Michigan Natural Resources Trust Fund again targeted by legislature

Given the conservative financial principles that have been enacted to manage the Michigan Natural Resources Trust Fund, the Senate’s latest efforts to override the judgment and recommendations of the MNRTF board are baffling.

SB76 is the appropriation bill that will fund grants awarded by the MNRTF board in December last year. Sen. Darwin Booher has attached an amendment to it that will use MNRTF reserve funds to fund an additional $7.7 million worth of projects that were not recommended by the MNRTF board. He has also introduced SB280, which will cut the authority of the MNRTF board, undermine the well-considered steps they have taken to maintain the long-term viability of the MNRTF, and insert legislative influence into what has been a very effective, objective process.

The state’s Natural Resources Trust Fund uses royalties paid on oil, gas and mineral extraction to buy and develop lands for public use. Since the fund reached its constitutionally established cap on revenues to the fund from those royalties, it now effectively takes the form of an endowment. The fund’s board has engaged in evaluation and adjustment of its policies, procedures and actions to ensure the fund retains its buying power to benefit future generations. These steps ensure inflation and obligatory expenses will not erode the MNRTF and reduce its capacity to meet its established mission. 

SB76 flies directly in the face of the spending and reinvestment policies that are in place, dipping into reserves for projects that did not score high enough in the ranking system to be funded in the first place.

SB280 is even worse. It contains a provision that would limit the DNR’s ability to seek other funding sources (such as federal and private) for acquisitions they are pursuing, meaning they would need to use MNRTF dollars first. Not only does this reduce their ability to bring other funds back to Michigan, it will also increase competition with local governments and parks, which also use MNRTF funds. Then there is a provision that effectively creates a shell game, allowing trust-fund monies to be used to acquire land that is already owned by the public for recreational purposes. This is a roundabout way to raid the MNRTF, allowing a community to sell recreational land to another agency and use the dollars received for other purposes. The bad provisions in this legislation are too numerous to list, and it is likely that both this and the amendment to SB76 are unconstitutional.

And once again, at the behest of Sen. Booher, the Michigan legislature has delayed their obligation to make the appropriation for the grants awarded last December by the MNRTF board. This means landowners who have agreements to sell must continue to wait to see if the legislature will meet their obligation; that funds awarded for recreational development grants are also held up, wasting valuable time as the construction season gets underway, and ultimately that these dollars are not being reinvested in local economies but instead languishing in the State’s hands while politics play out. 

The fund’s review process has been public and open to input from interested parties. The board has established spending and reinvestment policies, created a financial reserve and sought and received guidance from the Attorney General’s office that they have the authority and responsibility to take these actions.

The management strategy they have adopted will ensure investment income from the fund principle will allow for grant-making long into the future. The proposed legislative interventions will reduce returns to the principle and create more volatility for those considering applying.  

Stakeholders participating in the review process, which include Michigan communities and parks systems and those who receive MNRTF funding, understand that they are accepting near-term limitations on available funding to ensure long-term viability of the resource. They know that the days of major increases in available funds due to windfalls from increases in oil and gas activity and royalty revenue are over. They recognize the necessity of shifting to a conservative management strategy like those followed by foundations and endowments, rather than the more lavish approach that was possible when the MNRTF could count on additional revenue. 

Following these principles over the last couple of years, the MNRTF has been able to increase both spending and reserves. Due to the success of the fund managers and the MNRTF board’s policies, they have been able to spend more in grants each year than the limits they set, while still increasing the reserve. This has been a pleasant boon to applicants, tempering expectations at the beginning of grant cycles and then being able to exceed them, rather than creating unrealistic expectations and then disappointing many. The results support the wisdom of the approach.

The MNRTF has been a huge benefit to Michigan’s communities, citizens and economy, investing over $1 billion in recreational resources that has been returned many times over.  Twice now, Michigan citizens have recognized the importance and value of this resource and voted to protect it in the State’s constitution to ensure it is immune from raids and insulated from political meddling. 

The MNRTF functions well -- it is one of the few institutions that has withstood the test of time. There is nothing that needs fixing. Sen. Booher and the legislature need to do their part, and need to make the appropriation as they are directed to do.