The Free Press, Mankato, MN

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February 22, 2012

Our View: State cost estimates need shoring up

The Free Press

— New laws are often controversial, and the cost of legislation can be hard to pin down to everyone’s satisfaction — especially when not everyone agrees with the methods used to arrive at the figures.

A report by the Minnesota legislative auditor’s office contends that the state’s system for estimating the impact of legislation needs more transparency, and that the cost of legislative proposals on local governments needs to be clearer. Particular attention was paid to the issue of state fiscal notes, which have, according to auditor James Nobles, “gotten a bad reputation.”

Fiscal notes, which are generated by agencies in the executive branch, contain estimates that are potentially controversial. The Minnesota office contends that the fiscal note system, though “not fundamentally broken,” needs improvement. Most of the notes reviewed appeared to be based on plausible assumptions, according to the auditor’s report, but many didn’t adequately explain their assumptions, which made them harder to assess.

The good news in the report is that no evidence of inappropriate influence was found either by Mark Dayton administration, or the Tim Pawlenty administration before it. But one in five notes were found to have mistakes or omissions. Though most of them were small, some were in the millions of dollars.

The auditor’s office is not recommending that fiscal notes be abandoned. On the contrary, it warns that in 2011 legislators increasingly used an “informal” process that ignored fiscal notes, which failed to offer documents reviewable by the public.

But the system needs shoring up. When the costs associated with new legislation are considered iffy, it serves as an open invitation to undermine the legislation itself. Minnesota state government should do everything it reasonably can to arrive at a process that explains the assumptions in a way people can both review and understand.

Key auditor recommendations include: amending state law to require that fiscal notes on not-yet-introduced bills are classified as “not public,” while ensuring that notes on introduced bills remain available to the public; that the Minnesota Department of Management and Budget (MMB) ensure that agencies clearly explain fiscal note estimates, and that MMB improve fiscal note instructions to agencies; more effective communication on large-scale or controversial bills; and stronger efforts in fiscal notes to discuss the likely impact on counties, cities and school districts.

Since state programs are often administered by local governments, and since state law doesn’t require fiscal notes to address local impacts, they often do not. In fact, since notes were first authorized in 1998, an average of just 3.6 local impact notes have been prepared annually.

If that number is not to be significantly increased, more discussions on local impacts at the fiscal note level would be reasonable.

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