Report: Shutdown wasn’t so bad, fiscally speaking

The drama surrounding the cost of July’s state government shutdown was overblown, according to statistics released by the state’s budgeting office.

Minnesota Management and Budget released a report Tuesday that said the shutdown’s financial effects were smaller than most Minnesotans expected.

The shutdown cost the state $50 million in unrecoverable revenues, according to the report. Preparations and recovery cost the state an additional $10 million — more than $550,000 was spent to mail notices to citizens, stakeholders and vendors.

But temporary layoffs of 19,000 state workers generated $65 million in savings, MMB Commissioner Jim Schowalter  said.               

State employees and the Minnesota’s reputation shouldered most of the burden, Schowalter said. “We lost revenues for sure, we incurred costs for sure, but they were by-and-large counteracted by savings — almost entirely borne by state employees whose salary was not paid.”

The state government shutdown began on July 1 when the Legislature and Gov. Mark Dayton failed to agree on a budget by the deadline, leaving the state without a funding plan after June 30.

“I am grateful that the [r]eport concludes there was no net cost to Minnesota taxpayers. Unfortunately, it also shows that the worst financial hardship fell upon state employees, who were involuntarily laid off,” Dayton said in a statement Tuesday.

Several Ramsey County District Court orders maintained funding to certain programs in public transportation, higher education, health and human services and public safety.

Schowalter said that those court orders kept 80 percent of state spending flowing through the 20-day shutdown — the longest in state history.

“The economic impact, in large measure, was blunted by court-ordered spending,” Schowalter said.

The shutdown ended July 20 after Dayton signed 12 bills — nine of them budget bills — the morning after a marathon special session. The governor signed a budget that balanced the state’s budget by delaying $700 million in payments to K-12 schools and by issuing “tobacco bonds” — borrowed money from the state’s legal settlement with several tobacco companies.

Despite early talks of shuttering the University of Minnesota, University officials indicated the school’s doors would stay open despite the problems that a temporary loss of state money could cause.

“Like any large and complex organization, the University is prepared to fiscally manage fluctuations in our cash flow. We can weather a short-term disruption in the flow of next year’s state appropriation to the University,” Chief Financial Officer Richard Pfutzenreuter said in a statement on June 23.

Assistant Senate Majority Leader David Hann, R-Eden Prairie, expressed hope Tuesday that Dayton would sign on to legislation in the upcoming session that would prevent another government shutdown.