Dayton backs down in dispute over state auditor

Gov. Mark Dayton on Monday surrendered in his fight to undo or delay a new law that strips much of the authority from the elected state auditor, likely clearing the way for a special legislative session soon to resolve the unfinished state budget.

With 9,400 state workers on notice for a July 1 temporary layoff in the absence of new budget bills, Dayton said in an afternoon news conference that he could no longer prolong the standoff with House Republicans over the auditor issue.

"I've learned before, I can never match the intransigence of Republican legislators," Dayton said, specifically noting the 2011 partial state government shutdown that lasted three weeks until the DFL governor finally agreed to a budget that adhered to GOP demands.

Dayton's decision came after a morning news conference by House Speaker Kurt Daudt, in which Daudt reiterated Republicans' unwillingness to revisit the law changing the auditor's office.

"There will be no action taken on this provision in special session. Period," Daudt said.

Dayton has not yet called a special session. He said three disagreements remain between him and House Republicans in the clutch of budget bills that would be up in the special session.

Specifically, Dayton wants $5 million total for two programs: one to help Minnesotans with disabilities find employment, the other to prevent homelessness among the mentally ill. He wants House Republicans to drop their insistence on cutting a tax incentive for people who power homes or businesses with solar or wind energy. And he's seeking changes to a Senate DFL plan intended to help the taconite and forest products industries in northeastern Minnesota with utility rates, which he said would lower electric rates for large businesses at the expense of residential and small-business customers.

"Before I can call a special session, it remains necessary for us to reach agreements on the unresolved matters," Dayton wrote in a Monday letter to Daudt.

In response, Daudt said in a statement that he's "looking forward to working with Governor Dayton and the other legislative leaders to finalize the agenda for special session." Among the bills waiting to be acted upon include those funding public schools, environmental and agricultural agencies, jobs and energy programs, and about $373 million in bonding for public works.

Those bills make up nearly half the state's planned $42 billion in spending for 2016-17, including about $17 billion in education spending that initially was the main dividing line between Daudt and Dayton. But after they settled that dispute a week ago, the seemingly tangential squabble over the auditor's office took center stage.

At the end of the regular legislative session in May, lawmakers approved a wide-ranging budget bill that included language allowing Minnesota counties to contract for private financial audits instead of submitting to examinations by the state auditor, DFLer Rebecca Otto.

"I'm going to continue to fight this unjust gutting of a constitutional office. I will pursue every avenue to restore independent oversight of Minnesota tax dollars," Otto said Monday. Asked if that would include a lawsuit seeking to undo the changes on constitutional grounds, she replied, "You betcha."

Dayton signed the larger state government funding bill that included the provisions, after it was approved by both the DFL-controlled Senate and GOP House. He said he did so because a veto would have left thousands more state workers in line for temporary layoffs in the event of a partial shutdown.

Although House Republicans had been pushing the auditor provision throughout session, and aired the proposal in several committee hearings, Dayton's staff said Monday they were caught by surprise when it turned up in the final state government funding bill in the predawn hours of the regular session's last day.

In negotiations over that bill shortly after midnight on the last day of session, Dayton's chief of staff, Jaime Tincher said Republicans told her they planned only to conduct a review of the state auditor's office.

Tincher at the time had brought two other concerns to Republicans, including increased funding for the governor's office to cover the cost of staffers hired last fall. Their initial request for more funding had been rejected by the House. That meeting, she said, "was the first time that I heard about that this auditor stuff was going on. And I have to be honest, I didn't know the details of what was going on in this." It would not be until a later meeting, about 3 a.m., that the full language on privatization was pushed through in an apparent deal between House and Senate leaders.

Tincher said the governor's office did not know of the change until that afternoon. She said she communicated to Daudt that Dayton wanted the policy change out of the state government bill.

"Never did we say we were OK with the auditor language," she said.

However, Dayton ultimately signed the bill, which contained an additional $380,000 for his office over two years. Tincher had earlier in the session testified in committee hearings on the need for the additional funding, "so that we would fully function in this office."

Rep. Sarah Anderson, R-Plymouth, who leads the House state government finance committee, disputes Tincher's account and said the governor's staff knew of the auditor language. Tincher, she said, "informed our leadership staff that they would not veto the bill over the auditor language. And that was confirmed twice. And at the end of the day, he signed the bill. You don't sign the bill if you have this kind of problem with it."

Dayton and Daudt do not yet have a scheduled meeting for further negotiations.

Patrick Condon • 651-925-5049

Ricardo Lopez • 651-925-5044