The New Normal: Legacy Fund offers glimmer of hope, lots of room for debate

Like deer in headlights, applicants run toward this glimmer of light in a dark economy.

Millions of dollars can be released to begin new or ongoing environmental projects in Minnesota, now that legislators passed state finance laws and the Clean Water, Land and Legacy Fund appropriations during the July special session.

The latter, commonly referred to as the “Legacy Fund,” is derived from three-eighths of one percent sales tax approved by voters in a 2008 constitutional amendment. The tax will be collected until June 30, 2034 and allocated annually by the Legislature.

Legacy funds have been used to fight the environmental crisis de jour, such as alien flying fish and a beautiful emerald bug with a voracious appetite for ash trees. There are less sexy projects too, such as monitoring pesticides and pollution, or runoff from feedlots. Then there are applicants who, like deer in the headlights, run straight toward the only glimmer of light they can find in a dark economy.

Restricted Uses

Because the Legacy Fund is constitutionally dedicated, there are restrictions on how and for what purpose the money can be used. Appropriations must supplement traditional sources of environmental spending, such as the General Fund, and cannot replace those sources. That became one of the biggest challenges in the last legislative session when budget cuts within state agencies blurred the line between supplementing and supplanting.

“That’s exactly what the voters did not want just a few short years ago when they considered this,” said Rep. Rick Hansen (DFL-South St. Paul) in July when he voted against the legislation.

The fund is divided into four accounts: Outdoor Heritage Fund (33 percent), Clean Water Fund (33 percent), Arts and Cultural Heritage Fund (19.75 percent), and the Parks and Trails Fund (14.25 percent).

Despite the prohibition on supplanting, $1.5 million from the Clean Water Fund was tapped to pay for a much anticipated study of the effects of mining residue on wild rice. Because the last study was decades old, the study was viewed as having no traditional funding source so the project is being paid for with unmatched Legacy funds.

Protect, Purchase and PILT

In 2012, nearly $86.5 million is available for Outdoor Heritage projects. The Lessard-Sams Outdoor Heritage Council vets applications for the Outdoor Heritage Fund. Earlier this month, LSOHC members weighed in on 2013 applications, the next round of proposals. At least 99 percent of the money must be used to “restore, protect, and enhance wetlands, prairies, forests, and habitat for fish, game, and wildlife.”

“Protect” has become synonymous with buying land or perpetual easements. But after a legislative audit revealed the state owns more land than it can effectively manage, some legislators proposed “no net loss or gain” bills. Local governments also started complaining that they should be compensated with state payments in lieu of property taxes, known as PILT.

As a result, House Environment Finance Committee Chairman Denny McNamara (R-Hastings) began working on a way to set aside to pay for ongoing management costs or to pay PILT. But PILT doesn’t fit the constitutional muster as an appropriate use of Legacy Funds, according to Rep. Jean Wagenius (DFL-Mpls). A broader discussion is expected during the next session.

Minnesota Pheasants Forever is one of many stakeholder organizations that work with the Department of Natural Resources to acquire public land.

“Land acquisition is one of the tools to protect fish and wildlife habitat,” said Matt Holland, a senior field coordinator with Pheasants Forever. “We live in these communities too. We understand the balance and we try to target land that provides multiple benefits.”

The largest single Legacy Fund appropriation, $36 million, paid property owners for permanent easements in forests. UPM Blandin paper mill in Grand Rapids received the bulk of those payments and is allowed to continue working the land. Now the company has filed a petition in Itasca County to contest its 2010 property tax assessment, according to Itasca County Assessor Brian Connors.

“We don’t know if it’s related to the forest Legacy easements,” Connors said. Still, the issue hasn’t soured the LSOHC on buying more easements, according to council Executive Director Bill Becker.

“That particular one is bound to create lots of issues by its magnitude,” Becker said.

Play Fair

Bickering plagues the Parks and Trails Fund too. The Metropolitan Council receives an appropriation for Twin Cities Metro Area regional parks; the DNR receives a percentage for parks in Greater Minnesota. Legislators began adding up where most of the tax money is earned (the Metro) and where most of it is spent (Greater Minnesota). When the pendulum shifted under Republican leadership, giving a higher percentage to Greater Minnesota, some metropolitan lawmakers weren’t happy.

“We took a huge step backwards in fairness,” said Rep. Jean Wagenius (DFL-Mpls).

The fairness equation is one that’s sure to carry into the next session. Greater Minnesota representatives said they shop and play in the Twin Cities and contribute to the metropolitan sales tax. They also were quick to point out that metropolitan tax payers expect quality state parks and other services when they visit Greater Minnesota with their boats, fishing poles and hunting rifles.

Perhaps Rep. Dean Urdahl (R-Grove City), chair of the House Legacy Funding Division, said it best when he said the only way to make everybody happy is to make sure no one is completely happy.

Susan Hegarty