Office of Governor Mark Dayton
130 State Capitol • 75 Rev. Dr. Martin Luther King Jr. Boulevard • Saint Paul, MN 55155
August 29, 2012

Senator Mike Parry Chair Legislative Subcommittee on Employee Relations Room 309, State Capitol Building 75 Rev. Dr. Martin Luther King, Jr. Blvd. St. Paul, Minnesota 55155 Representative Steve Drazkowski Vice Chair Legislative Subcommittee on Employee Relations Room 401, State Office Building 100 Rev. Dr. Martin Luther King, Jr. Blvd. St. Paul, Minnesota 55155 Dear Senator Parry and Representative Drazkowski: My office received your letter, dated yesterday, at 11:30 yesterday morning. It is hard for me to take seriously your request in that letter to meet with me prior to your Subcommittee's meeting tomorrow morning at 8:30, which would effectively require us to meet today. Your Subcommittee's meeting tomorrow was scheduled last week. You could have given me more than a day's notice, if you truly wanted to meet with me. I am not interested in participating in any political theatrics. The legislature has adjourned until next January, barring another emergency situation. Next year's five-month session will provide ample opportunities to discuss any proposed legislative changes, prior to our beginning negotiations over the next two-year contract. The contract under review is the first which my administration has negotiated. It is a responsible agreement and one that is well within the financial parameters established in the four, two-year contracts negotiated by the previous Republican administration, all of which were approved by the legislature. Most of the other issues you raise are embedded in the contracts, which we inherited from the previous administration and previous legislatures. We can find no evidence that either of you publicly criticized the previous Governor for his four agreements. We can find no record that either of you offered amendments on the House or Senate floors to change the laws, rules, or procedures, which you now question. So, why is it that what was acceptable during the eight years of the Pawlenty administration, is now unacceptable under mine? You criticize us for agreeing to a 2% across-the-board increase in members' salaries for the last six months of the two-year contract. State employees have received no salary increases for the past 3&1/2 years. Moreover, 19,000 of them lost wages totaling $65 million during last year's shutdown. This 2% raise for six months does not begin to make up their lost incomes.

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Senator Mike Parry Representative Steve Drazkowski August 29, 2012 Page 2

During the contract years 2006 — 2009, before the state's finances plummeted, Governor Pawlenty's administration agreed to annual, across-the-board wage increases of 2% in 2006, an additional 2% for 2007, 3.5% for 2008, and an additional 3.5% in 2009. The legislature approved all four increases by overwhelming bi-partisan margins. Furthermore, as with previous contracts, this one would not cost Minnesota taxpayers one additional dollar. In July 2011, the legislature set state agencies' budgets for the two years of this contract, and those budgets would not change, if this agreement were approved. The agencies would be required to pay for the six months of salary increases from within their existing budgets. In this new contract, we negotiated the first increase in state employees' payments for their health care since 2008. They would pay almost $8 million more this year and every year thereafter. If, however, your Subcommittee rejects the contracts, those savings to the state will be lost. Your criticism of us for not revising the state's system of step increases again begs the question: where were you during the previous eight years? I am told by MMB that steps were enacted into state law by the legislature in the 1960s. When collective bargaining began in 1973, that system was incorporated into state contracts. In the following 39 years of collective bargaining, steps have been withheld only once, in FY 2009. However, they were restored by the previous administration with the concurrence of the legislature for FY 2010, the year leading into this contract. Again, where were the legislative proposals for "reform" (your word) during that time? I am told that the rationale for steps, which have now been in existence for nearly 50 years under Republican, Independent, and Democratic governors and legislatures, was that every year new employees work, they gain knowledge and experience which make them more valuable to the organization. Step increases are meant to reflect this increase in employee value. However, when employees reach the top of the salary range for their jobs, their step increases stop. Thus, contrary to some accusations, the step system does not reward long-term seniority. It actually applies to new employees in their first few years of employment. Regarding "pay for performance," my Chief of Staff, Ms. Tina Smith, is responsible for re-establishing such a system within state government, something that was largely ignored by the previous administration (again without any evidence of legislative criticism). We have begun with a performance award system. The awards are: • Tied to the performance of employees — not a broad payout to most or all employees. • Linked to our efforts to improve management for outcomes and results, and encouraging managers to provide better, more immediate feedback to employees. • Paid for out of agencies' existing budgets. • For all employees except AFSCME, whose previously negotiated contract expressly precludes performance awards for their members.

Senator Mike Parry Representative Steve Drazkowski August 29, 2012 Page 3

A crucial foundation for linking compensation to performance is to have a functioning employee evaluation system in place — something which did not exist when we arrived. We are requiring our department heads to ensure that all of their employees receive timely performance evaluations. Again, we are open to legislative suggestions for improving this system, which, I repeat, did not exist when I took office. In that light, I find it hard to fathom how my administration can now be criticized for our supposed "lack of reform," when, in fact, we have begun the first reform in more than a decade. In your letter of yesterday, you state that you "want to support our thousands of good, dedicated state employees . . . ." That is a laudable sentiment. However, as my Mother (may God rest her soul) used to say, "Actions speak louder than words." Your first action at the beginning of last year was to propose a 15% reduction in statefunded employees for every department, including even Corrections and Veterans Affairs. That opening gambit was followed by 22 bills introduced by members of your caucuses, which attacked public employees, collective bargaining, and even the right to form unions. The hearing you held recently to consider this contract was highly charged, adversarial, and partisan. That kind of atmosphere is antithetical to discussing and enacting the reforms you profess to be seeking. Hopefully, the next legislature can create an environment, where everyone can truly work together, cooperatively and constructively, to better serve the needs of the people of Minnesota. Let me conclude by reiterating that my administration greatly values our state's employees, most of whom work very hard for very little recognition or appreciation. They understand that we are in an era of increasingly limited budgets to serve ever-growing needs. Yet salary and benefits improvements are important to our retaining the best and brightest among them. Unfortunately, you and other Republican politicians continue trying to drive a wedge between public and private sector employees. The repeated claims that state employee unions are ripping off Minnesota taxpayers are designed for political gains, not constructive reforms. And they are wrong.

cc: Members of the Legislative Subcommittee on Employee Relations

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