Riled-up Iron Rangers rip GOP $60 million ‘raid’ on their development fund

Rep. Carly Melin
Rep. Carly Melin

Now they’ve done it. Now the Republicans have gone and offended Minnesota’s Iron Rangers.

Rukavina, Anzelc, Bakk, Dill, Tomassoni. All of those old Rangers are furious. But the most angry of all is the newest of the Rangers, the newest member of the House for that matter, Carly Melin, DFL-Hibbing.

“Shameful,” she said to members of the Jobs and Economic Development Finance Committee. “It makes me sick. Stealing money. Why is this OK?”

Rep. Tom Rukavina sat in the front row of the hearing room, nodding his head approvingly as he listened to Melin.

“She’s got a good Ranger accent,” he said. “She’s got a lot going for her.”

What has Melin and the other Rangers hotter than a blast furnace is their belief that the Republicans on the committee have lifted/purloined/stolen $60 million from the Douglas J. Johnson Development Trust fund and plopped it into the state’s general fund. That money, no different from local property tax money in the eyes of the Rangers, under law is supposed to be used only in the six northeast Minnesota iron industry counties.

Republicans seem sheepish about action
To be sure, the Republicans seem to feel a little sheepish about taking it.

Rep. Bob Gunther, the author of the bill that captured the money, was apologetic during a committee meeting that ended with the Republican majority approving of the bill that includes the Rangers’ $60 million. The bill now goes to the House Ways and Means Committee, where it surely will pass again.

“This was not my idea,” said Gunther, apparently of the budget target that was handed his committee and prompted the heist of Ranger loot.  “This was the hand I was dealt.”

Mostly, though, Gunther hung his head as the debate – which mostly featured Rangers and their DFL supporters – roared around him.

The stormy committee meeting Thursday afternoon represents the dilemma many Republicans face as they attempt to fulfill their campaign pledge to balance the state’s budget with no new revenues.

If you have vowed not to raise taxes, you’ve got to fill deficit holes somehow.

“The [Rangers’] money was just there,” said Gunther at one point in the middle of this afternoon’s storm.

Just how hard it actually is to close a $5 billion deficit without revenues is becoming more and more obvious.

Republicans are looking everywhere for whatever spare change they can find.

During a committee session Wednesday night, for example, Rep. Steve Drazkowski, R-Wabasha, proposed that the state start logging operations in at least a few state parks as a money-raising idea.

Remarkably, his bill passed through committee on a straight party-line vote.

Then, of course, there was that effort earlier this week to take $69 million of transit funds from five metro-area counties and use it to plug state budget holes. The outcry on that was so great that the idea seems to have moved to the back burner for the moment.

But the Ranger money?

The effort to “transfer” that to the state general fund is moving ahead.

Iron Rangers vent at news conference
Before the Economic Development committee hearing this afternoon, the Iron Rangers held a news conference to explain again how angry they are and how wrong Republicans are in thinking that trust fund cash belongs to the state.

They pointed out that mines do not pay property taxes. Instead, they pay a tonnage tax that goes into a number of funds. One of those, the Douglas J. Johnson fund, which receives 13.7 cents per ton of ore from mining companies, is set up specifically to be used as development money for diversifying the Range economy.

Only the interest is used from that fund, which has been crucial to starting up a number of firms, large and small.

There are, it should be noted, other funds coming from Range production that benefit the entire state. Over the years, a K-12 school fund has grown to $721 million. Interest from that money is paid out on a per-capita basis to students across the state. Additionally, there’s a University Fund, which currently stands at $355 million. Interest earned from that fund goes to public institutions of higher learning across the state.

All of this money, Rukavina said, is going across the state from a region that represents 3 percent of Minnesota’s population.

At the news conference, Rukavina, colorful as always, gave new meaning to the state’s motto.

Most people, he said, might think that “L’Etoile du Nord’’ means the Star of the North.

“ ‘L’Etoile du Nord’ means the ‘Money Goes South,’ ’’ Rukavina said.

During the news conference, Bakk said the “raid” of the trust fund money shows that the Republicans “about politics, not policy.”

That means he believes Republicans are taking the Range money because the Range is populated by DFLers.

But he also said there was irony in their decision.

“After all these years, the Republicans finally won a seat from the Range,” Bakk said.

He was referring to the House victory of Carolyn McElfatrick, by 400 votes, over DFL incumbent Loren Solberg.

“They [Republicans] won’t get another one for 50 years,’’ Bakk vowed.

Go back to the committee hearing.

Freshman legislators tangle
Melin offered an amendment to the finance bill. In her amendment, she said that instead of “stealing our $60 million,” Local Government Aid funds should be cut from the district represented by the bill’s author, Gunther, and from LGA funds from the district represented by Ernie Leidiger of Mayer.

Leidiger had made the mistake of earlier saying he “enthusiastically supported” taking the Ranger money.

Melin said that she would have preferred taking property tax money from those districts but was prevented from doing so by state law. 

Leidiger’s face turned red at this suggestion. But then he made a rookie legislator’s mistake. He asked Melin a question he didn’t know the answer to.

“How much money,” he asked Melin, “does the trust fund receive from the state’s general fund?”

“Nothing, not a dollar,” said Melin.

Leidiger tried to dig out of that hole with another question.

“In the future, is the IRRRB (the Range board that oversees the Johnson Fund) expected to receive money from the general fund?”

“No,” said Melin. “Never has, never will.”

Leidiger decided to cut his losses and ask no more questions.

Her amendment, of course, failed.

But the Rangers got moral support from other DFLers on the committee, including St. Paul’s Tim Mahoney.

He talked of how “shameful” it had been to see advocates from a number of organizations come before the committee and thank committee members for not cutting their budgets more deeply.

“Shame on every person who came here and said, ‘Thank you for not cutting my program more deeply,’ ” Mahoney said.

Programs are being spared deeper cuts, he said, because Republicans on the committee raided the Rangers’ money.

This battle isn’t over.

Rangers don’t yield easily.

Beyond that, there are deep questions whether the law even allows the money to be taken.

But that’s a battle for another day.

Besides, Gov. Mark Dayton, who owes his job to support on the Range, will almost certainly ride to the rescue on these funds.

That, of course, means Republicans will have to figure out another way to come up with $60 million. It’s a job that keeps getting harder and harder.

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.

Comments (20)

  1. Submitted by RB Holbrook on 03/24/2011 - 05:07 pm.

    “This was not my idea. This was the hand I was dealt.”

    What truly inspiring leadership.

  2. Submitted by Ray Schoch on 03/24/2011 - 05:09 pm.

    They built the fire, folks. Hold their feet to it… I especially like Melin’s suggestion that the money instead be taken from LGA funds for the districts of Gunther and Leidiger. Since LGA funds for three of the biggest cities in the state are currently being held hostage by threats from the GOP, it seems only fair that cities and towns in GOP districts give up THEIR LGA funds, too.

    As Doug suggests, closing a multibillion-dollar hole without adding any new revenue is going to be virtually impossible. We might be watching the Minnesota Republican Party commit hara-kiri by taking on the rhetoric and policy platform of the radical right.

  3. Submitted by Dennis Tester on 03/24/2011 - 05:40 pm.

    Hell hath no fury like a DFLer denied taxpayer money.

  4. Submitted by chuck holtman on 03/24/2011 - 06:09 pm.

    “That, of course, means Republicans will have to figure out another way to come up with $60 million. It’s a job that keeps getting harder and harder.”

    — Only, of course, if you are unwilling to request just a modest bit more from those most able to pay and who benefit the most from a well-ordered and stable society.

  5. Submitted by Hénock Gugsa on 03/24/2011 - 08:03 pm.

    Will Mark Dayton be able to use the line-item veto on this budget bill? If so, thank God for that.

    The Republicans could go to the Chamber of Commerce and see if they can steal some money there without feeling “sheepish.”

  6. Submitted by Hénock Gugsa on 03/24/2011 - 08:16 pm.

    @#3 – “Hell hath no fury like a DFLer denied taxpayer money.”
    _______________________________________________

    Who said it is taxpayer’s money? And if it is, again it is locally raised. Also … if it is a “trust fund,” nobody except the trustees are entitled to it, I’d think.

    It seems Republicans have empathy only for wealthy taxpayers, and everybody else can go eat cake.

  7. Submitted by Bill Coleman on 03/24/2011 - 08:23 pm.

    “The Rangers money was just there.”

    I hope that I am never sitting next to any of these guys at the local watering hole. You would not want to leave any money sitting on the bar. They probably would steal the bartender’s tips too!

  8. Submitted by Henk Tobias on 03/24/2011 - 08:35 pm.

    “They pointed out that mines do not pay property taxes. Instead, they pay a tonnage tax that goes into a number of funds. One of those, the Douglas J. Johnson fund, which receives 13.7 cents per ton of ore from mining companies, is set up specifically to be used as development money for diversifying the Range economy.”

    I know this is useless if a person is too dull to understand it the first time they read it, but this is not “taxpayer” money. Mines pay for the minerals they extract from our state, I know Wingnuts, like those that post here, think we should hand our resources over for free, but most of us think its only fair that they pay for them and that those funds be used as they were lawfully intended.

    Republicans see money and nothing will stop them from grabbing it. They are beyond contempt.

  9. Submitted by Ron Gotzman on 03/24/2011 - 09:26 pm.

    Chuck,

    Karl Marx and Lenin had a “well ordered and stable society.”

  10. Submitted by Paul Udstrand on 03/24/2011 - 09:51 pm.

    Amateur hour has arrived. And we thought the budget was train wreck before these guys took on the job.

  11. Submitted by Neal Rovick on 03/25/2011 - 07:38 am.

    Ron (#9), as I recall my history, the Soviet Union had the habit of making 5 year plans with numerical goals that were not possible or practical. The bureaucrats in Moscow would come up with the number to impress the Great Leader and the underlings were supposed to come up with the means, dirty, fair or foul, to reach the number of tractors or bushels of wheat specified. The destruction of the system that resulted from that practice was enormous.

    In this case, think of the Republicans and their budgeting goals.

  12. Submitted by John Olson on 03/25/2011 - 08:01 am.

    Republican leadership is raiding every fund it can lay its hands on to try and scrape together enough to cover the shortfall.
    When they start to go after the police and fire training funds, you know things are not working out as planned.

    Since tax increases aren’t on the agenda at the Legislature, I’m surprised we have not heard someone come out and said “Whoopsie, we miscalculated the estimated shortfall. It’s not $5 billion….it’s $3 billion. Heh heh heh.”

    Keep in mind that the machinations we are all witnessing are based on a projection. During the budget debacles of 1981 (3 special sessions), one of the most intense debates was over the forecasting model used at the time and the underlying assumptions.

    In the end, the-Gov. Quie reluctantly agreed to a 10 percent income tax surtax.

    I will not be one bit surprised to see the discussion of the forecasting model resurrect itself. If you can’t cut enough to make up the shortfall, reduce the projected shortfall.

  13. Submitted by Dennis Tester on 03/25/2011 - 08:28 am.

    #8 says “I know this is useless if a person is too dull to understand it the first time they read it, but this is not “taxpayer” money. Mines pay for the minerals they extract from our state”

    Then that money should go into the state coffers, not a DFL slush fund for their buddies up nort.

  14. Submitted by Pat McGee on 03/25/2011 - 08:52 am.

    Mr. Gunther, if the rangers money was “just there” why not take from the banks? The money is there too.

  15. Submitted by Clayton Haapala on 03/25/2011 - 10:36 am.

    Come on, @Dennis(#13), what part of “tonnage tax paid in lieu of property taxes” won’t you understand? That, and the article listed plenty of other mine-related moneys being distributed throughout the state.

    So, the state will incur costs when a court slaps down this theft in court. Brilliant.

  16. Submitted by Carol Overland on 03/25/2011 - 10:48 am.

    If you’re counting on Dayton for a veto, well, don’t hold your breath. He sure hasn’t come through with the vetos thus far!

  17. Submitted by cheryl luger on 03/25/2011 - 12:33 pm.

    appears as tho the final sentence in the statute isn’t strong enough to prevent the raid.
    does this dedicated use apply only to the interest and not the capital?

    ” Money from the trust fund shall be expended only in or for the benefit of the taconite assistance area defined in section 273.1341. ”
    +
    https://www.revisor.mn.gov/statutes/?id=298.292

    unlike some other funds, only interest is to be spent unless ___approved___ by the iron range board.

    interesting mining tax/fund document shows this fund on page 13 of the physical document, figure 5.(screen page 17)

    http://taxes.state.mn.us/special/mineral/Documents/2010_Mining_Guide.pdf

    i am curious as to the justification being used to get around the taconite area restriction and avoiding the iron range board approval for other issues.
    …. are proponents using a difference between “interest” and “fund capital” ? difference between “spent” versus “fund tranfer” ?

    maybe someone more familiar than i am with the leg. process could explain how the trust fund’s principal can be transfered to general fund given restrictions.

    what would be a stronger method to ‘protect’ … a constitutional amendment ?
    are there other ways to protect the intent of legacy/trust funds ? …since many policy makers don’t like the inflexibility of an amendment.

    best,
    cl luger
    mpls ward 12

    p.s…..this isn’t the only ‘trust’ fund that legislators are looking at….can dnr education trust be better managed ?
    several years ago i waS told that revenues from this fund were a drop in the bucket (student per capita basis)…but every drop now counts.

    http://minnesota.publicradio.org/display/web/2011/03/16/trust-fund-dnr-schools/

  18. Submitted by Rosemary Rocco on 03/25/2011 - 05:11 pm.

    How low will the GOP go to protect high income earners? If the items in this article (and about a dozen more not enumerated here)are any indication they are willing to pillage and plunder resources. So they will steal money from a fund dedicated to the Iron Range (by law) and to contemplate logging in our state parks. Watch out-the next thing we know they will introduce a bill to sell water from Lake Superior to the Southwest. I guess this is what we get with a Speaker of the House who is an immigrant from South Dakota!

  19. Submitted by Jim Roth on 03/25/2011 - 08:22 pm.

    This is just a continuation of Pawlenty’s policies to rob Peter to pay Paul. It’s not fair and it’s not sound public policy. Just another way to hide from reality.

  20. Submitted by Francis Ferrell on 03/26/2011 - 12:26 pm.

    It’s bad enough when real estate values have dropped nearly 30%+ in some areas and property taxes are increasing exponentially. Why doesn’t the Legislature reform the tax structure totally across the board so everyone pays their fair share of taxes?

    Raiding “trust funds”, cutting LGA without reforms, blind budget cutting without good reason, and just ignorantly saying “no new taxes” is absurd. At the present rate, this state will be in dire financial straits if visionary wiser minds do not prevail.

    TO the Legislature and especially the GOP:
    THINK!!! Leave the IRRRB trusts alone. Step back and work out a sensible workable budget like we common folks have to. Look at cash in hand and budget accordingly.
    (Forget the revenue projections. If you have the greenbacks in your treasury then don’t plan on any more funds until it’s in the treasury!)

    If you need additional revenues then; perish the thought!; raise taxes in a reformed progressive manner. That’s right, I said raise “income” taxes. If Bill Gates, Warren Buffet, and many lesser wealthy folks can come out saying they want to pay their fair share of taxes then what’s the problem?

    If you forget the inane MN politics of late and let reason prevail you will find that raiding trust funds like the IRRRB trust is only a stopgap measure and not a solution to the travails of Minnesota’s messy state budget.

    Remember, there has been eight years of budgetary slacking and inept fiscal budget policies by state government especially the past governor’s policies. Now it is time to remedy the situation and go forward.

    THINK and compromise–should be the modus operandi of the day for the Legislature. Isn’t that the American or Minnesota way of doing things?

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