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January 17, 2003

Minnesota Lawmakers Stand Up for Ethanol Producers

ST. PAUL PIONEER PRESS

Busloads of Minnesota corn farmers traveled to the Capitol on Thursday to fight Gov. Tim Pawlenty's plan to wipe out $27 million in ethanol subsidies, and lawmakers handed them a quick victory.

A Senate committee rejected Pawlenty's proposal to end a 20-cents-per-gallon subsidy to 12 nonmetro ethanol plants, agreeing only to cut the subsidy to Gopher State Ethanol, whose emissions have infuriated some of its urban neighbors in St. Paul's West Seventh Street area.

And Republican House speaker Steve Sviggum said the House would likely reduce the subsidy to $8 million to $10 million but not eliminate it entirely.

Those first steps to save the ethanol subsidy came as Senate committees worked over Pawlenty's $468 million budget-balancing package, reducing his proposed spending cuts by $85 million and making many of them temporary, rather than permanent.

The Senate Finance Committee will today consider the spending cuts and a number of accounting shifts to delay payments, and the full Senate probably will vote on them Thursday. House committees are scheduled to act on the budget next week, with a floor vote the following week. The two bodies will have to work out differences in their plans before sending them back to the governor.

Sen. John Hottinger, of St. Peter, leader of the Democratic-Farmer-Labor majority in the Senate, said DFLers viewed Pawlenty's request for speedy approval of permanent spending cuts as a rush to judgment.

"We want to have a public debate about major policy changes," Hottinger said. "We've taken care of the immediate problem, and we've done it promptly."

Sviggum, of Kenyon, said Senate Democrats' refusal to accept the full amount of Pawlenty's recommended budget cuts and accounting shifts would make for difficult negotiations in the end.

"That is wrong, it is absolutely wrong," Sviggum said of the Senate plan to cut less overall spending than Pawlenty recommended. "It is a bad place to begin negotiations."

On Thursday night, with fiscal analysts still tallying the results of the day's actions, it appeared the Senate committees had recommended $383 million in cuts and shifts -- enough to cover Minnesota's projected short-term deficit of $356 million and leave a small cushion of reserves.

But Pawlenty had recommended $468 million in borrowing, spending cuts and accounting shifts, leaving more than twice the cushion the Senate proposed. If approved, his plan would slightly reduce the deficit in the next two-year budget, from $4.2 billion to $4.1 billion.

The Senate committees' recommendations included:

• Refusing to go along with Pawlenty's proposal to cut $39 million from a 21st Century Minerals Fund established in 1999 to promote Iron Range development.

• Modifying a nursing home rate change so that about 10,000 Minnesotans who pay their own nursing home expenses would face a $2 per-day rate increase, rather than the $6 Pawlenty recommended.

• Restoring $10 million worth of aid to low- and middle-income college students who lost the aid when a state grant program ran out of money Jan. 10.

• Accepting a Pawlenty proposal to borrow, rather than pay cash, for $130 million worth of road and bridge construction.

• Accepting a Pawlenty plan to delay by 90 days the state's payment of $50 million in sales tax refunds to businesses that buy new equipment.

• Rejecting Pawlenty's recommendation to reduce by 5 percent the reimbursement rates the state pays to hospitals for care for poor people.

But the biggest change by the Senate -- and the onemost certain of survivingconference-committee negotiations with the House -- was the vote to maintain the subsidies for all of the ethanol plants but the Gopher State plant in St. Paul.

Sen. Sandy Pappas, DFL-St. Paul, who represents the West Seventh Street neighborhood, said she urged that the Gopher State subsidy be dropped.

In reply, Gopher State issued a statement that said, in part: "Gopher State Ethanol spends over $14 million annually with local farmers, has a payroll that exceeds $2 million, and spends over $5 million with other local vendors. This action stands to put into jeopardy a company and an industry that bring benefit at a ratio of 11 to one vs. the cost."

Pawlenty, who praised the ethanol industry in his inaugural speech, has not said whether he would propose permanently eliminating the ethanol subsidies that he proposed ending for the rest of the fiscal year. Finance Commissioner Dan McElroy suggested Tuesday that at least some of the ethanol plants receiving the state payments are profitable enough that they could survive on their own.

A caravan of buses brought corn farmers to the Capitol to lobby to keep the state ethanol payments. They argued that the subsidy, which expires after a plant becomes 10 years old, has served as a loan guarantee for bankers to finance construction and startup operations for the plants.

"We can understand budget cuts, but this isn't a cut," said Charles Grant, a farmer near Bingham Lake. "This would kill a state commitment to farmers and rural communities."

About 13 percent of Minnesota's corn crop is processed into about 244 million gallons of alcohol each year. The alcohol is used primarily as an additive to gasoline to produce a cleaner-burning vehicle fuel.

Data compiled by the Minnesota Department of Agriculture and circulated Thursday by rural lawmakers said the ethanol plants buy $200 million in Minnesota-produced corn each year, have created 1,000 manufacturing jobs and generate $15 million in state taxes each year.
 

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