The 2018 session of the Minnesota Legislature was a failure. But whose failure was it?

Gov. Mark Dayton did what he threatened to do. He just did it sooner than expected.

On Wednesday, just three days after receiving the two bills that contained most of the work product of the 2018 Minnesota legislative session — a tax conformity bill and an omnibus budget bill — the DFL governor announced that he had vetoed the measures.

“I said all this before,” Dayton said as he began his press conference to announce the move. His reasoning: both bills were too big; they included policy that shouldn’t be in them; and they didn’t address his priorities in ways he wanted them addressed, in that the tax bill helped the rich more than the poor and that the Legislature’s response to the emergency school funding proposal Dayton had requested was a sham.

And while Dayton said he regrets that many people in the state would have benefited from items in the bills won’t get the help they need, he also said the Legislature left him no choice. “This failure is their responsibility,” Dayton said. “I know they won’t take responsibility for it, but it’s theirs.”

Asked about Minnesotans who see this as a governmental failure, not just a legislative failure, Dayton who is not seeking another term quipped: “They don’t have to vote for me.”

He then said it is a failure of his and a failure of the Legislature before noting something he’s said before: that this session was worse than previous sessions that had similar political distribution of power. “Divided government has not worked well for Minnesota but it’s worked better than it did this time.”

‘I’m embarrassed by this governor’

Republican leaders’ reaction to the vetoes was equal parts anger and surprise. “I’m angry. I’m deeply disappointed,” said Senate Majority Leader Paul Gazelka, R-Nisswa, who said he had a meeting scheduled later Wednesday to talk with Dayton.

“In the end, it feels impulsive. It feels vindictive. And it didn’t help anybody in Minnesota,” Gazelka said. “I was hoping he would take that extra time even to just let the emotions of this whole conflict settle down a bit. There’s a lot of punching and counter punching. It is the way it happens in divided government. And then you get to the end and the dust settles and you sit back a little bit and you look at the bills and you look at who does this help and who does this hurt — not who wins and who loses.”

House Speaker Kurt Daudt, R-Crown, said he was “extremely disappointed” in the governor’s decisions. “There are a lot of people who are going to be hurt by this,” Daudt said. “It’s a staggering list of people. I’m not even going to read it. I think everyone is going to ask why? I’m actually to the point where I’m embarrassed by this governor.”

Daudt said he would not ask Dayton to call a special session — something the governor has already ruled out — but said he’d show up if one is called. “The people who are hurt need to ask him,” Daudt said.

House Speaker Kurt Daudt: “There are a lot of people who are going to be hurt by this.”
Daudt dismissed suggestions that House and Senate leaders forced Dayton’s hand by putting many provisions into just two bills. He said they’d tried to send the governor stand-alone bills, such as one that provided cash to private deputy registrars hurt by the failed computer system of the state licensing agency, MNLARS. That one was too small, Daudt said the Legislature was told, because it didn’t also include more money to fix the system.

Yes, Dayton had said it all before. Repeatedly. But driven either by politics or unbridled optimism, GOP leadership kept saying they thought that, in the end, the governor would sign them after all; that there was enough there that the governor liked. And Daudt and Gazelka repeated how they had removed dozens of items from both bills that Dayton wanted removed.

“In the end, part of it was about running out of time, and part of it was we wanted a bill that had so many good things in it — with a few minor policy provisions, when you look at them — that we thought he’d sign it,” Gazelka said.

“I really thought that when he looked at what was in these bills that he would sign them. But he didn’t look. He had his mind made up,” Daudt said.

Now, the only hope left for legislators to claim an accomplishment is the bonding bill, which pays for repairs and new construction for state, local and non-profit facilities. Dayton said he will act on that and the other remaining bills by Friday.

Much more than budget and tax bills

The shorthand for the two bills Dayton vetoed — the budget and tax bills — contained much more than their name suggests. The budget measure, also known as the mega-omnibus bill, appropriated only about $150 million in new spending on top of the $46 billion two-year state budget adopted last year. Much of the bulk was the contents of dozens of policy bills that didn’t come to a vote separately but were set aside for inclusion in what became a 989-page, three-inch thick document.

The tax conformity bill was intended to reconcile Minnesota’s income tax code with changes made in Congress late last year. Absent such changes, many state taxpayers will likely pay more, while tax filing will also be made more complex. But the bill contained more than just conformity measures, including many other tax related provisions. After Dayton vetoed a nearly identical tax bill a week ago, the House and Senate GOP included their version of emergency school funding in the same bill.

Over the weekend, Dayton said he expected to take most of the 14 days allowed by the state constitution to review the bills. That contributed to the surprise of Wednesday’s announcement. Dayton said the schedule changed because of a campaign by Republicans to build pressure from groups they said benefited from the bills.

Most of those gatherings were done in or around the Capitol. One, which was to feature disabled residents and their caregivers, was scheduled for later Wednesday. “I noticed there was posturing going on outside about how I could be persuaded,” Dayton said. “Legislators could have persuaded me last week if they’d been willing to engage in serious negotiations.”

Senate Majority Leader Paul Gazelka: “I’m angry. I’m deeply disappointed.”
In addition to blaming Republicans, Dayton blamed politics. “This session was never about working out agreements with me,” he said. “It was about laying out a re-election template and the money to carry it out.”

In addition to blaming Dayton, Senate and House Republican leaders blamed politics. “Minnesotans will be hurt because he chose politics over people,” Daudt said. “The reality is the governor was never going to sign these bills.”

So apparently it’s about politics.

“That’s what he wanted to create in an election year, that somehow this session was a failure,” Daudt said.

So if both sides’ rhetoric is to be believed, neither the governor nor the GOP legislative leaders ever intended for anything of substance to be passed into law this session. It was all a rather long and expensive prelude to the fall campaign season, when a new governor will be elected and party control of the House will be decided.

‘This is not normal’

Reaction to Dayton’s session-gutting act depended almost exclusively on which political tribe one belonged to.

It was hard to find Republicans who would say that Republicans might have egged Dayton on by ladling so much into two giant bills. The calculation was this year — as in past years — that the best way to GOP priorities signed was to combine them in a bill that contained stuff Dayton both wanted or needed.

The tax bill, for example, included cash and fund shifts to produce up to $225 million for school districts facing budget and staff cuts. Meanwhile, the mega-omnibus included money for opioid education and treatment; changes to the oversight of elder care facilities; money for deputy registrars; and money for school safety improvements.

If you want those items, the GOP seemed to be telling Dayton, sign both bills so we get some things we want.

Dayton has long complained about such tactics. But it has worked before, and recently. In 2017, he was forced to accept a passel of spending bills despite disliking much of what had been placed inside them. His resentment over the move was one of the motivations for his line-item veto of the Legislature’s own budget last year — and his demand that they’d need to rethink a half-dozen items he was especially unhappy with if they wanted to money back. It didn’t work out the way he wanted, even if Dayton did win the court battle over the legality of using the Legislature’s budget to pressure action.

It was just as hard — okay, impossible — to find Democrats who would say that the vetoes weren’t worth it, that they will deny Minnesotans of tax relief; force at least 50 school school districts to contemplate teacher layoffs; and deny people who care for the disabled a a pay raise.

“It’s Legislature 101,” said DFL Sen. Susan Kent at a St. Paul Area Chamber of Commerce panel Wednesday. “If you want get your bill passed you’ve got to work with all the stakeholders …. We’ve all watched ‘School House Rock,’” we know how this works.”

“The governor made it very clear,” Kent continued. “He was not going to support the bills that carried things he was not okay with. Our Republican leaders had an opportunity to do things that could get passed, but they chose to take a different path.”

At the same panel, Rep. Matt Dean, a Dellwood Republican who was a candidate for governor before dropping out earlier this year, said the one job of the session was to make the tax fixes, which the government failed to do. “There’s one thing you can’t screw up and this is it. And we didn’t do it,” Dean said. “For that I would like to say I am sorry. And I am sick and tired of trying to pretend that this stuff is normal. Because this is not normal.”

By Peter Callaghan

Erin Hinrichs contributed to the reporting of this story.

What you need to know about Somali money transfers and ‘mysterious bags full of cash’ flying out of MSP airport

Last week, Minnesota’s legislative auditor announced an investigation into allegations that some child care providers are defrauding the state’s Child Care Assistance Program, or CCAP, which subsidizes the child-care expenses of low-income children and is overseen by the Minnesota Department of Human Services.

The investigation was prompted by a report aired by Fox 9, which alleged that the child care providers were illegally obtaining millions of dollars in subsidies by overbilling the state.

The story didn’t stop there, though. It also suggested a connection between the alleged fraud, which centered on child care centers owned and operated by Somali-Americans, and “mysterious suitcases filled with cash” flying out of MSP International Airport by couriers working for money-transfer shops known as hawala. The story’s main source — a former Seattle police detective named Glenn Kerns — alleged that some of that cash was going to areas in Somalia controlled by the al-Shabab terrorist group, which would get a cut of the money. (At least the “bags full of cash” part was similar to a story done by Seattle TV station KING5 two years ago, a report that also relied heavily on Kerns.)

Since it was aired, the story has gotten a lot of attention, notably from Minnesota lawmakers, who proposed legislation seeking to further scrutinize the CCAP and the money-transfer system.

It’s also sparked frustration among members of the Somali community, who accused the report of conflating several issues and tainting the reputation of the community.

Given the long history of the hawala system in Minnesota and its central role in this whole story, it seems worthwhile for people to know a little more it: how it works; where the cash comes from; and why it’s transferred in bags:

OK, first things first: What is hawala and who uses it?
Hawalas are part of a traditional system of informal banking in Muslim communities — the word is derived from the Arabic word for “transfer” — that became popular in Somalia in the early 1990s, after civil war broke out. The war led to the collapse of pretty much all major government institutions, including the banking system.

The war also led hundreds of thousands of people to leave Somalia for other countries, including the United States, Canada, Europe, Australia and the United Arab Emirates. Escaping the war — which decimated much of the country’s economy — didn’t mean severing ties with family they left behind, of course, and the hawala system allowed the people who lived in the U.S. (and other developed countries) to safely get funds to those back in Somalia, and the businesses became popular in cities with large Somali populations. In Minnesota, dozens of such businesses have operated inside Somali malls and halal markets for nearly three decades now. Some of the main locations of these shops today include Minneapolis, St. Paul, Burnsville, St. Cloud and Rochester.

How does the system work, exactly?
Say you want to send $100 to a family member in Mogadishu: First, you need to tell the recipient which company you plan to use. (There are nearly 20 many transfer companies in the Twin Cities). You then need to take your money to the local branch of the business, present a photo ID for it to keep a record of what you send and who receives it, and pay a fee of $6 for each $100 you send. The money reaches Mogadishu within hours. When it does, the recipient gets a text message or a phone call from a local branch notifying him or her to come pick up the money.

How common is the system among Somalis in Minnesota?
Very common. Like many immigrant communities, Somalis in Minnesota tend to have many family members, relatives and friends who still live in Somalia or other lesser developed nations. With the high unemployment rate and the lack of opportunities in some of those countries, Somalis in Minnesota often represent a significant source of income for their relatives. It’s not uncommon for Somalis in Minnesota to send funds on a monthly basis to sustain family members living in other places.

According to a 2013 study from Oxfam American, an international humanitarian organization, the worldwide Somali diaspora sends home about $1.3 billion annually in remittances, with 16 percent of that coming from Somali living in the U.S.

OK, so is it true that people fly out of MSP with suitcases full of cash?
Absolutely, though that wasn’t always the case. Before 2010, there was no need for couriers from the money-transfer companies to transport cash across continents. They simply used mainstream financial institutions — Wells Fargo, US Bank, Sunrise Banks and others — to transfer the money for the hawala.

Today, none of these institutions will work with the money-transfer companies, which has forced owners of these companies to send the only way they can: by carrying cash in suitcases all the way to Dubai or Mogadishu, where most of them are headquartered.

Are they mysterious?
Not really. The system has never been a secret. In fact, the reason we know that the money is there — and how much of it is going through MSP — is because the couriers for the hawala companies have to fill out forms and notify security officials at the airport of exactly how much they are carrying and where it’s going.

Wait, American banks won’t deal with hawala anymore? Why?
In 2010, two Somali-American women in Minnesota were convicted of sending al-Shabab fighters in Somalia $8,600 through the hawala system. In the years that followed the conviction, almost all U.S. banks refused to work with the money-transfer companies because the U.S. government had begun to put more scrutiny on any bank that works with the hawala.

So people can actually use the hawala system to support terrorists?
The money-transfer companies aren’t that different than any other financial institution. They’re international companies serving millions of clients across the world. That means, some people can — and will — try to take advantage to commit wire fraud or provide unlawful financing. That said, the system is actually now more secure than it’s ever been. Shop operators are required to record the personal information of anyone sending money through the system. That wasn’t the case before 2010.

So what is the connection between Somali-owned child care centers and the money transfer companies?
The short answer is: none. But it’s worth noting a couple of things: First, the U.S. government doesn’t know much about the hawala system, even though it’s been around for decades and allows thousands of people across the country to allocate funds to their loved ones. To remedy that, for the past eight years representatives from the money-wire industry have been trying to work with the banks as well as the federal and state governments to find a way to improve the system — to no avail.

Then you have the story of the Somali-owned child care centers. In recent years, these businesses have seen increased scrutiny from federal and state agencies, largely because some of these centers have been, in fact, involved in fraud. Some owners and operators of child care providers have been convicted for stealing government money; others are still under investigation.

That said, there is no evidence directly connecting the money legally flown out of MSP to the money obtained from child care subsidy fraud, let alone connecting that money to terrorism, which is why many in the community are upset with Fox9.


By Ibrahim Hirsi

Childcare fraud, terrorism story spurs lawmaker to call for federal investigation

In the wake of a television news story alleging $200 million in fraud from Minnesota, a local GOP lawmaker is calling for a federal investigation.

State Sen. Carla Nelson, of Rochester, issued a statement Saturday referencing a story by Minneapolis-based KSMP-TV.

“When I heard this report I was appalled. Gov. Dayton allowed $200 million to be stolen from Minnesota taxpayers and be sent to a foreign country and terrorist organization, Al-Shabaab,” stated Nelson in her release. “Gov. Dayton and his administration must be held accountable for their failures that have led to millions of dollars being funneled to an enemy of America.”

Nelson called for a federal investigation into the allegations that Minnesota’s Department of Human Services was duped out of millions for three years by fraudulent child-care facilities, many owned by Somali immigrants.

A former employee of the department and anonymous sources alleged the breach in the story.


By Jeff Kiger

Our View: Crack down on child care assistance fraud

Twin Cities-based KMSP-TV Fox 9 reported last week that state investigators are checking out 10 child care providers for possible fraudulent activity.

The Fox story was thinly sourced and deeply flawed, mixing guesswork about the amount of money involved with speculation that it’s going to terrorists in Somalia, but the basic details about the fraud allegations are troubling.

The state’s Child Care Assistance Program provides $248 million annually to help pay for child care services for low-income Minnesotans. The program provides assistance for 30,000 children to be cared for monthly while parents pursue employment or education.

It’s an important program that helps kids get the care they need while families work toward a better future. It has rigorous income standards for families and extensive requirements for child care providers.

Nonetheless, the program has had problems in the past with fradulent activity, primarily by providers. In 2011, the department formed an Office of Inspector General to focus on fraud prevention and recovery in all state human services programs. A year later, a specialized child care fraud unit was formed. Since then, it has added specialized staff and technology to improve capability.

Since 2011, the Office of Inspector General investigations have completed 49 civil investigations and 13 child care centers have been closed due to fraud investigations. Referrals were made to law enforcement, and six of the 13 cases resulted in felony convictions. Two still are pending.

More than $4.6 million in restitution has been court-ordered from child care centers. Lotsa luck to the state in recovering that money, but at least the convictions and court orders are on the books and lessons may be learned.

Eight centers have been assessed for falsifying attendance records; $284,000 in overpayments have been collected to date.

The Fox 9 story reported that 10 other cases are active, which DHS confirmed, but it went on to imply that as much as $100 million may have been skimmed by those 10 child care centers — most of which are reportedly owned by Somali immigrants — with millions being shipped home to Somalia through Minneapolis-St. Paul International Airport.

The $100 million figure was outlandish on the face of it for a program with an annual budget of $248 million. The Post Bulletin contacted DHS Monday and was told $100 million “is not a credible number for Child Care Assistance Program fraud. We’re concerned about fraud and are aggressively pursuing it, but it’s not at that level.”

The restitution ordered in past cases may be a guide to the level of fraud that is now being investigated.

No amount of fraud is acceptable, especially in a program that’s intended to help children. A Senate committee hearing was hustled up this week in response, and the Legislative Auditor’s office is opening an investigation, which is entirely appropriate.

What’s not appropriate, as Minneapolis Rep. Ilhan Omar, a Somali-American, said in a news release, is “villifying an entire community — as stories like this often do,” for political purposes. “This is a serious crime that should continue to be thoroughly investigated and prosecuted.”

Those investigations, Omar asserted, “wouldn’t be possible without the strong relationships, communication, and shared trust that the Department of Human Services and the Somali community have built over several years working to bring fraud to the surface.”

If more investigators and regulations are needed to root out fraud in the Child Care Assistance Program, let’s get to it — every government program should get that attention. It’s an outrage that one taxpayer dollar is stolen from people who need help. But hyping and politicizing the issue is not helpful.