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Lawmakers nix plan to use more lottery money on fund for Minnesota environmental projects

Using more lottery money would mean less cash to use on other priorities. A DFL legislator said her leadership couldn’t agree where that additional money would come from.

St. Louis River, Jay Cooke State Park
St. Louis River, Jay Cooke State Park

Minnesota lawmakers are making progress toward approving a ballot question in 2024 that would let voters decide whether to extend the use of lottery money for environmental projects.

But some major changes proposed by Democrats to the Environment and Natural Resources Trust Fund — that would have resulted in more money for the account — won’t be part of the constitutional amendment before voters after all. 

On Wednesday, House and Senate lawmakers removed a provision that would have dedicated an extra 10% of net lottery proceeds to the environmental trust fund. And they also nixed a potential change in state law that would direct cash from unclaimed lottery prizes to the trust fund. Combined, the money would have added roughly $20 million each year to the account, which received $44.3 million from the lottery in 2022.

“I appreciate the opportunity to be here today and to strip out all the money from my bill,” state Rep. Athena Hollins, DFL-St. Paul, told the House Ways and Means Committee with lighthearted sarcasm. “Hopefully this will be the least painful thing you have to do today.”

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The trust fund was first authorized along with a state lottery in 1988. The money is doled out by lawmakers, but they get recommendations from a 17-member council. This year, the Legislative-Citizen Commission on Minnesota Resources recommended 85 projects with a total $79.8 million price tag.

State Rep. Athena Hollins
State Rep. Athena Hollins
But a link between the lottery and the trust fund is set to expire, motivating legislators to put an extension before voters in 2024. The Minnesota Constitution says 40% of lottery proceeds must go to the trust fund until 2025. Right now, 60% of lottery proceeds flow into the state’s general fund, which is the main pot of money used to pay for state services like education, health care and more.

Hollins and Sen. Foung Hawj, DFL-St. Paul, sponsored the proposal for a new constitutional amendment. And they initially wanted more cash for the trust fund. 

Under their first plan, the constitution would have instead dedicated 50% of lottery money for the environmental account if the ballot question was approved by voters. And the DFL proposal also would have changed state law to direct unclaimed lottery prizes into the trust fund rather than the general fund. 

State Sen. Foung Hawj
State Sen. Foung Hawj
The extra cash would grow the size of the fund, helping to pay for a new “community grants” program aimed at helping smaller nonprofits access the money, especially groups that seek to help people of color or low-income rural areas. 

But that plan hit a roadblock. Taking away general fund money would mean less cash to use on other priorities. Hollins said DFL leadership couldn’t agree where that additional money for the trust fund would come from.

“Thank you, Rep. Hollins, for staying within our budget parameters,” said Rep. Liz Olson, a Duluth DFLer who chairs the House Ways and Means Committee.

Now, the proposal to extend lottery funding for the trust fund contains the existing limit of 40% of proceeds earmarked for the environmental account.

Hollins and Fawj are still proposing some changes to the trust fund. One is allowing a greater share of the fund to be used each year. Currently 5.5% can be drawn from the account, which is invested by state officials to grow the cash. But the DFL bill would allow state officials to use an additional 1.5% of the trust fund every year to pay for the community grants program. That would leave less to be handled by the State Board of Investment.

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Money earmarked for community grants would be approved by the Walz administration on the advice of a new advisory council, rather than legislators, which drew frustration from Republican lawmakers in a Senate committee hearing on Wednesday. The GOP has also objected to a DFL plan to block the use of trust fund money for upgrading wastewater treatment facilities or for paying the principal or interest of any bonds used to finance infrastructure projects.

But DFLers hold majorities in the House and Senate and have advanced the legislation this week, moving it closer to floor votes. Democrats may also still alter the council that makes recommendations on projects.