Legacy Amendment is ‘a work in progress’
Legislative Auditor says some aspects—including ‘supplement, not substitute’—are not clear
By Hlee Lee, External Relations Director
The legislative requirement to use funds provided through the Legacy Amendment to “supplement, not substitute for traditional sources of funding” is confusing to everyone from legislators to those charged with distributing the funds to the recipients, according to a report by the Office of the Legislative Auditor (OLA).
OLA released two reports evaluating funding under the Legacy Amendment on Wednesday: a program evaluation of the amendment and a financial audit of the internal controls and legal compliance of three of the four funds.
Overall, the reports found no major issues in the appropriation of Legacy funds, but raised a number of concerns, from a lack of clarity about what qualifies for funding to questions of conflict of interest to whether funds have been used appropriately for administrative costs.
"The good news is that there are no shocking revelations in the report," said Parks & Trails Council Executive Director Brett Feldman. “Perhaps the most striking finding is that despite the constitutional requirement that Legacy funds be used to supplement and not as a substitute for traditional funding, there are no clear guidelines about how to ensure this is indeed what is happening.”
According to the OLA report, the “supplement not substitute” language baffles legislators; some believed it was to be a guide to future legislatures while others believed it was to restrict “the Legislature’s ability to reduce funding from ‘traditional’ sources to support Legacy-related activities.” During the 2008 and 2011 legislative sessions, some legislators worried about potential lawsuits over the definition of “traditional."
Recipients of Legacy money are also confused about the definition of “traditional” and are concerned about potential allegations of “substituting” if, for example, a foundation that had consistently funded certain activities were to change its focus and eliminate that funding.
The Parks & Trails Council of Minnesota was among 30 environmental and conservation organizations that sent a letter to Governor Mark Dayton regarding the “supplement not substitute” issue, asking that the Legislature maintain baseline levels of funding for Legacy-related purposes from “traditional”–or non-Legacy–revenue sources. .
After a record 20-day state government shut down this past summer, a special session compromise resulted in a 16 percent cut to the state Parks and Trails General Fund budget. This heightened concerns about the possibility that Legacy funds would be used to substitute for money previously allocated from the General Fund.
“This is especially disconcerting during challenging economic times like these when it is possible that disproportionate General Fund cuts are being made with a wink and nod to the Legacy Funds as a way for backfilling the cuts,” said Feldman.
OLA recommended that the Legislature establish a process making it possible for legislators to review past sources and levels of funding for programs and projects being considered for Legacy funding. It also recommended That Legacy fund recipients better document how they comply with the “supplement not substitute” provision. Recipients also should better document their use of the Legacy money.
The financial audit revealed that “organizations generally complied with” finance-related legal requirements, but there were some internal control issues. For Parks and Trails Legacy Funds, these included failure to show how some expenses complied with the specific purposes of the fund.
The report also noted confusion and concern over how Legacy money can be used for administrative expenses, most often the cost of office space for staff working on Legacy-funded projects and programs.
Clean Water, Land and Legacy Amendment
Minnesota voters approved the Legacy Amendment in 2008. It increased state sale tax by three-eights of 1 percent from July 1, 2009 to June 20, 2034. In its first year, the amendment collected $230 million, which is distributed between four funds: Outdoor Heritage (33%), Parks and Trails (14.25%), Arts and Cultural Heritage (19.75%) and Clean Water (33%) Funds.
OLA began its evaluation of Legacy funding in June, looking at three issues: (1) the structures and procedures being used to appropriate and distribute funding, and who had received money; (2) the processes to ensure accountability and oversight of the funds; and (3) which of the accountability and oversight practices are effective and which need improvement.
The evaluation process included interviews with personnel involved with the allocation and oversight of the Legacy funds, as well as legislators, legislative staff and state agency staff. The report looks at Legacy Fund appropriations and expenditures from July 1, 2009 through June 30, 2011.
To read the full reports, visit: http://www.auditor.leg.state.mn.us/
