Lower sales tax receipts projections could impact Legacy spending

Wielding a new gavel he received from his wife for Christmas, chair of the House Legacy Funding Finance Committee Rep. Dean Urdahl (R-Grove City) called its first meeting of 2016 to order Monday and began to address recent budgetary challenges along with an issue as old as the Legacy Amendment itself.

Urdahl told the committee that the only bill on the agenda, HF3829 – which was laid over and has no Senate companion – was “vehicle” legislation that would take its final form at the next meeting. But he then outlined the challenges facing the four funds created when voters approved the Clean Water, Land and Legacy Amendment in 2008. Those funds are:

• Clean Water Fund
• Arts and Cultural Heritage Fund
• Outdoor Heritage Fund
• Parks and Trails Fund

“Most of you are aware that because sales tax revenue did not meet the projections, we have a little bit of a deficit and we have to deal with it one way or another,” Urdahl said.

After the state’s February Forecast – which lawmakers use to create a final budget – showed lower-than-expected revenues, three of the four Legacy Funds face a projected deficit. Only the Parks and Trails Fund shows a positive balance ($156,000).

However, Urdahl said steps have already been taken to address these shortfalls. Because appropriations from the Outdoor Heritage Fund are done annually – unlike the others which make appropriations every two years – proposed funding recommendations for Fiscal Year 2016 have already been changed to eliminate its $617,000 deficit.

For the Clean Water Fund – which faces a $963,000 deficit – and the Arts and Cultural Heritage Fund – which faces a deficit of more than $2 million – Urdahl said Minnesota Management & Budget has taken action to solve the problem.

He read from a letter from MMB that said it would cancel $1 million from a 2011 appropriation to the Small Community Wastewater Treatment Program. This would eliminate the deficit in the Clean Water Fund.

MMB said it would resolve the deficit in the Arts and Cultural Heritage Fund by carrying forward some Fiscal Year 2016 appropriations into Fiscal Year 2017, which begins July 1, 2016, and authorizing agencies to “allot only 97 percent of their FY17 appropriations, holding back 3 percent of each appropriation for spending in the following fiscal year, FY18. We believe this restriction will be manageable by the agencies and will not cause hardship for grantees.”

Urdahl said MMB has statutory authority to take these actions and it would be up to the committee to either make changes or allow MMB’s decisions to stand.

“This is the approach recommended by MMB,” Urdahl said. “They instituted it last week.”

Supplement versus supplant

While the contents of HF3829 are expected to be much different when the committee next takes up the bill, Urdahl said the language it currently contains may begin to resolve an ongoing question that must be answered each time funds are appropriated.

The law requires legacy dollars to “supplement” rather than “supplant” existing expenditures. HF3829 would require those seeking money from the Parks and Trails or the Arts and Cultural Heritage funds to disclose whether a given program or project has been funded in the past (since 2006) and, if so, how it was funded. The other two funds were not included because it’s believed they are overseen by advisory boards that should already be considering this question.

Urdahl said this information would help legislators determine whether future Legacy appropriations would be going to efforts that had previously been funded.

“I don’t know that this is going to be a magic wand that solves this question from being asked in the future,” Urdahl said. “But at least we are making an attempt to deal with that question which comes up very often.”