we are heavily taxed and those taxes have placed us consistently in the top ten in many categories, including #3 for business environment.

It is a fair trade off. And if the GOP wants relentless tax cuts they better acknowledge their ambition to be Number 30! And the DFL better take those higher tax revenues and CONTINUE to transform them into positive "Top Ten" results.

MN is very lean

Why doesn't the article or the legislative debate mention the tiny portion of the state budget that is made up of state employees? Because the contractor budget far surpasses it!.

Many jobs that people assume are state employees aren't. They are private contractors. Many of those workers on the highway, computer programmers, management analysts, janitors, and more are not state employees. Too bad investigative reporting is dead. How much do those contractors contribute to parties? How many are former or current legislators?

1000 new jobs in 10 years? How many are positions that were previously cut during the Pawlenty years of cut government to lower taxes on his rich friends?

In the 22 years I've been with the state I've watched my health benefits erode, premiums, copays and other fees skyrocket. I have NEVER received a COLA that approaches actual inflation. I'm now at the enviable position of having annual pay cuts. State employee salaries do not approach equivalent jobs in the private sector. The Legislature won't even allow a study, because the last time they did a study only one job class earned more than the private sector - janitors. That's because the few state janitors that exist work full-time and get benefits. The private sector is notorious for part-time jobs with no benefits.

Before anyone jumps on me to quit my job, I'm 55 and chose public service. Switching jobs at my age is nearly impossible. The millennials though. They won't stay. They want promotions and raises every six months and they are willing and able to leave.

People get what they pay for. Low tax, low services. Why can't they just move south instead of wanting to make Minnesota into Mississippi?

BTW - the reduction of class mobility and increase in income disparities between the rich and the rest of us ARE NOT because of state government, state employees or high taxes. It is because of the low taxes on the rich that began under Reagan. The rich keep getting richer and do not pay their fair share at all. Corporate welfare costs far more than MFIP, SNAP or MA.