Minnesota House Speaker Kurt Daudt, R-Crown, and House Majority Leader Joyce Peppin, R-Rogers, talked with reporters on May 27 before meeting privately with Gov. Dayton. Tom Scheck | MPR News

Republicans in the Minnesota House entered budget talks with Gov. Mark Dayton Wednesday armed with support from a leading advocate for early childhood education.

Prior to meeting with the governor, House Speaker Kurt Daudt, R-Crown, and several other Republicans met privately with Art Rolnick, a former research director at  the Federal Reserve Bank of Minneapolis. Rolnick is also a leading proponent of directing taxpayer money to help disadvantaged children attend preschool.

Rolnick said he believes child care scholarships are the best way to close the achievement gap between white students and students of color.

“We have limited dollars. Let’s use them in the most effective way.” Rolnick said. “Start with our most at-risk kids. Make sure every child born into poverty has this opportunity.”

Republicans included funding for early childhood education scholarships in their budget but did not fund Dayton’s plan for universal pre-k for four-year-olds. Daudt said he isn’t convinced that universal pre-k is a better option.

“I don’t want to make an investment in a program that doesn’t have research that backs up results,” Daudt said.

By meeting with Rolnick, Republicans are also trying to dispel Dayton’s notion that the budget debate comes down to more money for schools versus a Republican plan to cut taxes.

But the governor insists scholarships could end up further segregating low-income children from peers whose parents still might not be able to afford to pay for prekindergarten.

“Put all the kids that are all poor in one group, you’re not going to get that kind of synergy and that sense of normalcy, that normalcy which is what we want to teach,” Dayton said Wednesday afternoon.

Dayton and House Republicans are at odds over education funding and other parts of the state budget. The governor vetoed three budget bills last week.

Along with the education funding bill, Dayton rejected the agriculture and environment budget bill and the jobs and energy budget bill.

Dayton will have to call lawmakers back in a special session once they reach an agreement. Portions of state government will shut down on July 1 if they don’t agree on a budget.

As interest groups reboot lobbying efforts for the special session in hopes of having a second shot at getting their top priorities passed, a statewide organization representing counties is pushing Gov. Mark Dayton and legislators to preserve a new law that was just put on the books.

The Association of Minnesota Counties (AMC) is concerned about a provision in the state government funding bill recently signed by Dayton that would allow counties to hire private firms to conduct annual audits.

Executive Director Julie Ring said her office will be working in the next few weeks to make sure the new law survives the special session.

“Many of our members will say this is an issue of fairness and competitiveness for counties to have the option [of private audits],” said Ring. “But that said, they’re comfortable working with the State Auditor’s office and don’t see a change in law as something that would automatically result in making a change away from the State Auditor.”

The counties have long asked the legislature for the flexibility included in the provision, and this year Republican legislators in the Minnesota House, including Rep. Sarah Anderson, R-Plymouth, who chairs the State Government Finance Committee gave it to them.

Now, the issue has become a flashpoint between State Auditor Rebecca Otto, who has taken to Twitter and the media to express her outrage over the provision, and counties that want the flexibility.

Dayton just signed the state government funding bill, but says he wants legislators to repeal the new rule because it undermines the role of Otto’s office. (Dayton served as Minnesota’s State Auditor in the 1990s, and vetoed similar legislation in 2011.)

“This is a core function of this office,” Otto said, pointing out that counties have millions of taxpayer dollars running through them every year.

Unlike most Minnesota cities, towns and school districts, counties are required to have the state auditor’s office conduct annual audits unless they get an exemption from Otto’s office.

Ring said the requirements for an exemption are opaque and confuse counties because they are required to audit with the state some years and allowed to outsource the work in others.

But Otto said the requirements to get an exemption are clear: Her office keeps a closer eye on counties who display red flags, Otto said, pointing to a driver diversion program in Wabasha County that raised concerns with the Auditor’s office and the courts.

Another county concern is cost. Some counties – especially smaller ones – say they can get a better deal by using a private firm because there’s competition for the business and because the price is fixed each year.

Otto’s office charges for the work, too, but she says private firms aren’t working for the taxpayer.

“When private sector auditors audit, their client is the county board, not the taxpayer,” Otto said.

Pine County Administrator David Minke said he might save money by using a private auditor. But timing and value are bigger concerns.

Typically, the state auditor’s reports come back in September, which is too late to use the information to help plan for the coming budget year.

“I may pay $48,000 for a state audit, but it only becomes a tool we put in a filing cabinet,” Minke said. “It’s not a management tool because it’s so untimely.”

Otto said counties that get audit results late in the year often aren’t trained or prepared to help her staff get an earlier start.

“There’s nothing we can do about that unless the county gets their act together,” Otto said.

Otto stressed that the audits aren’t a money maker for her office. But she said that if enough counties choose private auditors, her staff will inevitably be cut because there won’t be enough work.

Lt. Gov. Tina Smith  is meeting privately with state employees to discuss the potential impact of a partial state government shutdown.

Smith met with employees of the Departments of Commerce and Natural Resources and the Pollution Control Agency Wednesday. She’s scheduled to speak with Department of Agriculture employees on Friday.

Smith is talking about budget negotiations with House Republicans and providing an update on the special session.

The private meetings, which weren’t on Smith’s calendar released to reporters, are a sign that the Dayton Administration is trying to reassure nervous public employees about their employment status.

“These are people who could lose their jobs if things don’t get worked out,” Dayton spokesman Linden Zakula said. “We’re trying to explain to them that we’re trying to work it out and thank them for their service and take some questions from them and hear what their concerns are.”

Dayton vetoed three budget bills last week that could affect workers in as many as 16 departments, agencies and boards when the fiscal year ends on June 30. If no budget deal is reached by then, parts of state government will shut down on July 1.

John Pollard, a spokesman for Minnesota Management and Budget, said his department is preparing to send out lay-off notices on Monday to the affected workers. Pollard said the notices have to be sent on June 1 because some labor contracts require a 30 day notice before the state lays off workers.

Dayton and House Republicans are at a standoff over the budget. Dayton says he wants more money spent on education, including some form of universal pre-k for four-year-olds. He is also demanding more money for rural broadband and the removal of several provisions in the environment and ag budget bill and the jobs and economic development bill.

Dayton and Republican House Speaker Kurt Daudt were scheduled to hold another private budget meeting Wednesday afternoon at the governor’s residence.