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Otto v. Wright County

Supreme Court of Minnesota

April 18, 2018

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

          Court of Appeals Office of Appellate Courts

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

          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 Roche, John T. Kelly, Assistant County Attorneys, Saint Paul, Minnesota, for respondent Ramsey County.

          William Z. Pentelovitch, Michael C. McCarthy, Melissa Muro LaMere, Maslon LLP, Minneapolis, Minnesota; and Teresa J. Nelson, John B. Gordon, American Civil Liberties Union of Minnesota Foundation, Saint Paul, Minnesota, for amici curiae American Civil Liberties Union of Minnesota, et al.

          Erick G. Kaardal, Mohrman, Kaardal & Erickson, P.A., Minneapolis, Minnesota, for amicus curiae Association for Government Accountability.

          Kenneth H. Bayliss, Quinlivan & Hughes, P.A., Saint Cloud, Minnesota, for amicus curiae Association of Minnesota Counties.

          Adam W. Hansen, Apollo Law LLC, Minneapolis, Minnesota; and Jenifer Schaye, General Counsel, Louisiana Legislative Auditor, Baton Rouge, Louisiana, for amicus curiae Daryl G. Purpera, Louisiana Legislative Auditor.

         SYLLABUS

         1. Because the State Auditor retains significant duties and responsibilities in connection with audits of Minnesota counties, Minnesota Statutes § 6.481 (2016) does not violate the Separation of Powers Clause, Minn. Const. art. III, § 1.

         2. Because the duties of the State Auditor are germane to the operation of state government, the Legislature did not violate the Single Subject Clause, Minn. Const. art. IV, § 17, in enacting Minnesota Statutes § 6.481.

          OPINION

          GILDEA, CHIEF JUSTICE.

         In 2015, a new statute was enacted that governs the State Auditor's responsibilities over audits of Minnesota counties. The new statute allows counties to "choose to have the [required] audit" performed by either a Certified Public Accounting (CPA) firm or the State Auditor. Minn. Stat. § 6.481, subd. 2 (2016). The State Auditor contends that the new statute violates the Separation of Powers Clause, Minn. Const. art. III, § 1, and the Single Subject Clause, Minn. Const. art. IV, § 17. The district court held that the legislative modification of the State Auditor's duties is constitutional, and the court of appeals affirmed. Because we conclude that the legislative amendments to the State Auditor's county-audit responsibilities do not violate either constitutional provision, we affirm.

         FACTS

         Rebecca Otto is the eighteenth State Auditor of Minnesota, an executive department office that Article V of the Minnesota Constitution established. Minn. Const. art. V, § 1. With the exception of the Governor, Article V does not expressly detail the duties of the constitutional executive officers. The duties of the State Auditor are instead "prescribed by law." Minn. Const. art. V, § 4 ("The duties . . . of the executive officers shall be prescribed by law.").

         The State Auditor "superintend[s] and manage[s] the fiscal concerns of the state, " Minn. Stat. § 6.01 (2016). Since Minnesota's territorial days, this responsibility has encompassed some oversight of county finances. See, e.g., Minn. Rev. Stat. (Terr.) ch. 4, art. I, § 6 (1851) (requiring the Territorial Auditor to "keep an account" with the counties in the territory that "correspond[ed] with the . . . territorial tax . . . to be levied in such counties"). When Minnesota came into the Union in 1858, the State Auditor's duties included the responsibility for "fair and accurate records of all . . . public accounts." Minn. Gen. Stat. ch. 5, § 27 (1858).

         By 1878, the Public Examiner, an executive department office originally unrelated to the State Auditor, was responsible for examining and verifying county finances. Minn. Gen. Stat. ch. 6, § 91 (1878). After state statutes restructured the Public Examiner's duties in 1973, the State Auditor assumed the responsibility to "visit . . . each county and make a thorough examination" of the county's records relating "to the receipt and disbursement" of public funds.[1]

         In addition to duties and responsibilities concerning county finances, the State Auditor's responsibility for managing the "fiscal concerns of the State" includes audits of cities and other governmental entities; prescribing accounting and budgeting systems for all political subdivisions; examining the books of contractors, municipal hospitals, and county nursing homes, as needed; and other miscellaneous duties. Minn. Stat. §§ 6.01-.91 (2016).

         Since at least 2003, the statute that requires an audit of county finances has allowed a private certified public accountant to examine county accounts and records. See Minn. Stat. § 6.48 (2004) (stating that the State Auditor may require additional information when "the audit is performed by a private certified public accountant").[2] If an audit is performed by a private CPA firm, the State Auditor may "require additional information from the private certified public accountant, " "accept the audit, " or "make additional examinations" as the state auditor deems to be in the public interest. Id.

         As the undisputed facts show, every 3 years the State Auditor identifies which counties will be audited by the State Auditor's office, and which counties must hire a private CPA firm for their annual audit. For example, during the State Auditor's last cycle of audits before the 2015 legislation at issue here, the State Auditor audited 59 counties and directed 28 counties to retain private CPA firms. In all cases in which the State Auditor directed a county to use a private CPA firm, she had the authority to determine whether to require additional information from the firm, accept the firm's audit, or make her own examination. See Minn. Stat. § 6.48 (2014).

         In May 2015, the Minnesota Legislature passed, and Governor Dayton signed into law, S.F. No. 888, the State Government Finance Omnibus Bill. Act of May 23, 2015, ch. 77, 2015 Minn. Laws 1373. Article 2 of this bill included several provisions "relating to the operation of state government, " id. at 1373, 1389. As it relates to the State Auditor, the 2015 legislation repealed Minn. Stat. § 6.48 (2014), and in its place, codified a new statute, section 6.481. Act of May 23, 2015, ch. 77, art. 2, §§ 3, 88, 2015 Minn. Laws 1373, 1390-91, 1432. The 2015 legislation made two amendments that are relevant to the claims at issue here. First, the new statute altered the permissive annual county audit, imposing instead a required annual county audit. Compare Minn. Stat. § 6.48 (2014) ("At least once in each year . . . the state auditor may visit . . . each county and make a thorough examination of all accounts and records . . . ." (emphasis added)), with Minn. Stat. § 6.481, subd. 2 (2016) ("A county must have an annual financial audit." (emphasis added)). Second, the legislation specifically allows counties to decide who will conduct the required audit: either a private CPA firm or the State Auditor. Minn. Stat. § 6.481, subd. 2 ("A county may choose to have the [required annual] audit performed by the state auditor, or may choose to have the audit performed by a CPA firm . . . ."). Section 6.481 became effective on August 1, 2016. Act of May 23, 2015, ch. 77, art. 2, § 3, 2015 Minn. Laws 1373, 1391.

         Following the enactment of section 6.481, the State Auditor notified 61 counties that her office would conduct the audits for the next 3-year cycle. With the notices, the State Auditor also included proposed 3-year contracts for the State Auditor's auditing services. Fifty counties, including Wright, Becker, and Ramsey Counties, refused to sign the contracts. Wright and Becker Counties notified the State Auditor that they intended to use a private CPA firm for the ...


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