Dayton provided severance to appointees who resigned

Update: Sept. 21, 2016

When Katie Clark Sieben announced in April she was resigning as commissioner of the Minnesota Department of Employment and Economic Development, her boss, Gov. Mark Dayton, praised her "tremendous talent" and said she would be a "contributing leader of this community for many years to come."

He also quietly authorized a $33,750 severance payment to Sieben on top of the $10,490 in unused vacation and sick time Sieben cashed out when she left her position.

It was the third time Dayton had provided for severance pay for a top outgoing official, a practice that is a departure from his predecessor, Republican Tim Pawlenty, and has raised a question whether he has the budget authority to deliver such payouts.

"It looks and smells fishy," said Minnesota House Speaker Kurt Daudt, R-Crown. "We think the governor should explain why he's doing this. If there were circumstances that required that, I think he should disclose that."

Dayton officials say the payments were appropriate and allowed by law. But Dayton's decision to pay severance to commissioners seems to run counter to criticism Dayton made in the past about severance payouts to public employees.

In 2012, Dayton approved a $27,097 severance to Mark Phillips, a previous commissioner of the Department of Employment and Economic Development. Dayton also authorized an $18,064 severance to Sheila Wright, who served as Director of Higher Education Services for eight months in 2011.

High-ranking officials like Sieben, Phillips and Wright typically take top jobs knowing they entail the possibility that they could be fired or be asked to resign at any moment.

Payout equaled three months' pay

The Dayton Administration wouldn't clarify whether the three appointees resigned voluntarily or were asked to resign, although Myron Frans, Minnesota Management and Budget Commissioner, confirmed the three resigned.

It isn't clear why Sieben, Phillips and Wright were given a severance. Eight other commissioners who also left voluntarily during Dayton's time in office didn't receive severance pay.

Sieben, who served as Employment and Economic Development Commissioner from October 2012 through April 2016, declined an interview request. She issued a written statement saying she stepped down from her role after conversations with Dayton and Dayton's chief of staff, Jaime Tincher.

"The time had come for me to pursue something different, a new opportunity," Sieben wrote. "It was not an easy decision, but it is a decision we made together."

In each of the three cases, the severance payment was equal to three months of the officials' salaries, according to the governor's office. Sieben's severance was more than what some clerical workers and service employees at DEED earn in a year. Her annual salary was $135,000.

Phillips, who preceded Sieben at DEED, said he and Dayton mutually agreed that he should resign his position. After his resignation, Phillips said he was told he would receive three months' severance even though he never asked for it. Phillips said he thought the severance was routine, especially since commissioners take a big risk when joining an administration.

"I left a really good job to be appointed DEED Commissioner," Phillips said. "It seemed fairly reasonable or modest for me to re-enter the workforce to have 90 days (severance) to do that."

Phillips eventually found a job in the private sector but later rejoined the Dayton Administration. In 2015, Dayton appointed Phillips to head the Iron Range Resources and Rehabilitation Board.

Wright, who left the Dayton Administration in 2011, did not return messages to discuss her compensation. At the time of her departure, Wright also announced she was resigning her position.

State finance officials say the severance payouts were consistent with the law and were managed through existing department budgets.

That worries Rep. Sarah Anderson, R-Plymouth, chairwoman of the House State Government Finance Committee. She said she's never heard of political appointees receiving a severance. She said the Legislature appropriated money to the agencies for programming, not severance packages for commissioners who voluntarily leave their positions. She said Dayton's decision to offer severance to the three violates the trust of the taxpayer.

"They are not expecting their tax dollars to be a buyout for you," Anderson said. "They're expecting that money to go to the programming that is part of that agency. And my question is 'Where did this money come from?'"

Anderson said she'll push to limit severance packages for political appointees in the next legislative session.

A spokeswoman for the DFL Senate Majority said Senate Majority Leader Tom Bakk and Senate State Governments and Veterans Budget Division Chair Tom Saxhaug, DFL-Grand Rapids, said the two legislators would not comment on Dayton's decision to offer severance to political appointees.

Dayton Administration defends the practice

Frans said state law gives Dayton the authority to authorize severance payouts. Frans, who is appointed by the governor, said statute allows for governments to give highly compensated employees who earn 60 percent or more of the governor's salary a severance of no more than six month's pay.

Anderson and Daudt said the law Frans cited was designed to cap severance pay for public employees, not authorize it. They also said the Legislature never authorized the money for the governor's office to grant severance payouts.

Frans said offering severance is quite common in the private sector but is used on a limited basis in state government. He said Dayton authorized three severance payouts during his term as governor despite roughly 1,000 workers being eligible for it. "In these particular cases, the governor made a decision to use his discretion to make these payments and you'd have to talk to him to get those reasons," Frans said.

Linden Zakula, a spokesman for Dayton, declined a request to interview Dayton or Tincher. Instead, Zakula issued a written statement saying the governor made the decision to offer severance to Sieben, Phillips and Wright because, "in his judgment the circumstances justified those severances."

State finance officials say former Republican Gov. Tim Pawlenty did not offer severance to any political appointees during his eight years in office. Keith Hovis, a spokesman for Minnesota Management and Budget, said information on governors preceding Pawlenty was not readily available.

Dayton shifts stance on severance agreements for public employees

The law limiting payments that the Dayton Administration cited as the basis for the governor's action was passed in 1993 after he lobbied for it as state auditor. In 1992 and 1993, Dayton held news conferences in Duluth, St. Paul and Minneapolis criticizing severance payouts to public officials. At an event in Minneapolis, he called on the Minneapolis School Board to rescind severance agreements to two executives.

At a Senate legislative hearing in 1993, Dayton also lobbied the Legislature to cap severance for public employees. He complained the packages, which ranged from $30,000 to more than $200,000, were excessive.

"I think the overwhelming number of citizens who can't be here tonight, whose tax dollars go to pay these salaries, and whose trust in government is seriously eroded when they see these kinds of benefits that they can't even dream about, compels this kind of measure," Dayton said during testimony before the Minnesota Senate Government Operations Committee on March 31, 1993.

Zakula didn't explain the apparent shift in Dayton's position on severance for public employees. Zakula focused on the length and dollar value of the severance.

"Gov. Dayton's statements while state auditor over 20 years ago, criticized particular local governments' severance packages, which in some cases exceeded full year's salaries, and he questioned potential conflicts of interest regarding the negotiations of certain severance packages."

Dayton sparred with legislators from both parties last year over his decision to increase their salaries. Lawmakers eventually relented, allowing Dayton a one-day window to increase commissioner pay between 20 and 30 percent. Lawmakers heavily criticized Dayton for the pay hikes. Dayton maintained the pay hikes were needed to attract top talent to serve in state government.

Update: Sept. 21, 2016

Anderson said Tuesday she wants the governor to ask the former commissioners to pay the money back. "If we're not able to get them to rescind the payments and do it that way then the governor better find the money within his own budget and within his own budget in his office," she said.

Zakula responded that it wasn't clear the state could legally collect severance already paid out.

Dayton defended the payouts Tuesday, saying they were the right thing to do. "People will have to decide whether they can trust my judgment or not," he said.