With just a couple of days left for legislative leadership and Gov. Mark Dayton to reach a consensus on how to solve Minnesota's $5 billion deficit dilemma, a shutdown of Minnesota state government appears imminent. The two sides appear no closer than they were back in January, when new Republican majorities were sworn into office and Gov. Dayton became the first DFL governor since 1990.

At this writing, a number of court actions are being considered on a range of topics, including:

  • Determining what government services will be deemed "essential" during a government shutdown and will qualify to be funded.
  • Requiring the Governor to call a special session.
  • Not allowing the government to spend any funds unless authorized by the constitution or by federal mandate.
  • Requiring the appointment of a mediator to attempt to bridge the divide between the two parties.

All of this is very real and without much precedent. The 2005 shutdown of Minnesota government was short-lived, limited in scope and did not answer a lot of legal questions due to its brevity. This shutdown, many believe, will be different in both its scope and size. It will include the entirety of Minnesota government—save for the agriculture community—and could continue indefinitely. Besides political pundits making predictions of a weeks-long shutdown, office pools are getting in on the action and taking wagers on when the impasse will end.

Much of this is going to be up to the courts' interpretation and ultimate verdict. Much of it could also be subject to the courts setting up a formal process—much as they did in 2005—whereby a special master is appointed to hear the arguments of affected parties and decide if, in fact, the services being considered are essential government services and should be protected from the impact of the government shutdown.

What Are the Courts Saying?

Attorney General Lori Swanson (DFL) filed the initial petition with the courts, asking that state agencies and local governments be allowed to determine what their essential services are, and that a special master be appointed to listen to petitions of impacted parties that do not make the cut. Gov. Dayton responded with a much narrower interpretation, which would give him the authority to define essential services based on criteria established by the Minnesota Management and Budget Office. He did not request that a special master be appointed, but rather a mediator to compel him and legislators to find consensus on a budget proposal before July 1.

Ramsey County Judge Kathleen Gearin, who is presiding over the hearings, has ruled against appointment of a mediator, finding that the executive and legislative branches of government have "institutional competency" to resolve the budget impasse.

At the time this Alert went to press, Judge Gearin was still taking statements from the executive branch and over 20 intervening parties on whether the attorney general's motion should be granted in whole or in part—or no action should be taken. As soon as a decision is made, we will send a follow-up Alert.

Beyond the decisions in district court, on June 22 the Minnesota Supreme Court dismissed a petition filed by four GOP Senators—Warren Limmer (R-Maple Grove), Sean Nienow (R-Cambridge), Scott Newman (R-Hutchinson), Roger Chamberlain (R-Lino Lakes)—that any spending beyond what is required by the constitution, federal mandates and ongoing appropriations be deemed unconstitutional.

Guidance During the Shutdown

For the purposes of assisting you with running your company or organization, we have put together the following list of possible government functions that will be affected and may impact the day-to-day functions of your business or organization. The best day-to-day source of information on the shutdown and shutdown preparations can be found at the Web site of the Minnesota Management and Budget—Contingency Planning.

If you would like to become a student of previous government shutdowns and issues related to past budget impasses, the Minnesota Legislative Reference Library has put together a comprehensive website and listing of documents, including past decisions and court actions. Go to the Legislative Reference Library-Shutdown History for further information.

And, obviously, please feel free to contact us if you would like further information as this historical event unfolds. We would be more than happy to assist you with your questions.

Secretary of State: Business Services Division

Most operations of the Minnesota Secretary of State's office will shut down including important business transactional services. This will have wide-ranging implications for the perfection of loan documents, registration of new business entities, Uniform Commercial Code filings and searches, to name only a few. For more information, go to the Web site of the Minnesota Secretary of State.

Human Services Payments to Health Care Providers

Considered one of the most contentious components of a possible shutdown, payments to health care providers have now been included in the request by both Gov. Dayton and Attorney General Lori Swanson to the Ramsey County District Court in their filings to define and authorize essential government services during a shutdown. Gov. Dayton recently amended his request to include a broad range of provider services that were not included in his original filing. Up-to-date information on human services funding and provider payment can be found at the Department of Human Services.

Court System

Minnesota courts will continue to function and employees will be paid even if state government shuts down Friday, a judge ordered Tuesday, June 28.

According to a report in the Minneapolis Star Tribune, retired Judge Bruce Christopherson ordered the judicial branch to continue operating at current funding levels to “fulfill its obligations, and to ensure citizens’ rights, under the Minnesota Constitution and the U.S. Constitution."

Transportation

The Governor's recommendations regarding essential services impacting the movement of freight are mixed. In his petition, the Governor identified "truck permitting" functions at the Department of Transportation, such as issuing overdimension permits and motor carrier registrations, as essential. However, motor carrier credentialing functions performed by the Department of Public Safety, such as pro-rate services (IFTA/IRP), were not. Other functions of Driver and Vehicle Services, such as driver's license issuance and vehicle registrations, were also left off the list. Deputy registrars, which are private entities authorized to perform some of these functions, are expected to remain open. But if the shutdown extends beyond the period that temporary licenses and registrations are valid, or if the registrar's functions are dependent on transmission to the state, then having access to these services is pointless.

Road and Building Construction Projects

The Minnesota Department of Administration has informed all contractors, vendors and grantees that all work under state government contracts must be suspended effective July 1, 2011. A work stoppage on state road and building construction projects could result in layoffs and delays in construction completion due to the work stoppage and Minnesota's notoriously short construction season. For further information on the impact of a government shutdown on state construction projects, read Bob Huber's latest Construction Law Alert, which provides a thorough analysis of services that will be impacted and what you can do. The trade association for the building industry, Associated General Contractors, is one of the intervening parties that has filed an amicus brief arguing that their work on public projects is essential and should be continued during the shutdown.

Environmental and Inspection Permits

Permits issued by the Department of Natural Resources and the Minnesota Pollution Control Agency are likely to be suspended during the shutdown. Pending permit applications will therefore take longer and new applications will likely not be accepted. It is uncertain how any reduction or delay in state payments to local governments for local government aid will impact the ability of those local governments to issue local permits.