Betting on change


One of this year’s smallest budget bills could bring about some of the biggest and most transformative changes for state government.

HF577, the omnibus state government finance bill, would fund core state government operations for the next two fiscal years. It includes agencies like the Revenue Department, Minnesota Management & Budget and the Administration Department, as well as the Legislature, constitutional offices and nearly two dozen other state entities.

The bill would cut General Fund spending in these areas by 34.1 percent in the 2012-2013 biennium – one of the most aggressive cuts in any of this session’s budget bills. It also contains provisions that would dramatically reduce the size of the state’s workforce, consolidate agencies’ services, establish performance pay initiatives and loosen restrictions on outsourcing.

Rep. Morrie Lanning (R-Moorhead), the bill’s sponsor and committee chairman, said he intends to do more than just help balance the state’s biennial budget. He wants to make structural changes that will lead to a leaner, more efficient executive branch.

“The bill has, we believe, many important reforms … We can’t just simply reduce budgets without reforming the way we do business,” he told members of the House State Government Finance Committee March 22.

Nearly all agencies funded by the bill would have their operating budgets reduced by double-digit percentages. (Only the Departments of Military Affairs and Veterans Affairs would receive increases.)

To facilitate the reductions, the bill calls for a 12 percent cut in the size of the state’s workforce, with another 3 percent to follow in fiscal years 2014-2015.

Other significant reforms include:

  • a “sunset commission” to find and eliminate duplicative state services;
  • a requirement for budget officials to use zero-based budgeting;
  • a program to reward agencies for finding cost savings;
  • performance pay incentives for state employees;
  • a reduction in the total number of deputy and assistant commissioners;
  • a pilot program using revenue bonds to pay nonprofits for social work;
  • consolidating all information technology services under one agency; and
  • freezing state worker pay for two years.

Rep. Keith Downey (R-Edina), who sponsors many of the reforms in the bill, said the state needs to fundamentally restructure its executive branch. With multi-billion dollar deficits predicted well into the foreseeable future, he said this year’s reforms may be just the beginning.

“It’s not bite-sized, certainly. It’s a big bite of change and structural reform, but it’s just positioning us for the real action here that comes down the road,” he said.

Not everyone thinks such major reforms can be accomplished in just two years’ time, however. Rep. Nora Slawik (DFL-Maplewood) compared the bill to a “Christmas tree,” decorated with “every type of reform on it at once.” She argued that many of bill’s provisions are unrealistic.

“We can’t do it all,” she said. “There is just no way that this Legislature can pass all of those items and make the state budget work.”

Some state officials agree. Matt Massman, assistant commissioner for the Revenue Department, said the bill calls on the agency to bring in $169.6 million in new tax revenue even as it absorbs a 15 percent budget cut. He doubted whether that is feasible, given the circumstances.

“If there is a substantial loss of our resources … there’s just simply going to be less tax revenue collected,” Massman said at a March 23 hearing.

State Auditor Rebecca Otto testified that the 12.5 percent cut proposed for her office would result in less oversight of local government spending. Because of the way her office is funded, she said small but important programs like special investigations would bear the brunt of the reductions.

“It’s the taxpayers that I’m here for, and they’re the ones that will lose out,” Otto said.

Slawik said the Legislature should take a more incremental approach to reforming government. She argued the traditional method is to change state programs one step at a time.

“I agree, in normal times that’s the way legislatures work,” Lanning replied. “But this is not a normal time.”

Sen. Mike Parry (R-Waseca) sponsors the companion, SF604, which awaits action by the Senate State Government Innovation and Veterans Committee