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17- I <,~~ f LMC League 0{ M;nmmota C;ws Cities pronu.>tirrg tD:Ce!knce ities lIe tin Number 14 April 24, 2002 Little progress on state budget negotiations Is unallotment a possibility? Gary Carlson The snail's pace at which the Legisla- ture is moving toward resolution of the . state's budget shortfall has generated more questions from city officials about what could happen if the House, Senate, and governor are not able to agree on a package ofbudget modifi- cations to address the state's budget shortfall. The Legislature must find an additional $439 million in spending reductions, revenue increases, or transfers from other funds to address the remaining shortfall. Last Wednesday, the Budget Reconciliation Conference Commit- tee met for three hours and adjourned with no plans to reconvene. The meeting bounced around from topic to topic, including an attempt by Sen. Dick Day (R-Owatonna) to pursue the Senate Republican compromise, which splits many of the differences betWeen the House and the Senate. Toward the end of the meeting, the frustration of members was readily apparent and best illustrated by Rep. Ron Abrams (R-Minnetonka) when he turned to the audience and asked, "Has anyone heard an original thought from the conferees in the last 45 min- utes?" After a brief period of silence, Rep. Torn Pugh asked Abrams (0 FL- South St. Paul), "Why are you limiting your question to the last 45 minutes?" Earlier in the meeting, the Senate fered a proposal to temporarily blink on the cigarette and tobacco taxes . until the state's budget reserVe was replenished to $500 million and a $153 million education reserve account was reached. The proposal included the original Senate plan to refinance $245 million in transportation projects and shift approximately $300 million in school aid payments to the next biennium. House members w~re noticeably cool to the proposal and critical of the lack of progress by the Senate on the most controversial components, including the tax increases and the refinancing of the transporta- tion projects. Will progress be furthcoming anytime soon? The Senate and House held floor sessions on Monday; but the budget reconciliation, bonding, stadium, anti-terrorism, and the transportation finance conference committees have yet to announce plans to meet this week. Unallobnent If the session ends without a Housel Senate agreement that can also sustain a potential gubernatorial veto, the job of balancing the state's budget could fall back on the governor and the commissioner of Finance. Under state law, the governor and the c01IlIIlissioner of Finance can make "tmallotments" in state spending to balance the remaining deficit. The unallotment statute is fuund in MN Statutes 16A.152 and is gener- ally considered a broad grant of power to the executivehranch to address state budget shortfalls. Due to the structure of the statute and the fact that unallotment has not been regularly used, there are many questions about the limits that exist. Despite the vagaries of the law, there are several features that seem clear. Before appropriations can be unalloted, the statute suggests that the state's budget reserve account would have to be depleted. The coInInis.ioner of Finance must have the approval of the govemor and must" consult" with the legislative leaders, although this consultation does not require legisla- tive approval. Once the budget reserve account is used, relatively few restric- tions exist on what the govemor can cut. According to a House Research Department memo drafted by Joel Michael and Mark Shepard, generally no programs are exempt from cuts, the commissioner is not required to make across-the-board cuts, there is no maximum percentage that the commissioner can cut from any expenditure, and the commissioner can deter or suspend statutory provi- sions that would otherwise prevent the unallotment cuts from being implemented. UnaUobnent for cities The unallotment power seems to clearly extend to appropriations of aid Continued on page 3