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Republican questions IRRRB funds transfer

A southern Minnesota Republican state lawmaker is raising questions about a plan by northern Minnesota Democrats to stash public money in a private, nonprofit trust.

Sen. Jeremy Miller, R-Winona, chairman of the Jobs and Economic Growth Committee, says he's concerned about how the trust will be administered and how it will be responsible to public scrutiny.

Iron Range DFL lawmakers who comprise the Iron Range Resources and Rehabilitation Board — which advises the IRRR on how to spend its money — are expected to approve a resolution today transferring the first $50,000 from IRRR accounts to the nonprofit Range Trust to help establish the trust and get the entity moving.

Much larger transfers could follow later this year as Range DFLers prepare for a possible changeover to a Republican administration after this fall's election.

"As a Senator from Southeastern Minnesota, I typically would not get involved in Iron Range issues," Miller wrote in a letter to Mark Phillips, commissioner of the state Department of Iron Range Resources and Rehabilitation. But Miller noted his committee has oversight of the IRRR and that "it is imperative that we ensure taconite tax dollars are used only as intended — for economic development and job creation."

Here's the issue: The IRRR is a state agency, run under the governor and overseen by the state Legislature. Yet its funding comes from local taconite taxes, taxes mining companies pay on production instead of paying property taxes. Rangers say that money should be kept local, just like the property tax revenue from businesses in Miller's district.

It's a confusing mix of local money and state oversight. And more than once in past years lawmakers have eyed the IRRR's biggest bank account, called the Douglas J. Johnson Economic Protection Trust Fund, to help balance the state's budget. The fund, which now holds a whopping $175 million, was created to help diversify the economy as taconite iron ore mining winds down and, eventually, ends.

The most serious effort to raid the taconite money came in 2011 when the Republican-controlled Legislature used $60 million of IRRR money to help balance the state general fund budget. That effort was vetoed by DFL Gov. Mark Dayton, but it spurred Iron Range DFLers to take action.

In 2014, with DFLers back in control at the state house, the IRRR Board established Range Trust with the intention of filing it with money from the Johnson trust fund, and authorized moving up to $100 million into the private trust.

No money was ever transferred, although that may change today if the board moves the first $50,000. Philips and other Rangers say they will build in protections to "claw back" the money if Range Trust somehow doesn't follow its prescribed mission.

Sen. Miller raised other questions as well, such as whether the IRRR commissioner would have authority to determine how much money goes from IRRR accounts to Range Trust, or whether transfers would need IRRR Board approval.

"How will Range Trust's unelected board be accountable to the people of the Iron Range, and to the Legislature, to guarantee funds are spent only on projects related to economic development," Miller asked.

"I've had some people there express concerns that, once the money is in this private trust, that they may try to use it for other purposes. ... And once it's gone, we can't control that," Miller told the News Tribune.

Philips responded with a letter to Miller saying many details of Range Trust have not yet been decided.

The issues raised "must be determined through the Range Trusts organization process," Philips notes. "Since, technically, the Range Trust is no longer under control of the Agency, both the Agency (IRRR) and the IRRR Advisory Board must be satisfied that" the system will work as planned in 2014.

Since 2014, however, based on concerns raised by the Legislative Auditor, the status of the IRRR Board has changed from oversight to advisory. (The Legislative Auditor concluded that only the governor, not state lawmakers, can control a state agency like IRRR.) Phillips noted those changes also gave the IRRR commissioner increased power to spend money without board approval.

But Phillips also said another alternative may exist, hinting that Range Trust might not be needed if other ways can be found to protect the IRRR cash.

"If the leadership of the Legislature would work with myself and the IRRR Advisory Board on a way to ensure that these transfers will not happen, I think there would be less urgency to finish the organization of Range Trust," Phillips wrote in his response to Miller. "I would look forward to an opportunity to meet with with you and other leaders to discuss this issue."