In 2008, voters passed the Legacy Amendment to the state constitution, increasing taxes in exchange for cleaner water, better parks and outdoor habitats, and a stronger cultural sector. It turns out we may not be getting our money’s worth.
A generation ago, Pheasants Forever was but a dream of a young newspaper outdoors columnist named Dennis Anderson, who launched the organization to rally outdoorsmen to protect bird habitat from encroaching urbanization and agricultural use. Today, it’s a formidable entity with $43 million in annual revenue and 125,000 members (27,000 of them in Minnesota) in 600 chapters in the United States and Canada. Nearly half of its revenue comes from government sources.
Of late, the White Bear Lake-based nonprofit has taken on a more decisive role—buying hundreds of acres of land each year to keep it perpetually out of the hands of developers and agribusiness. Enabling it to do so is more than $45 million generated through taxes, dollars appropriated each year through Minnesota’s Legacy Amendment since its passage in 2008. In fact, Pheasants Forever receives more Legacy support than any other nonprofit program.
Why, and how, pheasant habitat protection has become the biggest private purpose of an amendment designed to sustain the state’s legacy helps illustrate significant questions and concerns about how the $7.5 billion it is raising is being managed. And it raises the question: Whose legacy will taxpayers really end up supporting?
The Legacy Amendment? If the name doesn’t resonate, you probably voted for it nonetheless. Six years ago, as a wicked recession stormed in and opposition to tax increases was rising, Minnesota voters chose, by a 56-39 margin, to write a 25-year tax increase into the state’s constitution. That decision raised the state’s sales tax by three-eighths of a cent to 6.88 percent. The regressive nature of the sales tax didn’t get much attention during the amendment campaign, but this tax hits lower-income households harder than taxes on property and income, according to the Institute on Taxation and Economic Policy.
Legacy revenue, pouring in at a rate of about $300 million a year ($7.5 billion over its life), is dedicated to clean water, the arts and cultural scene, parks and trails, and outdoor habitat. There’s no single river through which the revenue flows, no agency in charge. Four complex and overlapping funding structures—with a host of citizen boards and review panels—divvy up Legacy money for each of the four funding pots. The appropriations process is opaque. The Legacy website is incomplete and infrequently updated.
The Outdoor Heritage and Clean Water funds each get 33 percent of the money. The Arts & Cultural Heritage fund gets 20 percent. The Parks & Trails fund gets 14 percent. (See the supplemental information to learn more about each individual fund.)
Five years in, many question whether Legacy spending is living up to the promises of those who pushed the amendment and benefit from its largesse. In an audit released late in 2011, the state’s Office of the Legislative Auditor (OLA) raised numerous concerns around the Legacy funding process and its governance. OLA did not uncover major abuses, but concluded that “for most people the ultimate concern is whether Legacy money is used to achieve the outcomes proposed in the Legacy Amendment.”
Rep. Rick Hansen, a DFL legislator from South St. Paul, is among those calling for more monitoring of Legacy funding practices and outcomes. The House Republican leadership kicked him off the Outdoor Heritage Council in 2011 after he questioned the council’s emphasis on land acquisition, voting against certain purchases and proposing more effort be focused on improvements to existing public lands. Last year, with the DFL back in control of the Legislature, he was reappointed. Hansen, perceived by outdoor heritage interests as a maverick, thinks the council focuses too much on land acquisition and should spend more restoring and enhancing land already owned by the state.
Land purchases have become a source of ongoing tension in much of northern Minnesota, where large public holdings limit development and depress property tax revenue. State government owns at least 17 percent of land in Minnesota (some estimates place it as high as 25 percent), ranking fourth among states in total acreage, according to the Department of Natural Resources. Now it is bringing more land under public ownership thanks to Legacy acquisitions. Under the Outdoor Heritage Council’s 25-year plan, as many as 1.5 million acres could be publicly acquired (for all types of preservation and restoration purposes) with Legacy dollars if the fund’s current trajectory is maintained. This translates into about 2,300 square miles, or nearly four-fifths the acreage of the seven-county metro area.
Local government is concerned. Thirteen counties have already approved “no net gain” public land resolutions, some before the amendment passed. These declarations are only advisory, but they are a measure of the opposition to land sales that lead to yet more public ownership.
“The Legislature needs to ask tough questions because this is a large chunk of change,” Hansen says of Legacy funding. “It’s a question of outcomes. What are we getting for that money?”
Hansen is a member of Pheasants Forever and several other outdoors groups, but thinks some of the Outdoor Heritage Council’s most passionate backers, including Dennis Anderson, have too much influence at the council. “There has been a band-of-brothers philosophy that those who worked on the Legacy campaign,” he says, “are entitled to the fruits of the campaign.”
Pheasants’ members function almost as real estate brokers in connecting their organization with private owners willing to sell their land, says Garry Leaf, executive director of the advocacy group Sportsmen for Change, which backs the council and its grants to Pheasants and similar conservation organizations.
Pheasants spokesman Rehan Nana says the organization saw an opportunity to permanently protect habitats for wildlife. Pheasants has used two-thirds of its Legacy money for these purchases (the other third goes to restoring habitat). Pheasants defenders say its outsize role in handling Outdoor Heritage funds is largely due to its initial preparedness to take action with them. Bill Becker, executive director of the Outdoor Heritage Council, says Pheasants had already developed the capacity to engage in land deals and had projects ready when the amendment’s funds began to flow.
Pheasants conveys all of this land to the DNR or the U.S. Fish & Wildlife Service. Minnesota county officials worry about the tax impact of these deals. Counties have received payments in lieu of taxes for state-owned land for many years. But thus far, legal concerns have kept the state from using Legacy funds for land stripped from the tax rolls after it was acquired with Legacy money.
To get a sense of whether Legacy is delivering on its promises, TCB looked at more than 7,000 Legacy grants and appropriations among the $1.015 billion distributed in the first four years of the amendment’s life, interviewed more than 50 key stakeholders, and sifted through countless reports and articles. While departments of state government are Legacy’s main beneficiaries, parts of the nonprofit sector are awash in new funding.
Pheasants excels at securing grants from Minnesota’s Lessard-Sams Outdoor Heritage Council, which is funded through the Legacy Amendment. All told, it won $45.5 million in Legacy money during the period—roughly a seventh of all Legacy funds going to private interests.
The next largest recipient is the Minnesota Historical Society, at $19.9 million, followed by the Nature Conservancy at $19.6 million. But this is small potatoes compared to the dollars flowing to state government. (The Legacy statute requires its tax receipts to be dedicated to new programs and initiatives, even dollars that are routed to state agencies. But in their hands, Legacy dollars have become hard to trace. See “An auditor’s nightmare” sidebar.) Minnesota’s DNR is the hands-down biggest recipient, with more than $401 million in new money during Legacy’s first two biennia. And Legacy funding means the State Arts Board has the highest per capita spending in the United States, projected at $6.36 per person for 2014.
Backers argue this spending has made the state significantly more competitive economically. “What Minnesota did is one of the best investments in our economy we could have made,” says Peggy Ladner, executive director of the Nature Conservancy’s Minnesota operations. “It has everything to do with our business climate—our land, our water and our quality of life. These are what attract talented people.”
Yet interviews conducted by the Civic Caucus with a parade of business climate watchers last year show nary a mention of the Legacy Amendment as a factor in attracting or keeping business. Quality of life gets attention, but factors like education and workforce quality, regulation, taxes and support for entrepreneurs turn up as the primary concerns. (The caucus is a public affairs group; interviews are posted on its site, civiccaucus.org.)