Minnesota Goes Back to Work as Politicians Gauge Shutdown Fallout

Photographer: Tom Olmscheid/AP

Minnesota Senate Sergeant-at-Arms Nick Thompson removes a "This Building is Closed" sign from one of the State Capitol's main entrances Tuesday, July 19, 2011, in St. Paul, Minn. Close

Minnesota Senate Sergeant-at-Arms Nick Thompson removes a "This Building is Closed"... Read More

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Photographer: Tom Olmscheid/AP

Minnesota Senate Sergeant-at-Arms Nick Thompson removes a "This Building is Closed" sign from one of the State Capitol's main entrances Tuesday, July 19, 2011, in St. Paul, Minn.

Minnesota’s rest stops and parks must be cleaned after being closed almost three weeks during state government’s shutdown. Equipment must be returned to construction sites. There may be a backlog of hunting license applications. And winners and losers have to be sorted out.

The Republican-controlled Legislature passed the last of the budget bills about 3:30 a.m. local time largely on party- line votes, allowing Democratic Governor Mark Dayton to end the 20-day impasse. Dayton, who called a session yesterday after settling the details of a broad agreement last week with Republican legislative leaders, plans to sign the bills at 9 a.m. local time, according to an e-mail from his office.

Both sides took a political hit because they might have reached much the same deal last month, making it a lesson for politicians in Washington debating the federal debt limit, said Lawrence Jacobs, a University of Minnesota professor who directs its Center for the Study of Politics and Governance.

“The haunting lesson is, when you leave things to the last minute, miscalculations are quite probable,” Jacobs said in a telephone interview from Minneapolis.

Fitch downgraded about $5.7 billion in Minnesota general- obligation bonds one step to AA+ from AAA, the highest level, on July 7 in because of the state’s reliance on one-time funding sources during the recession and “the likelihood that the final budget agreement will again include nonrecurring solutions,” according to a release.

Plugging the Hole

Dayton, 64, and Republican legislative leaders agreed to close a $5 billion budget deficit with spending cuts while raising as much as $640 million through bonds tied to the 1998 tobacco settlement and shifting $700 million in additional education spending into the next budget, according to bills passed last night and this morning.

The Legislature also agreed to Dayton’s request for a $497.6 million bonding bill for capital projects. The budget authorizes the administration to set the terms of the tobacco bond sale, Representative Greg Davids, the Republican chairman of the Tax Committee, said in an interview on the House floor.

Most government functions stopped at 12:01 a.m. July 1 after Dayton and lawmakers failed to resolve the budget dispute in the Midwestern state of 5.3 million.

Emerging From Slumber

While some operations can restart just by turning on computers, it might be weeks before the state functions as it did before the start of the nation’s longest shutdown since 2002, said Jim Schowalter, commissioner of the Management and Budget office.

“Normal operations do not happen immediately,” Schowalter said during a conference call with reporters from St. Paul yesterday.

Minnesota has a plan for restarting itself, John Pollard, spokesman for the Management and Budget office, said in an interview yesterday in St. Paul.

The first step will be recalling about 23,000 state workers who were laid off, and employees have three days to return under an agreement reached with unions before the shutdown, Pollard said.

“It’s really tough to predict where the bumps will be,” he said, adding that it is too early to calculate a final cost of the shutdown.

Construction on 100 road, bridge and building projects may take the longest to restart, Schowalter said. In some cases, contractors pulled equipment off sites and assessments are needed to ensure work can resume safely, David Semerad, chief executive of the Associated General Contractors of Minnesota in St. Paul, said in a telephone interview.

Out of Hibernation

He compared the situation to resuming work after winter.

“It’s certainly not like turning a light switch on,” Semerad said.

Rest stops must be cleaned and damage from storms repaired before barricades are removed, Kevin Gutknecht, a spokesman for the Minnesota Department of Transportation, said in a telephone interview. That could take “a couple of days” after workers are recalled, he said.

About 300 bars, restaurants and liquor stores that were unable to purchase alcohol from wholesalers because their permits expired during the shutdown are getting a reprieve. One of the budget bills allows businesses with so-called buyer’s cards that expired between June 15 and July 25 to continue buying alcohol through the end of the month.

Dry and Angry

Public outcry about the possibility of businesses running out of booze, combined with the threat that MillerCoors LLC would have to pull its products from shelves because it failed to renew brand-label registrations, contributed to Dayton’s acceptance of Republicans’ June 30 budget offer with conditions, said Steven Schier, a political-science professor at Carleton College in Northfield.

“If you pull beer, you’re courting a political whirlwind,” Schier said in a telephone interview.

The final deal was a compromise, and it was clear last November it would be needed after Minnesota voters elected a Democratic governor and gave Republicans control of the Legislature, Dayton told reporters yesterday during a news conference at the Capitol in St. Paul.

“It just meant by definition that we’re not going to be able to, any of us, walk away saying we have everything we want,” said Dayton, who dropped his plan to raise the income tax on the wealthiest 2 percent of Minnesotans.

Although Republicans accepted higher spending, they prevented a tax increase that would have hurt Minnesota’s competitiveness, House Speaker Kurt Zellers said in an interview at the Capitol. Republicans found “common ground” with the governor “and we can move forward,” Senator Geoff Michel, the deputy majority leader, said in a floor speech.

Reckless Borrowing

Still, Representative Paul Thissen, the minority leader, called the spending plan “the most irresponsible budget in state history” in a floor speech because it borrows money and will create a deficit in the next budget, he said. Selling the tobacco bonds “violates every principle of good governance,” Democratic Senator Dick Cohen said in a floor speech.

Jacobs named three losers from the shutdown -- Minnesota, Democrats and Republicans -- and said the state got a black eye nationally.

“Minnesota went from being kind of poster child for good governance to being a warning label on how not to run the public’s business,” he said.

To contact the reporter on this story: Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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