Minnesota budget agency sides with DFL in state worker raise dispute

Minnesota will honor labor contracts set to raise pay for tens of thousands of state workers this summer, despite a vote by the GOP-led Senate to freeze salaries to help close a projected budget deficit.

The fate of the raises was left in limbo when the Legislature adjourned on Monday without reaching agreement on ratifying contracts that were negotiated with the Walz administration last year.

Democrats who control the House voted to approve the contracts, which include a 2.5% pay raise in July, while the Senate passed legislation postponing the raises until July 2021.

State law requires that legislators approve state worker contracts, but does not say they can change them. Minnesota Management and Budget Commissioner Myron Frans said Wednesday that a legal review by the agency confirmed that the Legislature does not have authority to "unilaterally modify the agreements or plans." By voting to OK the contracts without raises, the agency determined, the Senate effectively approved them.

Unions representing state employees celebrated the decision, saying it showed a respect for workers and the collective-bargaining process.

"This modest contract is fair and was negotiated in good faith," said Minnesota Association of Professional Employees Executive Director Lina Jamoul. "Wages contained in the contract support our members, their families and the local economy, which is part of the recovery from this crisis."

But the move was assailed by Republicans who had argued that the lack of consensus between the House and Senate should trigger a repeal of the contracts and raises. House Minority Leader Kurt Daudt, R-Crown, said a decision to honor contracts without the passage of identical bills is unprecedented.

"Giving pay raises to state employees while nearly 700,000 Minnesotans are out of work is offensive and deeply irresponsible," he said. "Our state can't afford it. Democrats are ignoring years of historical precedent as political payback to their biggest campaign contributors."

The decision could have implications beyond the state budgets and union contracts. Legislators are expected to return to the Capitol in June to resume negotiations on a public construction bonding package, a tax bill and other issues left unresolved at the end of session. Senate Majority Leader Paul Gazelka, R-East Gull Lake, suggested Wednesday that the administration's ruling could complicate those talks.

"The governor's cavalier decision to give state workers a raise this July against the clear direction from the Senate has put a chilling effect on the cooperation between the Senate and governor," he said. "It's time for the emergency powers to end."

The end-of-session fight over the contracts emerged after the economic crisis caused by the coronavirus pandemic wiped out the state's projected surplus, leaving lawmakers with a $2.4 billion budget gap. Republicans argued the state cannot afford another round of raises for nearly 50,000 employees. Budget officials estimate that the increases will cost the state nearly $445 million in the current budget cycle and $757 million in the next budget.

Frans said Wednesday that while "it will take hard work get back into balance," the two-year budget passed by the Legislature last year "accounted for compensation costs for all agencies," including wages provided by the original contracts.

He said state agencies have already taken steps to lower costs, including a hiring freeze and pay cuts for the governor and agency heads.