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Otto v. Wright County

Court of Appeals of Minnesota

May 30, 2017

Rebecca Otto, in her official capacity as State Auditor of the State of Minnesota, Appellant,
v.
Wright County, et al., Respondents, Ramsey County, Respondent.

         Ramsey County District Court File No. 62-CV-16-606

          Joseph T. Dixon, Joseph J. Cassioppi, Pari I. McGarraugh, Fredrikson & Byron, P.A., Minneapolis, Minnesota (for appellant/cross-respondent Rebecca Otto)

          Scott T. Anderson, John P. Edison, Elizabeth J. Vieira, Rupp, Anderson, Squires & Waldspurger, P.A., Minneapolis, Minnesota (for respondents/cross-appellants Wright County and Becker County)

          John J. Choi, Ramsey County Attorney, Robert B. Roche, Assistant County Attorney, John T. Kelly, First Assistant County Attorney, St. Paul, Minnesota (for respondent/cross-appellant Ramsey County)

          William Z. Pentelovitch, Michael C. McCarthy, Melissa Muro LaMere, Maslon LLP, Minneapolis, Minnesota; and Teresa J. Nelson, American Civil Liberties Union of Minnesota, St. Paul, Minnesota (for Amici Curiae American Civil Liberties Union of Minnesota, Professor David Schultz, Growth & Justice, Honorable Jack Davies, and Jewish Community Action)

          Erick G. Kaardal, Mohrman, Kaardal & Erickson, P.A., Minneapolis, Minnesota (for Amicus Curiae Association for Government Accountability)

          Considered and decided by Bjorkman, Presiding Judge; Cleary, Chief Judge; and Peterson, Judge.

         SYLLABUS

         1. Minn. Stat. § 6.481 (2016) does not violate the separation-of-powers requirements of Minn. Const. art. III, § 1.

         2. The Minnesota Legislature did not violate the Single Subject Clause of the Minnesota Constitution by passing Minn. Stat. § 6.481 as part of the State Government Finance Omnibus Bill.

          OPINION

          BJORKMAN, Judge

         This appeal is taken from a summary-judgment ruling rejecting the constitutional challenge to Minn. Stat. § 6.481, which requires counties to have an annual financial audit and permits counties to hire private certified public accounting (CPA) firms to conduct the audits. State Auditor Rebecca Otto contends that the statute violates the Minnesota Constitution by removing a core function from her office and that the underlying session law was adopted in violation of the Single Subject Clause of the Minnesota Constitution. In a related appeal, Ramsey County asserts that the claims against it are not justiciable. We affirm.

         FACTS

         Appellant/cross-respondent Rebecca Otto is the Minnesota State Auditor, a constitutional officer serving her third four-year term. A primary function of the Office of the State Auditor (OSA) is conducting and overseeing annual audits of Minnesota's 87 counties, including respondents/cross-appellants Wright County, Becker County, and Ramsey County. According to the state auditor, 64% of the OSA employees spend their time auditing counties or otherwise supporting the OSA's county-audit function. And the OSA reviews the annual use by Minnesota counties of more than $6 billion of federal, state, and local tax dollars.[1]

         In recent decades, the OSA has permitted some counties to hire private CPA firms to conduct their audits. Because of its size and large hospital operation, Hennepin County has been permitted to retain private auditors since 1970. Starting in 2003, in response to funding cuts, the OSA allowed other counties to hire private CPA firms. The OSA determined which counties to audit (and which would be permitted to have private firms) on a three-year cycle. During the 2012-14 cycle, the OSA audited 59 counties and permitted 28 to obtain private audits, subject to the OSA review. The OSA retained the ultimate authority over the auditing function, including the authority to determine whether an audit is adequate.

         In May 2015, the Minnesota Legislature passed, and Governor Dayton signed into law, S.F. 888, the State Government Finance Omnibus Bill. See 2015 Minn. Laws. ch. 77, at 1373-1449 (chapter 77). In addition to authorizing appropriations for state government, chapter 77 included provisions requiring counties to undergo annual audits and authorizing counties to choose whether to have the OSA or a private CPA firm perform these audits. See 2015 Minn. Laws ch. 77, art. 2, § 3, at 1390. These new provisions were codified at Minn. Stat. § 6.481 (the county audit statute) and became effective on August 1, 2016. Chapter 77 repealed a predecessor statute governing county audits, Minn. Stat. § 6.48 (2014). See 2015 Minn. Laws ch. 77, art. 2, § 88(b), at 1432 (repealer).

         Following passage of the county audit statute, the OSA sent notices to counties regarding the 2015-17 audit cycle, advising 61 counties that the OSA would conduct their audits. For the first time, the OSA sent out three-year contracts with the notices. Citing the new county audit statute, numerous counties, including respondents, refused to commit to a three-year contract with the OSA. Wright and Becker Counties notified the OSA of their intent to hire private CPA firms, but ultimately allowed the OSA to conduct their 2015 audits. Ramsey County did not state an intent to hire a private CPA firm, but declined to sign a three-year contract, preferring a year-to-year approach due to concerns about rising costs of the OSA-conducted audits if more counties elected to use private CPA firms.

         In February 2016, the state auditor commenced a declaratory-judgment action against Wright, Becker, and Ramsey Counties.[2] The state auditor sought declarations that the county audit statute must be interpreted consistent with the state auditor's exercise of her core function of auditing counties, and, if it cannot be so interpreted, that it violates Minn. Const. art. III, § 1, and art. V, § 1; and that the county audit statute is void because it was enacted as part of chapter 77, which combined multiple dissimilar subjects in violation of Minn. Const. art. IV, § 17 (the Single Subject Clause).

         After the district court denied the counties' motions to dismiss on justiciability grounds, the state auditor moved for summary judgment. The district court granted in part and denied in part that motion, ruling that auditing counties is a core function of the OSA but that the county audit statute permissibly modifies that function, and ruling that chapter 77 does not violate the Single Subject Clause because the various topics of the session law are connected by the common thread of state government operations.

         The state auditor appealed, and the counties filed notices of related appeals- Ramsey County as to the district court's denial of its motion to dismiss on justiciability grounds and Wright and Becker Counties as to the district court's determination that auditing counties is a core function of the OSA.[3]

         ISSUES

I. Does the county audit statute violate the Minnesota Constitution by removing core functions from the state auditor?
II. Did the Minnesota Legislature violate the Single Subject Clause of the Minnesota Constitution by including the county audit statute in chapter 77?
III. Are the state auditor's claims against Ramsey County justiciable?

         ANALYSIS

         In an appeal from summary judgment involving no dispute of material fact, this court reviews whether the district court erred in its application of the law. Associated Builders & Contractors v. Ventura, 610 N.W.2d 293, 298 (Minn. 2000). We review de novo the constitutionality of statutes, "proceed[ing] on the presumption that Minnesota statutes are constitutional and that our power to declare a statute unconstitutional should be exercised with extreme caution." Id. at 298-99. A party challenging the constitutionality of a statute "must meet the very heavy burden of demonstrating beyond a reasonable doubt that the statute is unconstitutional." Id. at 299.

         DECISION

         I.The county audit statute does not violate article III of the ...


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