Bad to worse: Raid on Environmental Trust Fund balloons to $98 million!
Note: Last updated May 2018.
In the words of Ron Burgundy: “Boy, that escalated quickly!”
In a shocking and unprecedented move, a much-feared $47 million dollar raid on the state’s voter-approved Environment and Natural Resources Trust Fund (ENRTF) ballooned to a $98-million raid during the final weekend of Minnesota's legislative session.
From good to bad
As we noted recently, the House and Senate’s modest $825 million bonding proposals were too small to fit $47 million in much-needed funding for wastewater infrastructure across the state.
Given Gov. Mark Dayton’s request of $1.5 billion for bonding, we had hoped legislators would increase the size of the bonding proposals to include money for municipal wastewater projects.
Rather than draft a larger bonding bill, legislators instead made a stunning move: funding the work with “appropriations bonds" to be paid back out of our state trust fund.
This unprecedented approach violates the principles of the voter-approved amendment and is bad policy for no fewer than nine reasons.
From bad to worse
Sadly, efforts to remove the original $47 million raid failed spectacularly. Over their final session days, legislators kept the original raid and added another $51 million in additional appropriations bonds!
The total trust fund raid is now $98 million!
Financial implications
The costs to the trust fund go well beyond the $98 million raid. The interest costs alone on $98 million of appropriation bonds could be in excess of $60 million in additional costs to the ENRTF over the 20-year period. This is just an estimate, however, as no fiscal note (standard analysis of costs and financial implications) was ever provided for consideration, and no public testimony was allowed when the provision was first introduced in the Senate Finance Committee on May 14th.
Is this allowed?
Short answer: No
Long answer: This raid isn’t just a terrible idea. It’s specifically prohibited by state statute.
To govern how these constitutionally dedicated funds are spent, the state has very clear guidelines that include several important prohibitions:
- Trust fund money can’t be used as a substitute for traditional state spending.
State statute is clear: “The trust fund may not be used as a substitute for traditional sources of funding ...”
Since state money for wastewater infrastructure has traditionally come from state general obligation bonds (instead of the trust fund), this is a clear-cut case of illegal substitution. - Trust fund money may not be used for municipal pollution control (wastewater treatment projects) or for waste disposal facilities (Anoka landfill).
State statute specifically states that ENRTF money cannot be used for municipal water pollution control under the authority of chapters 115 and 116 (i.e. municipal wastewater treatment facilities). It also states specifically that hazardous and solid waste disposal facilities are ineligible.
Thus, both the wastewater treatment funding and the $6 million directed to the Anoka landfill are prohibited. - Funds may not be spent on projects or purposes inconsistent with the strategic plan.
Statute requires a state commission to adopt a six-year strategic plan for making expenditures from the trust fund, to be reviewed every two years. Notably absent from the current strategic plan: $98 million to pay back state appropriations bonds.
Funding for many projects in the strategic plan will be eliminated, as their funding will instead be consumed to pay back state appropriations bonds.
Financial implications
As if the direct raid weren't bad enough, the interest costs alone on $98 million of appropriation bonds could be as much as $60 million in additional costs to the ENRTF over the 20-year period. These are, however, just our best estimates - as no "fiscal note" (standard fiscal analysis of a bill's costs and financial implications) was ever provided for consideration during this process, and no public testimony was allowed when the provisions were first came before the Senate Finance Committee on May 14th.
Can this be stopped?
FMR and our conservation allies are calling on Gov. Mark Dayton to line-item veto all “appropriation bonds” from the Environment and Natural Resources Trust Fund.
Otherwise, a significant share of our state’s environment trust fund will be diverted to service the debt on these bonds for the next 20 years — which is beyond the life of the current trust fund, which expires December 31, 2024.
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