Legacy $$: Let the backfilling begin

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Legislature will test limits on the uses of the $540 million in proceeds from the state’s 2008 Legacy Amendment

In what has become a biennial ritual of the deficit years, lawmakers are running their fingers through every pot of dedicated state money within reach as they labor to erase a multibillion-dollar deficit. But in 2011, most of the easy pickings have long since been taken – starting with $1 billion in tobacco lawsuit proceeds appropriated by Gov. Tim Pawlenty and the Legislature to help with a $4.3 billion deficit in 2003 – and legislators have already laid claim to roughly half of the $108 million in one of the few sizable dedicated funds still left intact, the Iron Range-specific Douglas J. Johnson Economic Protection Trust Fund.

But the most coveted, and most closely guarded, stash of all is the roughly $540 million in revenue from the 2008 Legacy sales tax amendment. Arts and environment advocates are already crying foul over lawmakers’ efforts to skirt the constitutional strictures governing Legacy spending.

“It looks like there’s huge potential to do that, and I cannot see how you can legitimately spend the Legacy money in the way it has been proposed,” said Rep. Jean Wagenius, the environment minority lead on the House Environment, Energy and Natural Resources Committee.

Exploiting ambiguities?

The Legacy funding is a relatively new creature in the budgeting process. In 2008, Minnesota voters passed a constitutional amendment that increased the state sales tax by three-eighths of 1 percent to pay for outdoors and cultural projects. In the 2009 legislative session, lawmakers set out to appropriate the money in a way that satisfied the strictures of the amendment. Among the thorniest issues they faced was the requirement that Legacy dollars be spent to supplement, rather than supplant, existing state spending.

Gray areas inevitably arise in judging whether the supplement/supplant test has been violated. But the issue is very much on the mind of Legacy Finance Division Chairman Dean Urdahl, R-Grove City. “We frequently refer to the issue of supplement versus supplant,” he said. “We are frequently cognizant of that.”

The House Legacy Funding Division has already laid over three of the four funding bills: clean water, parks and trails, and Lessard-Sams Outdoor Heritage. On Wednesday the committee will incorporate the funding bills into an omnibus bill. They will also hear policy bills, including a measure that would require recipients of Legacy money to report to the Legislative Coordinating Commission about the status of their projects. The bill will ultimately be passed on to the House Environment, Energy and Natural Resources Committee.

The House will begin work on the arts and cultural portion of the Legacy funding after the Easter/Passover recess.

Environmental groups are paying particularly close attention to the $180 million in recommendations for the clean water account. Budget bills now moving through the Republican-controlled Legislature contain deep cuts to environmental agencies like the Minnesota Pollution Control Agency and Department of Natural Resources. And those cuts invite efforts to use Legacy dollars to backfill general fund reductions – in other words, to use Legacy funds to supplant existing state spending.

Wagenius said she thinks the stage has been set to do exactly that. “What I see is huge cuts to waters programs in both PCA and DNR [finance bills],” she said. “And two years ago, we funded programs like Clean Water Partnership, which takes care of lakes, and then gave additional money from the Legacy funds that were meant to accelerate the program. Acceleration is fine. Substituting is not fine.”

Rep. Paul Torkelson, R-Nelson Township, is carrying the bill that appropriates the Legacy’s clean water dollars. In the example of clean water partnerships, he acknowledged they are funded in the bill even as they are subjected to cuts in the budget bill. Nonetheless, he argues that the Legacy bill dollars are not supplanting the funding for clean water partnerships or other programs in state government.

“In the case of the clean water [measures], most of the money goes to various state agencies,” Torkelson said. “It’s really up to the state agencies to do the right thing. There will be questions asked, and it will be a discussion we have to have.”

What’s in a word?

Since legislators started creating Legacy policy, three words have stoked intense controversy among conservationists: restore, protect and enhance. Lawmakers during Legacy’s early days wrangled over policy language before ultimately decreeing that the purpose of Lessard-Sams Outdoor Heritage projects is to “restore, protect and enhance Minnesota’s wetlands, prairies, forests and habitat for fish, game and wildlife.” That mouthful has been interpreted as giving Lessard-Sams a narrow mission to improve habitat, as opposed to a broader purpose that would add scientific research and environmental education to the mix.

This main contents of this year’s outdoor heritage bill consist of projects recommended by the 12-member Lessard-Sams Outdoor Heritage Council. But the House bill also features a provision sure to resurrect debate over the “restore, protect and enhance” rule.

House Environment Chairman Denny McNamara, R-Hastings, has added a measure to create a fund that will make ongoing payments in lieu of taxation (PILT) to local governments. The proposal would set aside 20 percent of the value of state land purchased with Lessard-Sams dollars for the PILT account. McNamara said the fund proposal seeks to allay discontent among local communities, particularly in northern Minnesota, where state land purchases made with Legacy funds are reducing local property tax bases. McNamara said he expects he will have to persuade legislators that the PILT fund fits under the purview of Lessard-Sams’ mission.

“That’s a legitimate discussion,” McNamara said. “I would argue that if you’re getting this land to restore, protect and enhance, the costs of keeping that land protected and restored and enhanced for the long term are part of that.”

While the proposal is in the House bill, Sen. Tom Saxhaug, DFL-Grand Rapids, said there is a concern that Senate Republicans won’t adopt the PILT provision.

The parks and trails Legacy bill, which was introduced last month by Rep. Deb Kiel, R-Crookston, has raised eyebrows for appropriating $600,000 for capital improvements at two veterans’ rest camps. The bill gives $500,000 to the Disabled Veterans Rest Camp on Big Marine Lake in Washington County. The remainder goes to Veterans on the Lake Resort in St. Louis County. The camps are not considered parks under the Legacy amendment, said Parks & Trails Council of Minnesota Executive Director Brett Feldman.

“One can appreciate the desire to take care of veterans,” Feldman said, “but the constitutional language states that the parks and trails Legacy fund must be used to support parks and trails of regional and statewide significance. Veterans are important, but when you talk about the proper use of the fund, it doesn’t meet the requirement.”

Urdahl has been mulling over the inclusion of the veterans camps in the bill. “We are still evaluating how to treat the camps,” he said, “but I think they are significant.”

Although the arts and cultural projects haven’t been assembled into a bill yet, arts advocates are already raising red flags over a number of bills that pay for construction projects with arts Legacy money. Sheila Smith, executive director of Minnesota Citizens for the Arts, said the proposals violate the intent of the Legacy amendment by paying for capital projects rather than programming. She noted that a bill by Rep. Tony Cornish, R-Good Thunder, and Sen. Julie Rosen, R-Fairmont, which has bipartisan authors, would spend $972,000 in 2012 to rehabilitate the historic Dodd Ford Bridge.

“I think when the voters passed the Legacy in 2008, nobody thought they were creating a slush fund for earmarks,” Smith said.