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Resignation puts state Department of Human Services under the microscope. Again.

Gov. Tim Walz rejected suggestions that the department is in chaos, citing the willingess of Pam Wheelock to take on the job. “I don’t think that acting Commissioner Wheelock saw an agency in crisis,” he said. “I think she saw an agency at a transition point.” 

Tony Lourey
Tony Lourey’s quick departure, especially after giving up a state Senate seat lost to Republicans in a February special election, created plenty of drama.
MinnPost file photo by James Nord

When Tony Lourey told Gov. Tim Walz he wanted to leave his job as commissioner of the Minnesota Department of Human Services, he said he wanted to do so immediately — to avoid drama and speculation.

Things didn’t exactly work out that way.

Pam Wheelock
Pam Wheelock
In a press release issued Monday morning, Walz’s office announced that Pam Wheelock would be appointed acting commissioner of the state’s largest agency. Wheelock has broad experience in government and nonprofits, including stints as Gov. Jesse Ventura’s finance commissioner and former St. Paul Mayor Norm Coleman’s deputy mayor. But beneath that annnounced in the release was the real news: that Lourey would resign and leave the job. At the end of the day.

Six months as DHS commissioner is not a long tenure, even in a volatile job like state government Cabinet secretary. And Lourey’s quick departure, especially after giving up a state Senate seat lost to Republicans in a February special election, created plenty of drama. Coming a weekend after the resignation of two long-serving and well-regarded senior department executives, the move also spawned widespread speculation.

Was he fired? Did the governor ask for the resignation letter? How much notice was Walz given?

At a news conference Monday, Walz said Lourey was not fired; that he didn’t ask for the resignation; and that he found out about the decision the day before. Even if those answers were designed to tamp down speculation, the timing and verbage the DFL governor used Monday — and that Lourey used in his resignation letter — triggered a day of reading between the lines. 

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A skilled legislator with an expertise in health and human services policy and finance (the HHS budget is the state’s second largest, behind only education), Lourey may not have had the résumé of a good manager.

While that isn’t unusual for political appointees, the difference was that Lourey also didn’t have a good working relationship with the senior bureaucrats who are often relied upon to run the place.

Walz said Monday that the two officials who recently resigned, Deputy Commissioners Chuck Johnson and Claire Wilson, spoke late last week with his chief of staff, Chris Schmitter, about their reasons for leaving the department. “When two longtime, dedicated public servants say they’re going to leave service, I want to know that, too,” Walz said. 

While Walz described them as “very respectful,” the two said they disagreed with the direction the agency was going under Lourey. 

“I expressed my desire to try to keep both of them,” said Walz.

Tony Lourey
MinnPost photo by Peter Callaghan
Commissioner Tony Lourey and Deputy Commissioner Chuck Johnson shown at a hearing in March.
Neither Johnson or Wilson are leaving immediately, and Walz wasn’t ruling out the possibility that they would rescind those resignations (Update: both rescinded their resignations Wednesday). “The resignation letter of the commissioner is very self-aware that maybe this is the wrong leadership style at this time to achieve the goals we are looking for,” Walz said. “I think Commissioner Lourey said, ‘I got you through this, I helped you get this budget, I got the provider tax sunset removed, now it’s time for someone else’s skill set.’”

That letter to Walz, while thanking him for the opportunity and citing “the real change I pushed for in an agency that needs to grow in how it connects with and partners with the people we serve,” noted in its conclusion: “I believe a new leader is necessary to best execute your vision for human services and continue the critical work of improving the health of Minnesotan across the state.”

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Lourey said through an agency spokesperson that he was not doing interviews or taking questions about his departure.

Walz rejected suggestions that the department is in chaos and used Wheelock’s willingness to take on the job as evidence. “I don’t think that acting Commissioner Wheelock saw an agency in crisis,” he said. “I think she saw an agency at a transition point.” 

Another issue might have contributed to the timing of the announcement. Last week, the Pioneer-Press reported that the Department of Human Services was still paying Inspector General Carolyn Ham four months after putting her on leave. While the suggestion was that she was the subject of an investigation into how the department responded to allegations of fraud and theft in the Child Care Assistance Program, Ham said no investigation had begun.

Gov. Tim Walz
MinnPost photo by Peter Callaghan
Gov. Tim Walz
On Monday, Walz said an investigation had begun but wouldn’t say when. Later, House GOP Leader Kurt Daudt said he’d been told that morning that the investigation had begun “very recently.”

Walz said he was restricted in what he could say but said that no state employee took money.

“The situation that happened with the Child Care Assistance Program  is totally unacceptable,” Walz said. “And to be totally clear, no one in state government stole any money. Private businesses stole from the state of Minnesota and we were negligent — or it appears to me that we were negligent — in stopping that in a timely manner.” 

The investigation, he said, is to understand why that happened.

But Walz also said there was no linkage between the CCAP issue and Lourey’s resignation. “I think there’s going to be a desire to find more drama than is there,” he said. “Those of you who know me know I don’t do drama. I think the situation is we have a complex agency, the skillset Commissioner Lourey possessed was incredibly helpful and was the catalyst to helping us get a budget done.” 

Now, however, as policies and budgets are implemented, and as the CCAP problems are addressed, “I will take Commissioner Lourey at this word that he felt he was not the right person at this time to do that.”

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While neither Johnson nor Wilson made public statements about concerns with the agency, another person who recently left the agency did. Dr. Jeff Schiff was the longtime medical director to the state Medicaid program before his job was eliminated last month. The Pioneer Press reported that he issued a statement last week after Johnson’s and Wilson’s resignations: “This event, following the reorganization that led to my departure, points to serious systemic issues with the leadership culture of the agency,” he said. “I call upon Governor Walz and Lieutenant Governor Flanagan to live up to their pledge of ‘One Minnesota,’ investigate, and act so that we can go back to being the healthiest state in the nation for all Minnesotans.”

Republican legislators had already scheduled a noon press conference to talk about the Johnson and Wilson resignations, arguing that it signaled disarray in the agency. Monday’s announcement changed the narrative a bit, but not the political message.

“Since Gov. Walz has taken office, the department has been embroiled in chaos,” said Rep. Mary Franson, R-Alexandria. She compared it to a dumpster fire. Daudt repeatedly termed the resignation of Lourey and whatever led up to it as a “scandal.” Daudt, R-Crown, said he has been around state government long enough to know commissioners don’t get fired, they get asked to resign.

The rapid action suggests that this has been “boiling up for a few days,” he said, and that the state is owed a more specific explanation of why Lourey resigned. “I can assure you that Commissioner Lourey didn’t give up a Senate seat to serve as commissioner for six months,” Daudt said. 

And while he was willing to allow Walz some leeway since the CCAP fraud investigation covered his predecessor’s term in office, that will end soon. “There comes a time when fraud is overlooked enough that Gov. Walz will own that fraud,” Daudt said. “If he does nothing to fix the fraud, he becomes part of the fraud.”

Unlike Daudt and Franson, who are minority members of the House, Sen. Michelle Benson is a member of the Senate’s majority caucus, and as such controls a committee with oversight of the Department of Human Services. The Ham Lake Republican said she had a working relationship with Lourey, both when he served in the state Senate and then as commissioner. She termed it a “functional working relationship” and said he called her last week to tell her of the Johnson and Wilson resignations.

Sen. Michelle Benson
MinnPost photo by Peter Callaghan
Sen. Michelle Benson, left, said she had a working relationship with Lourey, both when he served in the state Senate and then as commissioner. She termed it a “functional working relationship.” Rep. Mary Franson, right, has called for hearings.
But she said her hopes that Lourey would be a “transformative leader” were not realized. “It just might be the case that DHS is too big of an entrenched bureaucracy, even for someone with Tony Lourey’s experience, to transform,” Benson said. 

She renewed her call to break the agency up into parts and said Walz should call on experts from the private sector as he did to resolve delays and cost overruns in the MNLARS state licensing system. “It is time the governor grab the leadership and move this to a better place,” Benson said. “That’s all I want. In 18 months for the place to be noticeably and fundamentally better.”

Benson’s counterpart in the House, Health and Human Services Finance chair Tina Liebling, called the Lourey resignation disappointing and described him as “a great guy.”

But the job is a difficult one, she said, “maybe even harder than governor,” and that Lourey may not have known how tough it was until he was in the midst of it.

The DFLer said she too was surprised that the investigation into the office of inspector general and the CCAP issue either hadn’t begun or has just been begun. And she called the loss of Johnson and Wilson “a tremendous loss for the administration.” Johnson, she said, was respected by both parties in the Legislature. “He has always engendered a lot of comfort,” she said. “He knows the agency and he handles himself well.

“He’s the one you want in the room when there’s some tough issue,” she said.

But she rejected GOP suggestions that the situation at DHS represents disarray or chaos. “I’m as surprised as anyone. It is a short period of time,” she said. But compared to the comings and going of members of the Trump administration, it doesn’t suggest a lot of turnover. “It isn’t a disaster. I think it’s just an opportunity to rethink what the agency needs.”