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Minnesota House Republicans moved forward with a plan Tuesday that would funnel another $10 million to fix the state’s troubled vehicle registration system, but it requires Gov. Mark Dayton to cut agency spending by the same amount.

A House panel passed a bill that uses existing funds to continue the overhaul of the Minnesota Licensing and Registration System (MNLARS). It also reduces the DFL governor’s executive agency spending by $10 million over the next year, a requirement Dayton calls a “nonstarter.”

The measure would require state agency commissioners to give monthly reports on MNLARS, and would study whether a private vendor could replace the problem-plagued system the state debuted this summer.

The Transportation Finance Committee vote was just the first step for the bill, which could be altered in future committee hearings and needs to be squared with the Senate’s plan. Senate Transportation Finance and Policy Chairman Scott Newman has a different idea of how to handle MNLARS.

Newman, R-Hutchinson, said his committee will consider a bill next week to dedicate $7.3 million from existing revenue in the driver and vehicle services funds, the source Dayton proposed. Newman said that amount would just cover the costs for the contractors who are adding fixes and features to the system.

Other expenses, namely the cost of staff to answer phones, would not be included, he said.

Johanna Clyborne, new commissioner of Minnesota IT Services, said Tuesday she is “hamstrung” by the lack of funding and will have to start laying off contractors at the end of March.

Her agency, called MNIT, and the Department of Public Safety are responsible for MNLARS.

“At the end of the day, who is punished? The people of Minnesota are going to be punished,” Clyborne said.

Since the MNLARS system went into operation, Minnesotans have encountered long waits for car tabs and the inability to transfer specialty license plates. Deputy registrars, many of whom are private business owners contracting with the state to provide vehicle services, have struggled as costs piled up.

“We have to act now,” said Rep. Frank Hornstein, DFL-Minneapolis. He proposed another version of the bill at the House Transportation Finance Committee meeting that did not include the executive agency budget cuts or progress reports. It was rejected on a party-line vote in the Republican-dominated committee.

Rep. Steve Drazkowski, R-Mazeppa, said it would just “grease the skids” to spend taxpayer money without additional accountability. Lawmakers said accountability measures are critical, because the $10 million is not the administration’s only request.

Dayton has asked for a total of $43 million to get MNLARS working properly.

Dayton rejected the idea of cutting executive agency expenditures to fund MNLARS. He said it’s now legislators’ responsibility to approve the $10 million fund transfer and prevent the state from losing contractors. After that, Dayton said he and the Legislature can work out a plan for the rest of the $43 million request.

“They can build in a carefully thought-through oversight procedure, which I’m fine with as long as it doesn’t gum up the execution of the plan,” Dayton said.

Newman said Dayton’s attempt to shift the blame to the Legislature is unfair. “You just can’t wave a magic wand and just have $10 million fall in your lap,” he said.

He said he is open to a conversation about whether MNIT should be handling projects like MNLARS.

Sen. Julie Rosen, R-Vernon Center, proposed a bill Monday to eliminate MNIT and replace it with a division of information technology within the Department of Administration, which would go through annual audits. The bill also says state agencies could chose between the IT division or an outside source to handle information and telecommunications projects.

“It’s all about accountability, making sure they are transparent on dollars that are being spent,” Rosen said. “We just cannot afford to have another debacle.”

Clyborne said in a statement she was disappointed by the “knee-jerk reaction” to disband the agency.

“This bill would stall MNIT’s progress moving state government to modern and cloud-based solutions, which are a fundamental necessity to building a secure, digital government that is responsive to citizen needs,” she said.

Dayton said that he supports Clyborne’s analysis and that she deserves the opportunity to show the difference she can make at MNIT.

“We were not consulted on this legislation,” Dayton said. “I don’t know what [Rosen’s] intent is. I don’t know how she thinks it’s going to improve matters.”

Jessie Van Berkel • 651-925-5044