The PIM interview: Kelliher on Pawlenty’s DIY budget

Following the close of a legislative session that saw Gov. Tim Pawlenty turn his back on the Legislature and resolve to balance the state budget on a do-it-youself basis, legislative Democrats have been taking the measure of the governor’s unprecedented action. House Speaker Margaret Anderson Kelliher (DFL-Minneapolis), in particular, has been meeting and talking regularly with organizations likely to feel the brunt of Pawlenty’s pending cuts.

On Tuesday, just a couple of hours before Pawlenty announced he wouldn’t seek re-election, PIM sat down with Kelliher at her office to talk about the post-session landscape: unallotments, the $1.8 billion school shift that the governor will try to "mimic" (MMB Commissioner Tom Hanson’s word), and the prospects for legal challenges to Pawlenty’s approach. "I think this is a stretching of the unallotment law," she says. "It clearly was set up for the purpose of balancing the budget mid-biennium under emergency situations.

"I think it raises a very fundamental question about the balance of power and the separation of powers in the state," she continues. But don’t expect to see the Legislature press the matter in court: "I think that would be a costly suit, and it is not exactly what citizens expect of the Legislature and the governor. But I do think there are other interested parties who are probably going to do that."

PIM: I understand you had a meeting last Thursday with a number of groups that stand to be affected by the unallotment cuts. Can you tell me about the tenor of it, and what you discussed?

Margaret Anderson Kelliher: It was an interesting group of people–local units of government, all the way from top to bottom; folks who might be affected in the health care area, and education folks and labor folks. It was a very serious meeting. It was nothing anybody was excited about coming to, because we’re obviously discussing difficult topics. They were sharing what they have been working on. One of the things was just to share information about the effects of unallotment–the cuts to communities, the effects of the GAMC veto. Those sorts of things.

PIM: We’ve been talking to people about those same issues, and one thing we’re hearing is that the cuts will mostly be backloaded to year two of the biennium. Is that what you’re expecting? [Note: A couple of hours after this interview, Gov. Tim Pawlenty confirmed at a press conference that he will stress a backloaded approach to cuts.]

Kelliher: Well, I’d say [yes] with one big cautionary note. I think that overall, that could be very likely here. Except that there are certain things that go out in either monthly or quarterly or bi-yearly payments. And those are the school district payments and the payments to local governments. So I would fully expect that the governor is going to look at those areas, because if he’s going to make a move on those, he’s got to do it relatively [early] in the two-year budget period to make [the cuts] not completely catastrophic.

So yes, I think that may be likely. But he may also go after some things that he tends to like to go after as well–some of the health care dollars, and other things like that.

PIM: Do you think his proposed use of the unallotment law is within the bounds of the law?

Kelliher: Well, from my personal reading of the law, and from having conversations with members and others, I think this is a stretching of the unallotment law. It clearly was set up for the purpose of balancing the budget mid-biennium under emergency situations. I think there are very good arguments here that this situation is not an "emergency," and clearly it’s not mid-biennium. It’s at the beginning of a biennium.

I think it raises a very fundamental question about the balance of power and the separation of powers in the state. I would just like to ask any Republican member, or folks who affiliate differently than I do as a Democrat–what happens someday when there’s a Republican Legislature and a Democratic governor and you’re in a deficit situation? And the governor goes ahead and enacts by his signature an operating budget that you believe you’ve worked together on and didn’t have many disagreements on–and then the governor goes in and starts to unallot those very things?

It has much more a feeling of looking at the Nixon impoundment situation than it does with looking at past unallotments. It’s a big issue.

PIM: To your knowledge, is there a precedent for this kind of use of unallotment powers–to balance a budget as opposed to dealing with a more limited fiscal crisis–in any state?

Kelliher: Well, it’s fairly clear in the review of these cases nationally–other states’ executive branches using unallotment power–it is questionable about the use of it at the beginning of a budget cycle. Courts have ruled different ways on unallotment, but often different questions are asked [from case to case]. That’s what I would caution everyone. There are definitely cases where courts have limited governors’ abilities to unallot. Some states have percentage unallotment laws, not allowing a governor to unallot more than 1 or 2 percent of the state budget at any given time on their own. Some states have a ratification process by the Legislature, and it has to be called into special session before the unallotment goes into effect.

So there are a lot of different caveats with these laws.

PIM: But have you ever come across a case in which a governor has used these powers to balance a budget on his or her own?

Kelliher: At the beginning of a biennium, after coming out of a legislative session where there were many options for balancing a budget? No.

PIM: Do you think the Legislature should revisit the unallotment law next session and try to circumscribe those powers?

Kelliher: I don’t think that would be a bad idea. I’m personallly a believer that a lot of laws ought to be revisited–either to revamp them if they’re not working, or if they’re obsolete, to sunset them, or if they’re unclear to give them clarity. That’s part of the role of the legislative process.

So I do think that more definition around this would be important. Do I think it’s likely this governor would ever sign it? Probably not, given that he will be the governor who has used the unallotment power the most in the history of our state.

PIM: Is that something you’ll make a priority for the next session?

Kelliher: I think I would like to see what members and committees come up with. If there’s some reasonable review of what happens in other states–what works, what to avoid and what to highlight–I think it’s absolutely up to the body of the Legislature whether changes should be made in the unallotment statute. It’s not up to just me.

Then again, I believed that we needed changes in our election laws this year in response to what has happened in the U.S. Senate race, and clearly this governor didn’t believe that, either. Nor did a lot of the Republicans. You never know quite what is going to happen here in terms of whether people are responsive to the will of the public.

PIM: So when all is said and done, where will this session leave us with respect to the state’s structural deficit?

Kelliher: Technically, the state will not go into deficit until that second year of the biennium, because there is $31 billion coming into the general fund, and if the governor is able to even partly mimic a school shift, he’ll be able to cut that [looming deficit] down.

We won’t know [much more] until we see the November forecast. We’re all hoping for the economy to improve, and I think the governor is probably praying for the economy to improve based on [the next forecast]. We’ll see what happens, because [the projected shortfall] could be reduced to some extent based on the forecast.

We clearly do have an underlying permanent deficit that this governor has put in place. In talking to Minnesotans about what that means, it means we can’t be assured of keeping our commitment to students and senior citizens. We can’t be assured of a reasonable level of police and fire services around the state. And this is because we have this permanent deficit in the state that I think of as Governor Pawlenty’s deficit. He definitely gets to own that. There have been many times in the last three years that the Legislature has proposed changes to make sure that the permanent deficit piece of this is taken away.

Obviously we have been facing extraordinary challenges as a state and a nation and a world in terms of what’s happening. That’s a different factor in the drop in revenues, but there’s a permanent deficit here and it needs to be fixed.

PIM: You mentioned the schools shift, and it was discussed extensively in [meetings of the Legislative Commission on] Planning and Fiscal Policy on that last weekend of session. I’m sure you’ve looked into it more extensively since then. To what extent can he mimic a cost shift on the basis of executive power alone?

Kelliher: First of all, [the shift Pawlenty is attempting] is very large, and nobody really relishes taking that large of a school shift. That’s why we insisted in the Legislature that there be some ongoing revenue to pay the shift back. It could lead to really devastating results for school districts.

And the other part of that is the nearly 24 districts in statutory operating debt. They would have had a mechanism by which to get through a period of delayed payments by the state under the bill proposed by the Legislature that the governor vetoed. We do not believe the governor has the mechanisms to protect those school districts. The shift is basically a cut in payments to the school districts if the governor does it, because there is no trigger to pay it back.

That’s one of the biggest differences that you see. The final bill, which included both elements of [balancing the budget]–a little under $1 billion in ongoing revenue and the delayed payments for schools–would have provided both the trigger that it needed in order to be paid back.

PIM: One thing that most of the attorneys I’ve spoken with did agree on was that the Legislature could choose to sue the governor over the separation of powers issue. But it sounds like the Legislature has no interest in doing that. Can you tell me why that’s unlikely?

Kelliher: I think there are other interested parties who are likely to possibly file suits against the governor based on the statutory authority. And I think there are other interested parties who would like to look at the separation of powers issue.

First of all, from a standing point of view, although we may have standing, we do actually have some case law where the court has not taken kindly to legislators suing the governor over the unallotment question. The second piece of this is the issue of wise use of taxpayer dollars. That’s something I would think about long and hard before I ever sued the executive branch as the legislative branch.

I think that would be a costly suit, and it is not exactly what citizens expect of the Legislature and the governor. But I do think there are other interested parties who are probably going to do that.

PIM: We’re also hearing that the governor is likely to frame the cuts he imposes on units of government and health care providers by foregrounding the reserves they’ve got and saying, hey, it’s a rainy day. Use your rainy day funds. And if they choose not to spend them to help fill the shortfall, that’s their problem and their pain. How would you respond to that?

Kelliher: I think that should be a decision made at the level of local control. If some unit of government feels that they do have reserves to use to mitigate cuts, then they need to make that decision locally. It shouldn’t be dictated from the state level down.

Another part of this that I find interesting is the way we have been budgeting in the state–and we have obviously used our reserves, and we’ve used a lot of one-time money in this budget. It’s clearly one of the things on Minnesotans’ minds: How fiscally responsible is the budgeting that we’ve been doing at the state level? Because it seems like we just continually go in and out of these deficits, every year or every other year.

School districts and local governments need to make decisions based on what they think is fiscally responsible. I don’t think Gov. Pawlenty has led very well by example in fiscal responsibility. If he’s expecting local units to mimic his accounting and budgeting practices, I don’t think that should be met with a big hurray out there. I think that’s definitely a risky proposition.

PIM: You’ve said a couple of times in the last week that you were weighing a run for governor. What’s the state of those deliberations?

Kelliher: I think I just said I’m thinking about a run for governor. I don’t know if I said I’m "weighing" a run for governor. I’m definitely thinking about it.

PIM: Okay. So what’s the difference between "thinking about" and "weighing"?

Kelliher: [laughs] Being the Speaker of the House is a terrific place to be–in terms of working with the members of the House, the members of the Senate, the Senate Majority Leader, the governor. I think it comes down to this: I really feel like our state has some terrific assets in the people of the state. And we can do more, do a better job. We can see tremendous growth in this state–economic growth, growth in the achievement of our students. We can reduce our health care costs by doing more reforms.

So I’m thinking about that. I’m thinking about what’s the best place to be to help get those things done. That’s the nature of the thinking.

One Response to “The PIM interview: Kelliher on Pawlenty’s DIY budget”

1. Anonymous Says:
   June 5th, 2009 at 8:55 am

   Go for it, Margaret!