The Minnesota House has hired a Minneapolis law firm to represent it in a legal fight over legislative salaries, in addition to the court fight it has launched against Gov. Mark Dayton.

Under a legal services agreement signed last week with the Lapp, Libra Thomson, Stoebner & Pusch firm, the House will pay a discounted hourly rate of $320 for representation.

The firm is the default counsel for the House, under a 2001 Rules Committee action, according to a spokeswoman for the House Republican caucus.

A watchdog group called the Association for Government Accountability filed a lawsuit earlier this month that calls for legislators to receive paychecks at the higher salary recently prescribed by an independent panel. The panel was established by a constitutional amendment passed last fall. But House Speaker Kurt Daudt chose not to follow its recommendations, and no money was allocated in the final budget for the pay raises.

Minnesota Management and Budget Commissioner Myron Frans, another defendant in the case, is represented by the state attorney general. The state Senate is relying on its staff attorney.

The Legislature is also paying another outside law firm for representation in its legal challenge of Dayton’s line-item vetoes of the House and Senate operating budgets. The Kelley, Wolter & Scott firm is representing the House and Senate in that matter. Principal attorney Doug Kelley will charge a discounted hourly rate of $325.

Dayton hired former Minnesota Supreme Court Justice Sam Hanson of the Briggs and Morgan firm to represent him in the case. Hanson will be paid an hourly rate of $506.25, which is a 25 percent discount.

Hearings on both matters are scheduled Monday in Ramsey County District Court.


Updated at 5:45 p.m. to correct how lawmakers paychecks affected

The Minnesota Legislature would begin shutting down operations in late July — with hundreds of staff members sidelined in two waves — if funding for the House and Senate is choked off, lawyers write in documents filed Thursday in a lawsuit seeking to nullify Gov. Mark Dayton’s line item veto.

The filing provides the first detailed look at how the Legislature would deal with fallout from the veto of operating funds for the House and Senate if lawmakers aren’t successful in getting a court to overturn Dayton’s action. A Ramsey County District Court judge is set to hear arguments Monday on whether to issue a restraining order or otherwise block the veto from taking force.

“The governor’s vetoes will wreak significant and widespread financial harm upon the Legislature and the state as a whole. Employees will be furloughed and later terminated; the Senate will default on its lease payments for the Minnesota Senate Building; and the state’s credit rating will likely be downgraded ‘several notches’ as a result,” wrote Doug Kelley, the attorney hired by the Legislature to challenge the veto.

Dayton’s legal team, led by former state Supreme Court Justice Sam Hanson, had its own filings Thursday that defended his veto and sought a deep look at House and Senate finances to determine what are critical expenses to operate those chambers in the absence of a full funding agreement.

“If plaintiffs are unwilling to reach an agreement with the governor on appropriations, the Minnesota Constitution does not entitle them to obtain an appropriation, but only to receive, by court order, the minimum funding strictly necessary to perform the Senate and House’s critical, core functions, if and when that funding ever becomes necessary,” Hanson wrote.

Lawyers for the Legislature painted a grim picture.

The Senate, which has about $3.9 million in reserve, would be the first to furlough staff members. That would happen on July 28, putting all but three of the Senate’s 205 staff members out of work. They would continue to have the employer portion of health costs paid but wouldn’t receive a paycheck. Full layoffs would occur months later, but that would force the state to pay out accrued time off to those affected.

In the House, furloughs would hit on Sept. 1, affecting 213 of the 232 permanent staff. At the end of October, layoffs would commence. The House expects to have $11.3 million in available money on July 1.

Paychecks for lawmakers would continue until July 31 in the Senate, although travel and other expense allowances would cease sooner. House members would see their paychecks halted after Aug. 31 and wouldn’t be able to collect expenses beginning in July.

Republican legislative leaders contend Dayton exceeded his authority when he struck down funding for the House and Senate while signing the rest of a state budget. At the time, Dayton said it was a response to a measure the Legislature passed that make funding for the Department of Revenue conditional on him signing a separate tax-cut measure.

The DFL governor said he would call lawmakers back into special session to approve a new legislative budget but only if they agreed to other concessions.

Kelley’s court filing said Dayton’s motive for his line-item veto was impure and therefore the veto is null and void. Kelley cited sections of the constitution that indicate the governor’s veto power applies to items he objects to. Kelley said Dayton didn’t take issue with the funding amounts themselves and actually supported similar levels in his own recommendations.

“Once one recognizes that ‘objecting’ is a core requirement of the use of the constitutional veto power, it is clear that Governor Dayton’s use of the power here, where he has no objection to the appropriations at issue, exceeds the constitutional limits of the power and must be voided by the court,” Kelley wrote.

Hanson pushed back on that notion in his court brief.

“The governor has explicit and unqualified authority under the Minnesota Constitution to line-item veto any item of appropriation,” he wrote, adding later, “The Minnesota Constitution authorizes the governor’s line-item vetoes, without any qualification as to the governor’s subjective intent or purpose. “

All three of the Wall Street agencies that make credit determinations for states have now weighed in on the budget fight between DFL Gov. Mark Dayton and the Republican-led Legislature, with two saying there’s no reason for alarm and a third putting the state on notice.

Moody’s Investors Service delivered its verdict on Wednesday in a statement first provided to The Bond Buyer and relayed Thursday to MPR News. Genevieve Nolan, a Moody’s vice president and lead analyst for Minnesota ratings, said the state’s strong economy and finances have already been balanced against its “idiosyncratic budget problems” of recent years.

“The state has many tools available to ensure debt service is paid on time and in full,” she said. “We expect it will continue to adhere to the sound financial management practices while resolving the funding plan for the state House and Senate.”

Dayton’s line-item veto of House and Senate operating budgets has caused doubt about whether lease payments will be made on a Senate office building. Those funds feed into an account used to make twice-yearly debt payments, with the next due in December.

As a result, S&P Global Ratings said last week that it was putting Minnesota on credit watch. Fitch Ratings decided this week it wouldn’t make any moves on Minnesota’s status for now.

The ratings determine how much the state is charged in interest when it borrows for construction projects. Minnesota has a near-perfect credit rating.

Both S&P and Fitch suggested the Department of Administration could use other funding sources to pay the debt, although administration officials haven’t said if they concur with that assessment in response to multiple requests from MPR News.

Asked about that Wednesday, Dayton didn’t address that either other than to say he believes S&P acted hastily.

“My belief is that these matters will be resolved by the judiciary one way or another. I can’t say exact timeline but certainly well before December,” Dayton said. “I do not believe the bonds are at any risk whatsoever. Minnesota, to my knowledge, has never defaulted on bonds. We do not intend to default on these, and we will not do so.

The validity of Dayton’s line-item veto is the source of a lawsuit that is set for its first hearing Monday in Ramsey County District Court.