With Landfill Fund Loan, State Costs Piled Up

ST. PAUL, Minn. (AP) — Taking from the trash has wound up costing Minnesota big bucks.

Custodians of the state treasury forked out $61 million this year — and owe about $40 million over the next few years — to repay a loan half that size from the state's Closed Landfill Investment Fund. The fund is administered by pollution regulators to pay for programs that ensure proper environmental attention is given to more than 100 closed landfills.

The $48 million loan was ordered by lawmakers in 2010, to help dig out from a steep budget deficit. As part of an agreement put into law then, the loan was to be repaid with interest that matched any investment earnings the fund missed out on as a result.

As they released a budget forecast last week that showed a $1 billion projected budget surplus, finance officials pointed to the loan repayment as a rare area where costs were climbing more than they were counting on. The reason? Stocks and bonds that the fund invested in boomed amid a market recovery from the Great Recession.

"I don't think any of us realized at the time that it was 100 percent invested in the stock market. And the stock market did very well," Minnesota Management and Budget Commissioner Jim Schowalter told the House Ways and Means Committee on Friday.

Legislators and then-Gov. Tim Pawlenty's administration were drawn to the fund because they exhausted other options, and the money wasn't slated to be used for remediation until 2020 and beyond, said Sen. Richard Cohen, DFL-St. Paul and chairman of the Senate Finance Committee. The move helped stave off other cuts at the time.

"There wasn't $50 million from someplace else," Cohen said. "At that point we had been looking everywhere. We tried to make things as palatable as we could in 2010 in a bad situation."

He said the extent of the potential windfall wasn't anticipated and could get a second look from the Legislature in the upcoming session.

The loan is being repaid in four installments, with the one already made this year accounting for the biggest. At least $38 million in principal remains — to be spread roughly evenly over the next three years. The amount of interest on that could change, but is expected to top $5 million.

At the Minnesota Pollution Control Agency, planners are banking on lawmakers following through on their commitment. The fund had less than $4 million until the recent installment. It must balloon in size to cover the estimated $173 million need over the next three decades for care of landfills after they close, said Kirk Koudelka, assistant commissioner of legislative affairs, land and solid waste policy.

The fund was started, in part, with money drawn from solid-waste taxes that customers pay on their garbage bills.

"This is important work," Koudelka said. "These landfills don't go away. The trash we throw away — there are long-term repercussions. And to protect the public we need the long-term care of these facilities."

As for lawmakers, the deal drives home the cost of deferring budget pain. Cohen said there's a lesson for the Legislature.

"Try to be a little bit careful about borrowing money from various funds because at some point you've got to pay them back," he said.

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