News Release

Robert S. Carney Jr.
4232 Colfax Avenue South, Minneapolis, MN 55409
Home: (612) 824-4479 * bcarney@bobcarneyjournal.com * bob@republicancontract.com

October 5, 2009

An open letter to members of the Minnesota Legislative Advisory Commission

Delivered by e-mail
Minnesota State Capitol
75 Rev. Dr. Martin Luther King Jr. Blvd.
St. Paul, MN 55155

Re: Unallotment and Minnesota PCR Lawsuit update; request for at least one additional hearing

Dear Members of the Legislative Advisory Commission (“LAC”):

As you know, at your June 30^th 2009 hearing I testified regarding the Political Contribution Refund (“PCR”) program. I asserted, supported by a legal memo from a large Minneapolis law firm, that because it is a tax refund, individuals and classes of individuals have standing to sue if the Pawlenty Administration proceeded with the attempt to, using their word: “eliminate” the PCR for the current biennium. At both the hearing, and in a prior letter to Governor Pawlenty, I encouraged the Administration to reconsider their position, and warned them of the possible legal consequences if they did not. Unfortunately, both Commissioners Hanson and Einess told me after the hearing that they were, to paraphrase, confident regarding their legal position, and unwilling to reconsider. Having exhausted all other options, I have proceeded with a lawsuit. The initial hearing is scheduled for 1:30 PM, October 13, 2009, in Ramsey County District Court, before Chief Judge Kathleen R. Gearin.

By this letter, I am asking any two of you to schedule at least one additional hearing of the LAC, to question representatives of the Pawlenty Administration, including MMB Commissioner Tom Hanson, regarding issues raised in this letter, and in the court record for my lawsuit. I would appreciate the opportunity to testify at that hearing.

As documents become a part of the legal record of my lawsuit, and become available to me, I have been putting them on-line at my website, www.republicancontract.com. At this time, the documents include (some may not yet be on-line):

Plaintiff's original complaint.
Defendants' response -- a Memorandum of Law asking for dismissal, or summary judgment.
An affidavit supporting the Defense Memorandum of Law.
Plaintiff's Memorandum of Law demonstrating that the motion to dismiss, and in the alternative a motion for summary judgment, should be denied.
Plaintiff's motion for a preliminary injunction.

I want to emphasize that with respect to my lawsuit, I believe the effort to unallocate the PCR is illegal according to existing statutes. One of my reasons for writing to you is to draw your attention to what my attorneys and I have identified as the Pawlenty Administration's misreadings and unsupportable constructions of Minnesota statutes. For a summary form of arguments, please see the 12 page Excerpts – Plaintiff's 10/2/09 Memorandum of Law; that document is a second e-mail attachment.

For more detail regarding the Pawlenty Administration's legal position you should proceed to read first the Defense Memorandum of Law (it should not be necessary to read the Garry Affidavit, but you may want to refer to it), and then our most recent Memorandum of Law in response. Of course, as the case proceeds, issues of statutory interpretation will be further elaborated. As you review these documents, I am sure you will want to consider how these legal arguments regarding statutory construction bear on other aspects of the Administration's actions with regard to unallotment.

Looking beyond my lawsuit, as this court record has developed I have become deeply disturbed by the invasive legal position the Pawlenty administration appears to be asserting with respect to executive branch unallotment powers and authority. The prospective consequences extend far beyond the narrow scope of my lawsuit, and bear on the actions of the Pawlenty Administrations broader attempt to -- in my view -- usurp the power and authority of the Legislature. This usurping is both with respect to current Statutory enactments, and in the face of our State's permanent (but amendable) Constitution.

Here is a summary of what I perceive the Pawlenty Administration to be claiming -- in court, as a matter of law -- regarding executive branch unallotment powers and authority:

The power to unallot immediately and/or prospectively -- at or even before the commencement of a biennium -- any percentage, up to 100%, of any allotment, subject only to minimal separation of powers exclusions respecting the operation of other branches of government.
The power to “re-unallot”. Although the Defense Memorandum of Law suggests the Legislature could, in 2010, reauthorize spending for the PCR program, the spending is already authorized. By the logic of the Administration's own position, there would be nothing to stop them from simply “re-unalloting” any such reauthorization. There appears to be nothing in the Administration's stated legal position to suggest that this process cannot go on forever.

The power to unallot with respect to any and all statutory obligations enacted subsequent to the 1987 enactment of the current 16A.152 Subd. 4(b). Note: This subdivision provides for a power to “defer” or “suspend” “...prior statutorily created obligations...”, meaning obligations arising from statutes enacted prior to the enactment in 1987 of Subd. 4(b). The 1987 Legislature had a clear view of the scope of this restriction – but not of the future. The Pawlenty Administration's position amounts to this: that the intent of the 1987 Minnesota Legislature was, through executive unallotment power, to preemptively restrict any statutory obligation enacted by any future legislature. This is contrary to the plain meaning of the words of Subd. 4(b). It is not supported by the 1987 Legislature's deliberative record (see Garry Affidavit, Ex. 14).
The power, by means of “deferring” or “suspending” payment of “prior statutorily created obligations” into subsequent bienniums, to force the Legislature to either appropriate money in future bienniums for expenses incurred in prior bienniums, or to default on the payment of what the unallocation statute explicitly states are “obligations”. We must consider this: how is imposing a requirement on a future legislature to appropriate money in a future biennial budget for expenses incurred in a prior biennial budget any different in its effect from deficit spending?

Let me be blunt about the future that the Pawlenty Administration's unallotment actions is pointing us towards. We should expect a future “Republican” candidate for Governor to campaign along this line – maybe not with these words, but with this message:

“This Bud's for YOU! Elect me... I'll use my action figure unallotment super power to unilaterally balance the budget on my pinky. Makes you feel good to elect DFL'ers to the Legislature? Wife wants you to vote for 'em -- put out a sign? Go ahead! Let 'em play their games. It don't matter what they pass for spending – Gov has the checkbook – I'll be the decider for Minnesota on what's spent and what's not spent. But listen – you gotta give me this: 'boots on the ground' -- one third plus one in one house of the Legislature. That's all we need.”

Get ready – that's where we're heading – right now.

In the above “Republican” is in quotes, because such a person is not a Republican at all – that position is fundamentally contrary to how a republican form of government is intended to work. I will do everything I can to oppose this, and to prevent it. The Legislature is in my assessment already way too polarized along caucus lines – but it is still a place, and a forum, for some independent minded people to try to think through what is best for our state – both in the next biennium, and in the long run. Whatever remaining common ground we have is at risk.

In view of the recent legal assertions of the Pawlenty Administration -- representing an unprecedented breadth and scope of claimed unallotment powers -- it seems essential for the LAC to question the Pawlenty Administration further regarding their unallotment actions and intentions. As a Republican, I am opposed to judicial activism. I believe that when issues arise between the executive and the legislative, as a general principle these should be resolved between the two branches. As you know, my current lawsuit is categorically different from almost all of the other unallotment actions: because it is a tax refund, individual taxpayers such as myself have standing to sue if the State of Minnesota refuses to pay money that is legally owed to us. However, in view of the present extraordinary situation, I believe it is essential for the Legislature to begin to formally consider all available legal and constitutional options to oppose, and stop, what seems to be a clear usurping of both statutory and constitutional Legislative authority and power. Holding a LAC hearing is properly the next step in this process.

In conclusion, let me draw your attention to my party's stated position, and my position, on the proper relationship between the Executive and the Legislative branches. The 2008 Republican Party of Minnesota Standing Platform, under the heading "Making Government Smaller and Better", calls for (emphasis added): "Reinstating the constitutional separation of powers and opposing legislation by executive order, judicial rulings, or unelected regulatory agencies."

Sincerely,

Robert S. Carney Jr.

cc: Governor Tim Pawlenty
Attachments

Note: This excerpts document was prepared from a Memorandum version just prior to the final filing document – there may be slight differences from the filed Memorandum of Law – this excerpts document is not part of the court record.

A. The Clear Legislative Intent Behind Minn. Stat. § 16A.152 is to Serve as a Process for Correcting a Budget That Becomes Unbalanced, and Not as a Budget Balancing Authority.

Defendants ...noted that “[t]he MMB Commissioner, Tom Hanson, determined that probable receipts for the general fund would be less than anticipated and that the amount available for the July 1, 2009 to June 30, 2011 biennium would be less than needed.” (Id.) In other words, Defendants claim that the Commissioner determined that anticipated revenues did not equal the budget as passed by the Legislature. But this is not the predicate for the invocation of the unallotment power.

The “probable receipts for the general fund” as “anticipated” on June 4, 2009 were projected to be $30.7 billion. (See Garry Aff. Ex. 1.) There is no indication that the Commissioner determined that the receipts for the general fund would be less than $30.7 billion after July 1, the allotment date. Put simply, the evidence supports the conclusion that the probable receipts for the general fund are exactly what they were anticipated to be at the time of the unallotment, as that “anticipation" was contemporaneous with the passage and enactment of this budget into law. Absent this predicate, Defendants lack authority under Minn. Stat. § 16A.152, subd. 4(a) to transfer funds from the reserve prior to unallotment, and subsequently to unallot expenditures enacted by the legislature.

Minnesota Statutes § 16A.14 establishes the Allotment and Encumbrance System. Subdivision 3 describes the spending plan, and requires:

A spending plan shall be submitted [from an agency] by July 31 to the commissioner on the commissioner's form. The spending plan must certify that the amount required for each activity is accurate and is consistent with legislative intent; revenue estimates are reasonable; and the plan is structurally balanced, with all legal restrictions on spending having been met for the purpose for which money is to be spent.”

Minn. Stat. § 16A.14 subd. 3 (2008). Subdivision 4 provides: “The commissioner shall approve the estimated amount for expenditure if the spending plan is within the amount and purpose of the appropriation.” Minn. Stat. § 16A.14 subd. 4. Whether any of this was done is not evident from the presently available record. But, this much can be said: it seems doubtful that a spending plan for the PCR that eliminated the program for the current biennium is consistent with legislative intent.

From these provisions of § 16A.14 it is evident that the unallotment power of Minn. Stat. § 16A.152 subd. 4(b) must be based on events that occur after the start of the biennium; then and only then do Defendants have the power of unallotment. Instead of following the clear statutory intent to make mid-course corrections to balance revenues after the start of the biennium, it appears Defendants prospectively “unalloted” funds that had never been alloted in the first place. Defendants therefore exercised authority not granted to them by the Legislature or under the Constitution of the State of Minnesota.

An analysis of the unallotment statute establishes the clear intent of the legislature that this process is a kind of “mid-course correction” or “safety valve” for budgets that begin in balance, but become unbalanced through revenues that are less than expected. It is important to note that Defendants do not have the power to unallot based solely on the state of anticipated revenues. If projected expenditures were to decrease in line with projected revenues, Defendants would have no power to unallot. Subdivision 4(a), after the requirement for revenues to be less than anticipated, states that unallotment can only be done when “the amount available for the remainder of the biennium will be less than needed.” Furthermore, subdivision 4(e) requires that savings from expected expenditures be considered before Defendants can alter the budget. “The commissioner shall reduce allotments to an agency by the amount of any saving that can be made over previous spending plans through a reduction in prices or other cause.” Minn. Stat. § 16A.152 subd. 4(e).

In the plain language of subd. 4(a), the shortfall in receipts refers to “the amount available for the remainder of the biennium” and therefore assumes that any unallotment must take place after the start of the biennium. Subdivision 4(a) therefore requires that the reduction of a budget reserve must take place within the biennium, and then, if there is an additional deficit subdivision 4(b) becomes relevant. Defendants’ prospective unallotment therefore exceeds the authority granted them, and the deprivation of Plaintiff’s statutorily mandated PCR was improper.

B. Defendants’ Interpretation of Their Authority Under the Unallotment Statute Renders the Executive Branch the Ultimate Legislator of the Budget.

Defendants maintain the curious suggestion that legislation could restore the funding to pay the refunds at issue. (Defs.’ Mem. of Law, p. 10.) Defendants at this point also attempt to characterize this unallotment as a suspension, and not a repeal of the statutory obligation. However, Defendants' proposed unallotments of June 16, 2009 state: “The refund would be eliminated for any political contribution made between July 1, 2009 and June 30, 2011.” (Garry Aff. Ex. 2 (Emphasis added).) The same language is used to report the final unallotments on July 1, 2009. (Garry Aff. Ex. 6.) Presuming the Legislature acted specifically to reinstate the PCR, however, there is nothing in Defendants’ position that would not permit it to “re-unallot” this expenditure.

The effect of this process, as presented by Defendants, is that absent an opposing two-thirds majority in both houses, the Governor can launch the State into a new biennium with a multi-billion dollar deficit, and then has a veto over all spending in a manner not subject to the normal legislative override. Defendants’ actions represent a disincentive for the Governor to engage in the constitutional process of legislation; instead according to Defendants’ theory, he can exercise unilateral power. Defendants’ statement that the Legislature could restore funding does nothing to alleviate this unbalancing of the constitutional delegation of power.

II. DEFENDANTS’ INTERPRETATION OF THE “NOTWITHSTANDING CLAUSE” IS NOT A LOGICAL INTERPRETATION OF THIS STATUTE.

Defendants focus on a phrase in the unallotment statute, which states: “Notwithstanding any other law to the contrary, the Commissioner is empowered to defer or suspend prior statutorily created obligations which would prevent effecting such reductions.” Minn. Stat. § 16A.152, subd. 4(b). Defendants’ emphasis on the “notwithstanding clause” is inappropriate in this instance. The proper emphasis is on the phrase “prior statutorily created obligations.” Defendants presumably take this phrase to mean a statutory obligation created prior to the unallotment. This is not the natural interpretation of this phrase, however.

Under Defendants’ interpretation, the word “prior” would be superfluous because it would be impossible to unallot an obligation that was not created prior to the unallotment. The better understanding of this phrase is that the statutory obligations existed prior to the enactment of Minn. Stat. § 16A.152. That is, that the Legislature empowered the executive branch to unallot obligations that it knew of at the time it created the unallotment power. Any new statutory obligations would require either amendment of the unallotment statute, or recognition within the statute creating the obligation that it was subject to the unallotment power. While Defendants reference a section of transcript from the Minnesota Senate discussion of what would become Minn. Stat. § 16A.152 subd. 4(b) and claim this supports their construction of “...prior statutorily created obligations...”, the operative phrase from these legislative transcripts is the recognition that the Legislature was “expanding the [unallotment] authority [to defer or suspend] to all appropriations and expenditures which had been limited until this time.” (Defs.’ Memo of Law, p. 10; Garry Aff. Ex. 14 (Ex. C).)

DEFENDANTS’ METHOD OF BALANCING THE BUDGET IS NOT ANTICIPATED BY LAW AND SUBVERTS THE INHERENT BALANCE OF POWERS.

As discussed above the, the unallotment statute was designed as a safety valve in situations where revenues are less than anticipated, and expenditures remain greater than revenues. There is nothing in the language or history of the statute that presupposes revenues are not initially projected to be less than projected expenditures. While there is no specific statutory requirement that the Legislature and Governor agree to a balanced budget, this is the implicit assumption underlying the budgeting process.

The process of passing the budget for the fiscal years 2010-11 involved the Legislature, as prescribed, presenting revenue bills and spending bills for the Governor’s signature or veto. These bills presented to the Governor, taken together, constituted a balanced budget. Governor Pawlenty obviously has the authority to sign or veto these bills, either in whole or part, subject to an opportunity for the Legislature to override any veto. Governor Pawlenty presented back to the Legislature a budget that was not in balance by vetoing revenue-producing measures without vetoing equivalent spending measures. Instead of vetoing spending so that the Legislature could consider an override of his veto, the Governor chose to unilaterally cut spending in a manner he intended to take away the Constitutional opportunity for overriding these cuts.

The Governor now appears to argue that the Legislature intended this process when it enacted Minn. Stat. 16A.152, in contradiction to the fundamental framework of the enactment process. Had the Legislature in fact made such a thorough delegation of the spending authority to the Executive branch, this would constitute a violation of the non-delegation principal, allowing the Governor to create his own budget without legislative review. But this is not the purpose of Minn. Stat. § 16A.152. “Minn. Stat. § 16A.152 does not reflect an unconstitutional delegation of legislative power, but only enables the executive to protect the state from financial crisis in a manner designated by the legislature.” Rukavina, 684 N.W.2d at 535.^¹

The Rukavina Court’s assessment of the unallotment statute is correct; the legislature provided flexibility and efficiency for the State’s ability to react to budget shortfalls should a crisis occur. There is no current crisis, however, with the possible exception of a projected imbalance of the Governor’s creation. As discussed above, there is no shortfall of anticipated revenue because Defendants are unallotting based on initial projections. Instead, the Governor is attempting to create a financial crisis in order to expand his unchecked authority and usurp legislative power. It is inconceivable that it was the intent of the legislature to permit this when it enacted Minn. Stat. § 16A.152.

The implicit assumption of a balanced budget is seen when the conditions for unallotment are considered. The initial requirement, “If the commissioner determines that probable receipts for the general fund will be less than anticipated” would not be satisfied if the budget as enacted was not in balance and a budget projection showed anticipated revenues greater than previously anticipated. This can be demonstrated if it is assumed that the budget was passed with anticipated revenues of $30.7 billion and projected expenditures of $35 billion, and the Commissioner determined through later evidence that anticipated revenues were actually $32 billion. Probable receipts for the general fund would be more than anticipated, so the triggering condition of subdivision 4(a) would not be met.

In the scenario above, either the State would run out of money or the Legislature and Governor would have to agree on increasing revenue or decreasing expenditures. In other words, the political process, with the assigned roles and checks and balances, would have to resolve this problem as the political process must resolve the situation in which the State currently finds itself. Defendants cannot abdicate their responsibility to follow the legislative process, and unilaterally eliminate the Legislature’s express plan that Plaintiff be granted the PCR, without being subject to the opportunity for the Legislature to override what is effectively a veto.