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Serving Northern St. Louis County, Minnesota

State auditor “investigation” underwhelms

Office’s legal counsel suggests school districts can campaign for referenda, as long as they report spending

Tom Klein
Posted 10/15/14

REGIONAL – An investigation by the Minnesota State Auditor’s Office affirmed a court decision that the St. Louis County School District used misleading and one-sided information to promote …

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State auditor “investigation” underwhelms

Office’s legal counsel suggests school districts can campaign for referenda, as long as they report spending

Posted

REGIONAL – An investigation by the Minnesota State Auditor’s Office affirmed a court decision that the St. Louis County School District used misleading and one-sided information to promote passage of a $78.8 million bond issue.

But the investigation failed to address several other issues raised by petitioners and claimed that districts can use tax dollars to promote passage of a referendum as long as they file the necessary paperwork.

“The auditor’s office is on thin ice on that issue,” said Marshall Helmberger, who drafted the original complaint to the auditor for a citizens group. Petitioners expressed disappointment that the auditor failed to answer many of the questions submitted in their audit request. “We had expected they would look into other key issues that the courts never really addressed, but they failed to do so. It was a weak effort, to say the least,” said Helmberger. Petitioners met with the auditor and her staff prior to the ISD 2142 school board meeting on Tuesday.

Investigation sought

The investigation stemmed from a petition by citizens following the passage of the bond referendum in 2009.

The petition was received by the State Auditor’s Office on Jan. 29, 2010, and alleged that school district officials, board members and consultants from Johnson Controls Inc. had “engaged in an inaccurate and misleading campaign to promote a ballot question authorizing a $78.8 million capital bond.”

Petitioners asked the auditor’s office to examine the district’s records to determine if public dollars and resources were used improperly to promote a “yes” vote for the bond issue.

The investigation was put on hold after a complaint making the same claims was filed with the Office of Administrative Hearings. More than three years later, the case culminated in a landmark decision by the Minnesota Supreme Court, which remanded the case back to the OAH for an evidentiary hearing.

At the end of May, the OAH issued its ruling that the district had promoted a “yes” vote by using outdated and misleading information to sway voters. The district received a reprimand and was ordered to file a report detailing its campaign expenses.

“By stressing only exaggerated benefits of a ‘yes’ vote and then describing only the most extreme negative possibilities of a ‘no’ vote, the district was not providing balanced informational material to its readers; it was advocating for a specific result — the passage of the ballot question,” the OAH three-judge panel stated in its decision.

The auditor’s office cited the court’s ruling in its report and also checked to see if the district had filed the required campaign report. The report had initially been emailed to the OAH, but the office does not accept such mailings. Documents were not properly filed with the OAH until Sept. 23, the report stated.

School Board Chairman Robert Larson said the report contained no surprises. “It was pretty much what we expected and hopefully this ends it and we can focus on educating students,” said Larson after the meeting.

Questions remain

But the legal skirmish is not over yet. While the auditor’s office confirmed the court’s ruling validated petitioners’ allegations that the district promoted passage of the bond referendum, the office failed to address several other significant issues.

Meanwhile, a complaint alleging that the district failed to file a complete accounting of its campaign expenses is pending.

The state auditor’s investigation did not address a series of questions about the integrity of the financial data cited by the district in making its case for the bond referendum. Nor did the investigation determine if the district had exceeded its authority by using tax dollars to promote the referendum.

Instead, Mark Kerr, assistant general counsel for the auditor’s office, claimed that districts can use public funds and resources to promote referenda as long as they file campaign finance reports.

Kerr, who was at Tuesday’s school board meeting along with State Auditor Rebecca Otto and Deputy State Auditor Greg Hierlinger, was asked by board member Troy Swanson if school districts had to remain neutral on ballot issues and could not promote their passage.

Kerr said the court “was unclear about that” but the OAH panel “was clear that if you do promote, then you’re going to have to file the campaign finance report.”

“So you can promote?” asked Swanson.

“If you do, you need to file,” responded Kerr.

The district’s attorney, Steve Knutson, made a similar claim in a press release issued after the OAH’s decision. “Minnesota’s campaign finance and reporting laws do not prohibit a school district from promoting a ballot question or urging the adoption thereof,” the release stated.

While that is accurate for campaign finance and reporting laws, a 1966 opinion by the state’s attorney general determined that a school district had no authority to spend money to promote one side of a bond referendum. School boards could, however, expend a reasonable amount of funds to educate voters of facts pertinent to a ballot question or educational levy referendum.

The Court of Appeals also stated in its ruling on the district’s promotion of the bond referendum that spending public money to promote the referendum was not legal.

“In this case,” wrote the court. “the school board’s expenditures — public funds used to promote the passage of the ballot question by presenting one-sided information on a voter issue — were not authorized by law.”

That difference of opinion could lead to a legal fight for the auditor’s office. Erick Kaardal, who represented the plaintiffs in the referendum dispute with the school district, has already indicated he might take additional action on the issue.

That’s why officials with the Minnesota School Boards Association are continuing to urge school districts to refrain from promotional campaigns to win passage of ballot measures.

“All it would take is one attorney to appeal this and a school district would find itself back in court,” said Greg Abbott, communications director for the MSBA.

Abbott agreed that the recent court rulings have muddied the waters on the issue, and that it will likely take further action to obtain the clarity school districts and organizations like the MSBA are looking for.

“You’re probably going to have to have a state law or a Supreme Court ruling that spells this out,” he said.