Minnesota Democrats block GOP-sponsored ‘Fraud Isn’t Free Act’ in committee

On Tuesday, lawmakers in the House State Government Committee heard HF 3395, a GOP bill dubbed the “Fraud Isn’t Free Act.” Authored by House Republican leadership, the bill is a staple of the GOP’s legislative agenda and anti-fraud efforts.

The Fraud Isn’t Free Act requires Minnesota government agencies to fire state employees who intentionally or negligently allow fraud to occur in state programs. The bill would also reduce a state agency’s administrative budget and commissioner pay if fraud occurs.

Further, HF 3395 would require Minnesota’s state budget forecasts to include an estimate of how fraud is impacting the state’s finances.

Last month, the Walz administration released a damning report about how the Minnesota Department of Human Services (DHS) has not taken state program integrity seriously. The report said DHS “emphasized compassion over compliance” while administering programs.

DHS oversees federally-funded programs that were reportedly defrauded of $9 billion in recent years.

The lead author of HF 3395, GOP Floor Leader Harry Niska, presented the bill at Tuesday’s committee meeting. The bill is co-authored by Republican House Speaker Lisa Demuth.

Speaking to the committee, Niska highlighted the program integrity report, criticized DHS staff for backdating documents during a recent financial audit, and told the committee that only one DHS assistant commissioner has been fired during the ongoing fraud saga.

“Fraud isn’t free,” Niska said. “It’s time for the people in charge to start paying for it. That’s what [HF] 3395 does, and I urge members to support it.”

Critics of HF 3395 said it would violate “due process” for state employees, impede agency operations, and disrupt services provided by state programs. HF 3395 says agencies must pause enrollment in state programs when responding to fraud in those programs.

Niska said the bill does not change a state employee’s ability to contest their dismissal. The GOP leader encouraged lawmakers to advance the bill.

“The point of this bill is to create another mechanism for commissioners to be held accountable, which unfortunately we have not seen happen as billions of dollars have flowed out of our state coffers,” Niska told the committee.

“Any functional private sector organization would’ve had hundreds of people fired in a billion-dollar scandal, including, probably the CEO of that organization, and that accountability has not happened [in Minnesota],” he added.

Rep. Ginny Klevorn, the lead Democrat on the committee, was critical of the bill, saying it did not have a cost estimate and lacked measures to prevent fraud on the front end. The DFLer also questioned if budget cuts to an agency’s central office would impact programs.

Niska said a cost estimate had been requested but was not yet available. He also said the cost savings from the bill would be “the biggest impact” of HF 3395.

“I would ask [DFL] members to vote ‘no’ on this bill,” Klevorn said. “It’s not ready, it’s not preventative, and it is actually punitive and harmful — harmful — to the Minnesotans who are … suffering from fraud, which we all agree should not occur.”

Klevorn said the bill “is punitive, in that, you just un-allot their services.”

Closing his remarks about HF 3395, Niska said the bill ensures agencies get a mandate to prioritize compliance or risk losing their funding.

“Minnesotans demand accountability,” he said.

After lawmakers discussed HF 3395, the committee tried to send the bill to another House committee. However, that vote did not gain support from a majority of the committee; Republicans voted to advance the bill while DFLers voted against advancement.

As such, HF 3395 will stay in the State Government Committee. At present, the House is evenly split with 67 Republicans and 67 DFLers. The State Government Committee is also comprised of an equal number of Republicans and Democrats.

Luke Sprinkel

Luke Sprinkel previously worked as a Legislative Assistant at the Minnesota House of Representatives. He grew up as a Missionary Kid (MK) living in England, Thailand, Tanzania, and the Middle East. Luke graduated from Regent University in 2018.