Government shutdown didn't scar Minnesota budget

Minnesota's historic state government shutdown had essentially zero impact on the state budget, actually saving the state a tiny sliver of money, according to a report released Tuesday.

The 20-day break in service cost the state nearly $60 million in lost revenue and shutdown-related costs, but taxpayers saved $65 million in salaries from the 19,000 state workers who were laid off.

Further muting the impact were court orders that restored about 80 percent of state funding during the closure, mostly for health and human service needs for Minnesota's poorest and most vulnerable residents.

"The economic impact, by and large, was blunted by the court-ordered spending," Minnesota Management and Budget Commissioner Jim Schowalter said.

The 44-page report indicated that the shutdown did not have the dire economic consequences predicted by a chorus of political leaders on both sides. The report offered the most complete snapshot of the workings during the state government shutdown, which began July 1 when DFL Gov. Mark Dayton and Republican legislative leaders were unwilling to strike a deal to resolve the state's $5 billion deficit.

"The broad economic impact didn't really occur," Schowalter said.

Schowalter said the shutdown's major effects were not purely economic. He said the shutdown damaged the state's reputation with lenders, caused hardship for state workers and created countless hassles for Minnesotans.

The aggravation of the shutdown built slowly for Minnesotans, throwing thousands of professionals into limbo as their state licenses began to expire. As it progressed, the shutdown delayed road construction projects, closed state parks and eventually capped the flow of alcohol to some bars and liquor stores.

Schowalter painted a harrowing picture of state budget leaders plunging into high-risk chaos as they were forced to create an entirely new budgeting infrastructure to handle the state's day-to-day finances.

As the nation's eyes turned toward Minnesota's hobbled government, budget officials secretly lived in fear the state's computers would become a prime target for hackers looking to create high-profile mischief.

Schowalter's biggest surprise was that no catastrophes emerged, that "nothing blew up."

"The governor and legislative leaders understood it was dangerous from the very beginning," he added.

Schowalter said the state is bracing for lawsuits from contractors and vendors who lost out during the shutdown, which could cause its costs to rise.

"There are likely to be lingering impacts," Schowalter said.

The report offered a rare glimpse at the inner workings of state government during the closure.

To keep the skeletal state government running, 13,000 employees were deemed critical and continued working, costing $102.9 million. About 125 employees never returned to work, including several scooped up by the private sector.

Of the 19,000 workers who were laid off, all but 2,000 filed for unemployment insurance, costing the state more than $10 million for its share of the benefit.

The state's failure to collect delinquent taxes cost $33.5 million, its most significant loss of revenue. The state also lost $10 million in lottery revenue and $3.5 million from the lost state campground fees and lost sales of hunting and fishing licenses.

"I am grateful that the report concludes there was no net cost to Minnesota taxpayers," Dayton said in a statement. "Unfortunately, it also shows that the worst financial hardship fell upon state employees."

The end of the shutdown in late July also put a point on one of the stormiest political seasons at the Capitol in state history. For months Republicans had refused to accept Dayton's proposed tax increases while the governor stood firm against their desire for deeper cuts.

Ultimately, Dayton agreed to accept a Republican budget solution that met his spending requirements but which delayed more payments to K-12 schools and sold high-interest bonds backed by tobacco settlement money to close the gap.

Assistant Senate Majority Leader David Hann held a news conference immediately after the release of the report to put the blame on Dayton.

"It was completely unnecessary," said Hann, R-Eden Prairie. "We didn't need to do this, and we didn't need to act this way."

He vowed to support legislation that would prevent or limit future state government shutdowns.

Soon afterward, Dayton's office issued an amended statement, adding: "Minnesotans know that it was the Republican legislators' refusal to consider a reasonable and balanced solution, which caused the shutdown."

Baird Helgeson • 651-222-1288