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Minn. lost $60M in shutdown, but saved on salaries

ST. PAUL, Minn. (AP) — This summer’s Minnesota government shutdown forced the closure of state parks during peak camping season, interrupted road projects, frayed nerves and tempers and left thousands of public employees lighter in the wallet. But for the state, at least, it was somewhat of a financial wash.

The 20-day shutdown in July cost the state about $60 million in lost revenue and associated expenses, but it saved the state about $65 million in salaries not paid to workers who were temporarily laid-off, according to a fiscal analysis released Tuesday by the Minnesota Management and Budget department.

Jim Schowalter, the state budget commissioner, said the shutdown’s greatest impact was not on the state’s finances, but on its reputation for functional government.

Asked if too much had been made about the shutdown, given the limited financial damage, Schowalter replied: “Only if we’re OK with continuing to damage our state’s credibility in the business community and the financial markets, only if we’re OK with impairing our ability to retain and recruit state employees in the future, and only if we’re OK with periodic cessation of public services and low performance. Then I guess a shutdown’s OK.”

Tuesday’s report touched off a new round of the type of partisan squabbling that marked the weeks and months leading up to the shutdown, and it fed speculation among some that it could make future shutdowns more likely.

Gov. Mark Dayton was quick to note that the disruption was anything but inconsequential for 19,000 state employees who were temporarily laid off.

“I am grateful that the report concludes there was no net cost to Minnesota taxpayers,” Dayton said in a statement released by his office. “Unfortunately, it also shows that the worst financial hardship fell upon state employees, who were involuntarily laid off.”

The shutdown came about after Dayton and Republicans who control the state House and Senate failed to agree on how to close a $5 billion budget shortfall by the June 30 end of the state’s fiscal year. Their dispute echoed the ideological clash over federal spending currently playing out in Congress, with the Democratic governor pushing for a mix of spending cuts and tax hikes on the state’s wealthiest citizens and Republican lawmakers insisting on spending cuts alone.

The standoff finally ended when Dayton dropped his insistence on tax hikes and agreed to a mixture of cuts, delaying state payments to school districts and selling of bonds to be paid off by future proceeds from a 1998 state settlement with tobacco companies.

At the time, Dayton said he felt compelled to drop his tax hike push because Republicans seemed unwilling to move off their refusal to consider tax increases and he was concerned enough about the disruptions shutdown was causing, including delayed road projects, state parks closures, the unavailability of lottery tickets and alcohol at some restaurants and bars, and others.

After the report’s release, Republicans insisted Dayton was solely responsible for the shutdown since he could have agreed to their budget solutions earlier.

“We believe this was a political calculation on the part of the governor to cause pain for political purposes,” said Sen. David Hann, R-Eden Prairie. He said when lawmakers reconvene for the 2012 session in late January, Republicans will introduce a bill to prevent future shutdowns by maintaining previous-year spending levels in the absence of a new, finished budget.

House Minority Leader Paul Thissen, D-Minneapolis, countered that the report on the shutdown’s impact “is yet another reminder of the extent the Republican legislature will go to put the richest Minnesotans and big corporate interests ahead of middle class Minnesotans.”

Dayton echoed that argument, saying in his statement that “Minnesotans know that it was the Republican legislators’ refusal to consider a reasonable and balanced solution, which caused the shutdown.”

Despite the disruption to the lives of numerous state workers, the leader of the union that represented the largest number of laid-off workers sided squarely with Dayton.

“State employees lost $65 million in wages because a gridlock group of tea party Republicans chose to protect millionaires instead of Minnesotans,” said Eliot Seide, director of the state chapter of the American Federation of State, County and Municipal Employees.

Schowalter said the state avoided larger disruptions mostly because a district court judge ordered about 80 percent of state spending to continue during the shutdown. That preserved programs ruled essential to maintaining the health and safety of citizens, including the Minnesota State Patrol, state courts and prisons, and health and welfare benefits.

The budget department’s estimate does not account for the economic impact of having 19,000 mostly middle-class workers not earning a salary for three weeks and likely not spending as much. The state did see a noticeable spike in its unemployment rate for July, and some private-sector contract workers were idled because of the road project delays. But the report’s authors say these factors “are expected to have only a marginal impact” on the state’s economy going forward

While the shutdown’s economic costs were apparently negligible to the state, its political cost may not be known until next November, when all 201 legislators seats — but not Dayton’s — are up for grabs.

Steven Hoffman, who chairs the University of St. Thomas’ political science department, said he suspects the report will temper the shutdown damage for incumbents by the time the 2012 elections roll around.

“Politically it’s a real long time ago, and because the effects were so modest in many ways, the ability to use it will be limited,” Hoffman said.

The finding could even make shutdowns a safer political strategy in the future.

“The strength of a taboo against a government shutdown has certainly been diminished to the point it may not be seen as a taboo on the part of many people anymore,” said John Bryson, a professor of public affairs at the University of Minnesota’s Humphrey School. “It’s a viable policy option — or at least some.”

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Associated Press writer Brian Bakst contributed to this report.

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Online: The Minnesota Management and Budget shutdown report can be found at: http://www.mmb.state.mn.us/doc/shutdown/2011-shutdown-report.pdf

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