This week’s update from lobbyist John Tuma:
“It is extremely desirable to remove as speedily as possible so vexing a question from our State politics, not allowing it to remain for years to disturb our own elections…”
That quote was from our second governor, Alexander Ramsey, at his first inaugural address in 1860 describing a huge financial crisis facing the State of Minnesota as a result of some very speculative railroad financing schemes created by the previous legislature and administration. Dealing with state budget problems is nothing new under the sun as our 2008 Minnesota Legislature is facing its own vexing question of a nearly one billion dollar deficit.
What you may not know is that Minnesota’s statehood started 150 years ago in the midst of a huge financial mess known as the five million dollar railroad loan debacle. Minnesota’s government was strapped for cash, but this did not squelch the big dreams of the fortune speculating pioneers who envisioned several railroads pushing westward from our Mississippi River ports. In the spring of 1857, the territorial legislature issued bonds of credit to four railroad companies bent on their dream of westward expansion. Not wanting to bend to eastern barons and believing they could command their own destiny, many railroad investor groups were made up of legislators, their families and their constituents.
Unfortunately for the big-dreaming pioneer speculators, they lacked the cash to finance their big dreams and develop a scheme to fund the railroads by issuing speculative bonds. Their timing was horrible as the panic of 1857 hit in August only a few months after the scheme was hatched. As a result, Minnesota’s political and economic future took an amazingly different and difficult direction. It would be more than 20 years until a real functional railroad was built in Minnesota and only then after being taken advantage of by speculators.
Alexander Ramsey was able to win the next gubernatorial election in part based on his position of cleaning up this “vexing question.” For a state that was leaning Democrat, it quickly swung to solidly support the new and upcoming Republican Party. Post Civil War, the state would remain solidly Republican until the winds of change of prairie populism would catch fire, in part because of abuses by the railroad barons who became rich by speculating on the poorly developed railroad land grants given in conjunction with the state’s poorly conceived financial scheme.
Therefore, Minnesota State politics is not unfamiliar with a financial budget crisis. In proportional comparison, the one billion dollar deficit in 2008 is nowhere near as daunting as the one faced 150 years ago, but it is always challenging for legislators to decrease programs they are often personally invested in. Nonetheless, when legislators returned after Easter break this Tuesday, they quickly focused most of their efforts towards developing their budget balancing proposals.
In past years the environmental budget has taken the brunt of these budget fixes. In the 1990s the environment portion of the state budget was almost two percent of the general fund expenditures. After the 2003 budget crisis, the environmental portion of the state’s general fund dwindled to one percent. Therefore, when the state’s economy started to derail last summer, the environmental community became rightfully nervous.
Fortunately for us, we have two new environmental finance committee chairs who have been tireless champions for the environment – Rep. Jean Wagenius (DFL-Minneapolis) and Sen. Ellen Anderson (DFL-St. Paul).
On Tuesday of this week, the House Environment and Natural Resources Finance Division adopted recommendations for budget reductions. It was given a target for cuts from the House leadership in the amount of $3.362 million, which was the same as proposed by the Governor. This division handles the budgets for the Pollution Control Agency (PCA), Department of Natural Resources (DNR), Board of Water and Soil Resources (BWSR), and Metropolitan Parks. This would amount to only a 1.1% reduction in the general fund dollars going to the environment.
On Wednesday, the Senate Environment, Energy and Natural Resources Finance Division presented their budget fix. The Senate’s proposed cuts for PCA, DNR, BWSR, and Metropolitan Parks amount to $2.95 million. The Senate was able to reduce some of the cuts’ impact by capturing surpluses in some one-time accounts and increasing the water usage fees for permits.
Given the extent of the budget crisis, a one percent cut would be a huge improvement over past years. More importantly, there were no major raids on any of our dedicated funds, which were common in past budget fixes. Further, Rep. Wagenius and Sen. Anderson made it a priority not to make any significant cuts to the Clean Water Legacy programs. Most of our critical programs will still be moving forward and only losing possible increases that were provided in last year’s budget. If these budget recommendations hold, our chairs have removed what appeared to be a vexing question for our environmental community.
A couple additional notes. The Capitol Investment Bill has not yet wrapped up as of the writing of this Capitol report Thursday night. From all the rumors and activities in the Capitol halls, it would seem that they are very close to resolving the bill. The conference committee members have been holding their negotiations very close to their vests. It appears that the House and Senate have worked out an understanding, but have wisely started to work with the Governor’s office to get a bill he will sign. Those negotiations have been a little rocky, thus causing the delay. One of the Governor’s major demands is funding for the Vermilion Lake State Park.
The Clean Car Initiative supported by MEP received a little boost in the House Environment Finance bonding proposal. Rep. Wagenius included a small appropriation to the PCA in her bill for implementation of the Clean Car Initiative. This provision survived attacks in both her committee and the full Finance Committee on Thursday. An amendment to remove the provision failed in the full Finance Committee on a vote of 14 to 20. We had several swing votes go our way on this vote. It is certainly not a final vote on the Initiative, but it was encouraging that the momentum for this bill has continued to build.
As we look forward, both legislative bodies should have their proposals for the budget fix developed by the end of this week. The conference committee work will start in earnest next week to try to resolve what appeared to be major overall differences between the Governor, the Senate, and the House. The House uses much more of the rainy day funds than either the Senate or the Governor. Both legislative bodies also create more revenue through fees and taxes than is probably palatable to the Governor. Therefore, they still have a few vexing questions before them that they need to deal with speedily in order to not allow “it to remain for years to disturb our own elections.”
*History of Minnesota, Edward Neill, 1873.