Lawsuit over environmental trust fund may have implications for Legacy Amendment money

Environmentalists were infuriated this year when Minnesota’s Legislature funneled money from a natural resources trust fund to pay for a $98 million bundle of infrastructure projects — the first known instance of such a maneuver.

But a lawsuit filed Wednesday by the Minnesota Center for Environmental Advocacy and other groups to reverse the spending from the Environment and Natural Resources Trust Fund (ENRTF) may have implications that go far beyond that goal.

Aaron Klemz, an MCEA spokesman, said the legal action also serves as a warning to legislators to stay away from the state’s other constitutionally dedicated funds for the environment. That primarily means money from the voter-approved 2008 Legacy Amendment, which pays for a swath of natural resources projects across Minnesota through a sales tax.

And while some lawmakers assure that money isn’t likely to be diverted in similar ways, environmental groups are still concerned the trust fund budgeting may be a sign of things to come. In fact, some watching the new case say it could set a precedent for how much discretion the Legislature has over how it spends other voter-approved funds written into the state constitution.

“I think what they’re trying to draw is a line in the sand here,” said David Schultz, a professor of constitutional law at the University of Minnesota and political science at Hamline University.

The trust fund link

Minnesota voters first approved the ENRTF in 1988, and the constitutional amendment that established it says the cash is meant for “protection, conservation, preservation, and enhancement of the state’s air, water, land, fish, wildlife, and other natural resources.”

The brief amendment was accompanied by a set of state laws which outlined in more detail how the money, which comes from the state lottery, would be spent. Those statutes said the cash was to supplement traditional environmental and natural resources spending rather than replace it. It also made clear what the money should not be used for — including city water pollution control.

But the 2018 Legislature amended those laws, authorizing the fund to be spent on special bonds for construction projects that benefit the environment — including water treatment in small towns as well as parks and trail upkeep.

Supporters argued the changes were consistent with the trust fund’s constitutional language, as well as its mission of offering needed environmental projects. For example, bonds backed by the fund financed more than $14 million in grants for wastewater infrastructure, which can be overwhelmingly expensive for small cities.

“I’m not exactly sure what the MCEA thinks the money should be used for if it’s not cleaning up water,” said state Sen. David Tomassoni, DFL-Chisholm, who serves on a commission of lawmakers and citizen appointees that recommends projects to bankroll out of the lottery trust fund.

State Rep. Rick Hansen, DFL-South St. Paul, told MinnPost the infrastructure projects are essential, not supplemental projects typically funded by traditional bonds, which the Legislature could have afforded this year without using trust fund money. Republicans used the special bonds to fund projects because they self-imposed a maximum for their general obligation bonds at $825 million last year in the aim of remaining fiscally sound. Gov. Mark Dayton had proposed a $1.5 billion bonding bill.

The underlying debate in the lawsuit — how much power the Legislature has to interpret constitutional amendments and their governing language — will be central to the court case, said Schultz, the UMN professor.

Wherever the court lands could also inform future legislative decisions over the Clean Water, Land and Legacy Amendment, an extremely broad program which doles out hundreds of millions of dollars per year for water, parks and trails, arts and culture and outdoors projects. In the 2017 budget year, the amendment’s Clean Water fund alone received than $115 million.

While the Legacy Amendment is more explicit in its constitutional language about money being used strictly to supplement traditional spending on natural resources, Hansen and Klemz said they had concerns the Legislature could be given a wide berth on how they interpret what is considered supplemental spending because of the lottery trust fund case.

“I think the Legislature looks at precedent,” Hansen said. “When you break the seal on one fund it puts other funds at risk because you’ve set a precedent on a constitutionally dedicated fund.”

On the flip side, Mary Jane Morrison, an emerita professor at Hamline Mitchell Law School, said if the MCEA wins its lawsuit it could make stricter legal protections for how Legacy Amendment money is used.

Sending a message to the Legislature?

Morrison and Schultz were not bullish on the MCEA’s chances of winning its lawsuit. Schultz said courts can take many factors — including “enabling legislation,” public debate and even news articles into consideration — when trying to interpret the meaning of constitutional amendments if they don’t directly address a question before the court.

But he also said when amendments are vague, as the lottery trust fund is, the court sometimes shows “deference” to the Legislature in reasonably interpreting them. He noted the Minnesota Supreme Court has not ruled against the Legislature often recently, including their April decision upholding a law challenged by Auditor Rebecca Otto that allows counties to hire accountants outside of her office.

Even when the Supreme Court has ruled against the Legislature, as it did when Gov. Mark Dayton defunded the House and Senate via a line-item veto, Schultz said, the justices offered a life raft to lawmakers, saying the dispute must be resolved through mediation and that the Legislature be eventually funded. “It just doesn’t seem like this court has waded significantly into … political controversies” or second-guessed the Legislature, Schultz said.

The MCEA does make other arguments in its lawsuit. For example, it says the interest payments and other money related to the bonding process has not been explicitly authorized by the trust fund. Morrison cast doubt on those too, saying the relation between the environment and projects is still key.

Regardless of the MCEA court case, Hansen, the DFLer from South St. Paul, said he believes lawmakers are less likely to drastically change how they use money from the Legacy Amendment than the lottery trust fund. Since it was passed more recently, the public is more aware of it and there is more political pressure to keep the status quo, he said.

Klemz characterized changes to the Legacy fund so far as more of a “slow motion problem” in which some underfunded state agencies have increasingly tried to use money to continue work that should be paid for out of the state’s general fund, including protecting drinking water.

But he said the lawsuit still “sends a message to the Legislature.”

“The will of the voters as expressed through the constitutional amendments goes above and beyond anything they want to do in any given session with that money,” Klemz said.