Last year the Legislature passed, and the governor signed into law a bill which created a Legislative Budget Office. It was maligned by some conservatives and notably got a negative rating from the Legislative Evaluation Assembly. We differed with those views and found the LBO concept very promising. This week's hearing in the State Government Finance committee was a reminder of why.

To understand why there might be a need to create a new government entity you first have to go back to the State constitution. Minnesota is modeled on the Federal Model of three branches of government, co-equal, with checks and balances.

In the constitutional budget process, the Governor submits a budget to the legislature; the legislature modifies it based on serious and often contentious negotiations with the Governor. Legislators who want new programs or changes to existing programs submit them as individual bills. When the bill reaches a finance committee, a staff person, (Usually the committee administrator of the House Ways and Means Committee) requests a fiscal note on the bill. The fiscal note is put into a database, and MMB manages the process of gathering information about the cost of what is proposed in the bill. This usually involves some research and sending information requests to a budget officer in any other relevant state agencies. When the form is filled out, the note is signed by the agency budget officers sign it, and it is deemed "complete." Before a hearing in a finance committee, the note will be pulled off the database and printed copies will be distributed to the legislators, along with the copy of the bill and a description of the bill with house research. These three documents are the central pieces of information for a legislator in deciding on whether to vote for a bill. Partisan Staff provides other summaries, but they are still based on the information on those three documents, of which, the fiscal note is a key piece.

So as one legislator asked, what's broken here? Why do we need to fix this process, create a new program, potentially spend more money?

Let's go back to the constitution again-In the current process, Legislators are being asked to base their decisions on what laws to make using information sourced solely from the Executive Branch. In the hearing, it was interesting to hear the perspective of newer DFL representatives who didn't see why there should be differences between the executive branch employees and legislative employees. Since they haven't experienced a Governor of a different party, their concept was more like a unitary form of government.

DFLers made the point that, after all, since agencies are the ones who will implement these policies, they must know what it will cost.

In theory.

The problem is that increasingly, fiscal notes have become a way for the Executive Branch to challenge bills that it does not like and give glowing, low ball estimates of policies that it does want. The problem was studied in depth by the Legislative Auditor in 2012.

The Dayton Administration was not solely to blame. There were examples of political disagreements about fiscal notes during earlier administrations. The beginnings of the legal fight between State Auditor Rebecca Otto and the legislature can be seen in the fiscal note for the first bill which tried to allow counties to select a private auditor for their primary audits rather than her office. The note forecasted ruin for her office, assuming no cost savings for doing fewer audits and the same level of overhead.

[For a more recent example, listen to the testimony below of Chair Duane Quam about his frustrations in dealing with an oppositional agency while trying to get an accurate estimate of a bill he was working on.]

So, the legislature is trying to take some ownership over the process, to create an office similar in many ways to the Office of the Legislative Auditor, but one specifically devoted to the fiscal note process. It would be jointly shared by the House and Senate, through the Joint Legislature's agency, the Legislative Coordinating Commission or LCC.

The intention of the legislature so far has been to try to make the LBO spending neutral. But that would require cutting some Full-time equivalent units in State government (since none of the fiscal note work in agencies is a full-time job, but part of someone's job). Taking money from the Executive Branch and reassigning it to the Legislative Branch is a tricky business and probably the easiest thing to negotiate away. We'll see about that.

In House State Government Finance Committee, last week, the Legislative Budget Office taskforce presented its report on work thus far. There is a lot more work to do, and it will probably be done in stages with another bill or provision in another bill passed this session. The likely vehicle is HF599 (Vogel) /SF78 (Kiffmeyer) but it could just as easily end up in a policy bill dealing with state government.