District fined over flawed campaign report

ST. PAUL – The St. Louis County School District violated state law by failing to file an accurate and complete report of its campaign expenditures related to a 2009 bond referendum, according to ruling issued on Friday by the Minnesota Office of Administrative Hearings.

The OAH ordered the district to file a revised report by Aug. 15 and also slapped the district with a $200 civil penalty.

Superintendent Steve Sallee said the district would comply with the court’s order and expressed relief that the episode could now be put behind the district.

“We are very pleased with the ruling,” said Sallee. “We finally have some direction from someone with the authority on what else needs to be included in the campaign finance report.”

Sallee said he has no plans to appeal the decision.

School Board Chairman Chet Larson said the district had sought guidance from state agencies on the campaign finance report, “but no one wanted to touch it.” He said the district would have to comply with the court order.

Court case “unnecessary”

Timberjay publisher Marshall Helmberger, who assisted complainants Steve Abrahamson and Tim Kotzian in filing suit against the district, said the court case could have been avoided if the school officials had heeded warnings that the report it was planning to file was inadequate.

Although some board members — most notably Nancy Wall Glowaski and Troy Swanson — had sought to amend the report, other board members and Business Manager Kim Johnson resisted those efforts.

“It’s a mystery to me why the school district opted to go this route,” said Helmberger. “We had informed school officials specifically that they needed to include the cost of the polling, the consultant’s report and the additional work of the public relations firm, and that they needed to list their sources of funding. Had the school district simply done these things, the entire case would have been unnecessary.”

“Now, thousands of dollars in legal fees later, they have a court order telling them to do exactly what we had previously requested,” Helmberger continued, and he urged board members to seek accountability for “some very poor decision-making by school authorities.”

Glowaski shared Helmberger’s concerns over how the district handled the campaign finance report. She said that was part of the reason she could not endorse a recently-approved school board resolution that commended Johnson and challenged some of the allegations in the complaint filed by Abrahamson and Kotzian.

“Part of Kim’s job is to ensure the district files complete legal reports and she failed to do so in this case,” said Glowaski, who further suggested that Johnson should voluntarily pay the fine for the district out of her own pocket. “She’s not living up to her job description.”

Glowaski said if the district had followed the advice of Helmberger and the complainants instead of labeling them as troublemakers, they would have been spared legal expenses, and the embarrassment of the court loss and fine.

“The ugly thing is that the district used money that could have gone for kids on legal costs to do their dirty business,” she said. “We have to be above-board and be willing to admit when we make mistakes.”

Sallee continued to defend the actions of the district and Business Manager Johnson.

He contended that the OAH rejected the majority of the complainants’ claims against the district and quoted the ruling, which stated that “the panel also rejected the complainants’ position that the school district and Mrs. Johnson, in particular, intentionally concealed disbursements and that a referral to the appropriate county attorney for possible criminal sanctions is warranted.” The OAH also rejected the complainants’ request for a substantial penalty, contending that the $200 fine was appropriate punishment.

“The panel instead is persuaded that the school district attempted to comply with the reporting requirements but fell short,” the ruling states. Judges added that the district should review the campaign manual and other campaign finance documents before filing reports in the future. Copies of such materials were provided to the district by Helmberger when he advised officials to amend the report.

In addition, Helmberger contended that complainants never argued that Johnson intentionally concealed information or defied a direct order by the board, but that she had stubbornly resisted efforts to amend the report. “There was evidence in the record, particularly emails, that showed that pretty clearly,” he said.

Report required

The case stemmed from the outcome of a prior case that contended the district did not remain neutral in information it provided to residents and had promoted passage of $78.8 million bond issue.

In May 2014, the OAH ruled that the district had used misleading and inaccurate information to sell the referendum to the public. The district received a reprimand and was ordered to file a campaign finance report.

The district’s initial report claimed campaign expenses totaling $11,142 but later amended the report to bring the total to $12,561.

Complainants argued in their suit that the district failed to account for significant campaign expenditures, including polling conducted in advance of the referendum, a report by the firm of Himle Horner that offered advice on how to promote the referendum and work done by Johnson Controls Inc. on behalf of the referendum.

The district initially claimed it only had to report expenditures related to the cost of producing three newsletters and a single brochure, and later argued in its brief that it didn’t need to report any costs incurred prior to Sept. 14, 2009.

The OAH rejected those arguments, saying the district had to report all campaign-related expenses regardless of whether they were made prior to Sept. 14, 2009.

The ruling stated that “to interpret promotion efforts as narrowly as the school district urges would lead to the unreasonable result where committees would be able to evade reporting requirements by making expenditures, such as printing campaign material, prior to the ballot question being qualified or approved. Such a result would defeat the purpose of campaign financial reporting.”

The panel, however, ruled that complainants hadn’t proven that all $58,000 in communication services provided to the district by Johnson Controls needed to be included in the campaign report, although it acknowledged that the failure was due in part to Johnson Controls’ refusal to provide detailed billings, which complainants had sought to subpoena. Yet the panel dismissed outright the district’s claim that only eight percent of those costs were campaign expenditures. “The percentage is unsupported in the record and lacks any factual basis,” the ruling states.

The panel conceded that it might be difficult for the district to determine how much of the $58,000 should be included in its new report, because Johnson Controls provided little detailed information about how the money from the district was spent.

“However, in the event, the school district is unable to determine how much these particular services cost, the district may consider reporting the entire $58,000 in communication costs as campaign expenditures and report that it is unable to segregate the portion actually expended to activities related to promoting the ballot question.”

The panel also stated that the district staff had apparently spent work time on the campaign effort, and that such in-kind contributions should be reported. But given that the district never tracked the time spent and that so much time had elapsed, the panel excused the district from reporting those expenses. At the same time, it put school districts on notice that such expenses will need to be reported in the future.

Promotion issue

The OAH did not address a request by complainants to determine whether school districts can legally use public tax dollars to promote a referendum.

The issue has been in legal limbo since the State Auditor’s Office suggested it was okay for districts to campaign, provided they file a campaign finance report. That interpretation by the office contradicts a prior opinion issued by Minnesota’s attorney general that prohibited the use of tax dollars to promote a referendum.

The Minnesota School Boards Association is still advising districts to abide by the attorney general’s opinion, but agrees that the interpretation by the State Auditor’s Office has muddied the waters.

In its ruling, the panel stated that “the issue of whether a district may expend public funds to promote passage of a ballot measure is beyond the scope of this hearing and is within the exclusive province of the judicial branch to resolve.”

That likely means the issue will resurface in other courts in the future.