Environment & Natural Resources Trust Fund Q & A

What is the Environment and Natural Resources Trust Fund?

The Environment and Natural Resources Trust Fund is a permanent fund established in the Minnesota Constitution.

What can it be used for?

It can only be used to fund projects of long-term benefit to Minnesota’s environment and natural resources. The Trust Fund may not be used as a substitute for traditional sources of environmental or natural resource funding. It must supplement, not supplant the traditional sources of money.

How is it funded?

The Trust Fund receives 40 percent of net Minnesota State Lottery proceeds. This source of funding is guaranteed by the Minnesota Constitution through December 31, 2024. The Trust Fund may also receive contributions from other sources, such as private donations.

What types of projects are funded?

By law, money in the Trust Fund may be spent only on certain types of projects. These include:

The fund must be used for projects “whose benefits become available only over an extended period of time.”

Are there projects that cannot be funded?

By law, certain types of projects cannot be funded through the Environment and Natural Resources Trust Fund. These include:

Who qualifies for Trust Fund money?

Anyone may apply for an appropriation from the Environment and Natural Resources Trust Fund providing the proposal is consistent with public purposes. However, many more proposals are received than can be funded. Past recipients include state agencies, local governments, colleges and universities, school districts, and non-profit organizations.

How much money is available this year?

The Minnesota constitution provides that up to 5.5% of the market value of the fund can be utilized for projects each year. The legislature can spend approximately $23 million each year for fiscal years 2008 (beginning July 1, 2007) and 2009 (beginning July 1, 2008).

Who decides where the money is spent?

Applications for funding are made to the Legislative-Citizen Commission on Minnesota Resources (LCCMR), composed ot ten state legislators and seven citizen members. The LCCMR makes a recommendation to the full legislature which in turn must pass a bill allocating the funds. Once passed, the bill may be signed or vetoed by the governor. The Minnesota State Lottery has no say in how or where the money is spent.

How does the LCCMR decide what to recommend?

The LCCMR reviews the major environmental issues facing the state and prepares a strategic plan that identifies priority areas for funding. The commission then gathers proposals and may ask selected organizations to make presentations prior to final review and recommendation. Final recommendations are based on consistency with the strategic plan with regard to the available funding.

How do I apply for an appropriation?

Contact the LCCMR at 65 State Office Building, 100 Constitution Avenue, St. Paul, MN 55155, telephone (651) 296-2406, e-mail lccmr@commissions.leg.state.mn.us. You can also visit the LCCMR website, for more information.

Is the Environment and Natural Resources Trust Fund the only resource for funding environmental projects?

No. In addition to the Environment and Natural Resources Trust Fun, the Lottery also makes annual contributions to the Game and Fish Fund and the Natural Resources Fund.

These special funds are only a small part of state spending relating to the environment and natural resources. The General Fund and user fees account for the bulk of spending in these areas.

My part of the state seems to get less than its “fair share” of the money. Why?

There are several reasons why it may seem that some portions of the state receive less than would be “expected” given either population or Lottery sales. First, many of the approved projects are of statewide benefit and cannot easily be identified with any given locality. An example of this type of project is research into the control of pests such as Eurasian water milfoil and purple loosestrife. Second, by law, the LCCMR reviews proposals based on their individual merit and consistency with the strategic plan, not with regard to geographic quota. There simply may be few or no proposals submitted from a particular area. Finally, the legislature may have decided to fund projects in a particular area through other sources.

During the last biennium the Lottery contributed $62 million to the Trust Fund, but only $37 million was appropriated. Why?

The Trust Fund is a permanent fund, similar to an endowment. The Minnesota constitution provides that up to 5.5% of the market value of the fund can be utilized for projects each year. Lottery proceeds are added to the fund's principal. Over time, as the fund grows, earnings will also grow, and more projects can be funded. Eventually, the amount available for expenditure will likely be greater than the annual Lottery contribution.

Who invests the Trust Fund's principal?

The State Board of Investment, the agency charged with the administration and direction of all state funds, is responsible for the management of the Environment and Natural Resources Trust Fund.

Lottery sales during the last biennium were over $800 million. Isn’t the Trust Fund supposed to receive 40 percent of that?

The Trust Fund does not receive 40 percent of Lottery sales. It receives 40 percent of net Lottery proceeds, the amount left after all expenses are paid. By far the largest expense is the payment of prizes, accounting for approximately 60 percent of all lottery sales. Other expenses include administration and retailer commissions.

The other 60 percent of net Lottery proceeds goes to the state’s General Fund. In addition, a 6.5 percent “in lieu of sales” tax on Lottery tickets is applied to environmental projects through the Game and Fish Fund and Natural Resources Fund.

How long has the Trust Fund been in existence?

The Environment and Natural Resources Trust Fund was established following voter approval of a constitutional amendment in November 1988. The first lottery proceeds were deposited in the fund in May 1990. In November 1990, voters approved dedication of 40 percent of net lottery proceeds to the Trust Fund through December 2000. This dedication was continued through December 2024 after passage of a constitutional amendment in November 1998.

How much money has been spent so far?

From Fiscal 1991 through FY07, the legislature has appropriated $208 million for 343 projects.

How can I find out more about individual projects?

The LCCMR's web site (http://www.commissions.leg.state.mn.us/LCCMR/projectabs.html) includes all project abstracts, as well as contacts at organizations receiving grants.

The Minnesota State Lottery’s web site has a list and descriptions of all current projects funded through the Environment and Natural Resources Trust Fund. It also contains a list of projects by county for those cases where a specific project location can be determined.