St. Paul — The risks and effects of the Legislature’s unprecedented move to raid the Environment and Natural Resources Trust Fund of $98 million over the next 20 years have been examined by the commission charged with recommending how the funding is spent.
On July 18, several members of the Legislative-Citizen Commission on Minnesota Resources, which is responsible for recommending how the ENRTF is distributed, criticized the legislative action. That action, too, has been seen by conservation groups as a betrayal of the 1988 voter-approved amendment that set up the fund.
The LCCMR received a presentation from Jennifer Hassemer, assistant commissioner for debt management at Minnesota Department of Management and Budget. Hassemer offered an overview of state appropriation bonds, and a short course on bond basics and background on state bonding. The MMB is responsible for issuing the controversial bonds, and Hassemer was careful to avoid stepping into the political fray during her presentation and during a question-and-answer session with the LCCMR that followed.
Hassemer’s presentation included a comparison of state appropriation bonds – which are set to be issued this fall because of the legislative move to fund such infrastructure items as repairing and renovating wastewater treatment facilities – and the general obligation bonds that are the traditional source of funding for such projects.
Hassemer noted that general obligation bonds have lower interest rates, have the state’s full faith and credit pledged, and carry the highest rating. State appropriations bonds are subject to annual appropriation of the Legislature, and, according to Hassemer pay a “slightly higher interest cost.” They are rated a notch below the state’s GO bond rating.
Hassemer did not bring with her an estimate of the actual difference in interest cost over the course of the 20 years that the bonds would be paid back, which raised the ire of LCCMR member Rep. Jean Wagenius, a DFLer from Minneapolis.
“We all need to know how much more this is going to cost the trust fund over time,” Wagenius said. “You should have brought that to us today. It was an obvious question.”
The cost of the interest that would be paid on the appropriations bonds over the 20 years has been estimated by some state conservation groups as potentially as high as $60 million. Hassemer, who agreed to follow up with Wagenius, did not return a phone call from Outdoor News seeking the MMB’s estimate.
Wagenius said this was the first time “we have used special appropriations bonds for general obligations projects,” but LCCMR member Sen. Torrey Westrom attempted to “correct the record” on that claim and another by Wagenius, who was critical of the fact that the wastewater treatment projects typically go into larger rivers. “Normally when we are talking about unique natural resources, we are talking about a fen,” she said.
Westrom, who pushed for the idea of using the fund to pay for wastewater treatment projects in rural Minnesota, tried to correct Wagenius on both counts, noting that state appropriations bonds recently were used to pay for the state Senate building.
The money for that building, however, was not funded by the ENRTF.
“What Jean said I don’t think was fully accurate,” Westrom said. “I’ve never heard that a fen is the definition of unique environmental aspect or whatever she was referring to. In my area, they are usually called sloughs.” Westrom, and any other supporters of the move to raid the ENRTF, did not defend the legislative action during the meeting.
But many ripped it as unconstitutional and not in keeping with the spirit of the state constitution.
“Did you confer with the attorney general about the legality?” citizen member Nancy Gibson asked Hassemer.
Yes, Hassemer said, as far as the MMB is concerned.
“When we issue the bonds, we will be seeking opinions that they are being validly issued and meet all of the legal requirements for the issuance of debt,” Hassemer said. “Typically that does not get down to a project-by-project review of the eligibility. We do look to the Legislature for those types of differentiations. We will be seeking to execute the law as it is passed, and hope to sell the bonds this fall.”
Gibson, riffing on the fact that the bonds are paid back each year by legislative appropriations, asked what would happen if they weren’t paid back. Would the ENRTF be responsible?
“That is a good questions,” said Hassemer, who added that if the Legislature took away or non-appropriated the appropriation that is part of the 2018 budget bill, “there would be no funds to pay investors back, and that would have huge consequences for the state’s credit rating. … The investors take the risk that they will get paid by the funding sources identified by the Legislature. … They would have no legal entitlement to get paid. That does not mean there would not be moral pressure to get paid.”
One person spoke out against the legislative move in a public comment period at the end of the discussion. Elise Larson, staff attorney for the Minnesota Center for Environmental Advocacy, noted that the fund has been used toward approximately 1,000 projects, including fighting invasive species, reintroducing native mussels to Minnesota’s waters, improving water clarity and habitat quality, and steadying native pollinators.
“This is important work,” she said. “And it is work that would not be accomplished without funding from the trust fund. … MCEA has serious concerns regarding the expensive, precedent-setting use of the trust fund to fund appropriations bonds. The appropriation bonding reduces the money available for otherwise worthwhile projects, diverting the funds for infrastructure projects.”
Larson said the projects in question are important and need to be funded, but “we strongly disagree with diverting money from the trust fund when it would be cheaper and less risky to fund these projects from the General Fund. In addition to the availability of such funding sources, MCEA has concerns regarding the constitutionality of the statute creating the appropriations bonds.
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