Serving Minnesota and Northern Iowa.

Budget bill reduces ethanol producer payments

By Janet Kubat Willette

Date Modified: 04/15/2010 8:50 AM

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ST. PAUL – Gov. Tim Pawlenty signed the latest round of state budget cuts into law on April 1.

The bill cuts spending in 10 areas of the state budget, including agriculture, higher education, public safety, environment and natural resources and economic development. The cuts plug about a third of the state's budget deficit. Still to be dealt with are health and human services and education funding, which together account for the majority of state spending.

The bill cuts agriculture spending by 7 percent and includes a one-time transfer of $1.046 million from the agriculture chemical response and and reimbursement account to the general fund. ACRRA is funded by fees collected from pesticide sales and it's typically dedicated funding used to clean up pesticide spills, said assistant Minnesota Department of Agriculture commissioner Joe Martin.

Gov. Pawlenty suggested the transfer and the Legislature used this suggestion, said Rep. Al Juhnke, DFL-Willmar, chairman of the House agriculture finance committee. Legislators do things in extraordinary times that they wouldn't normally do, he said.

The transfer was controversial, Martin said.

It's not a good precedent, but it came down to an unwillingness to find another $1 million to cut from the department, he said. Taking money from funds funded by fees erodes confidence in regulated parties who pay fees for services, he added.

On the bright side, there are no fee increases in the budget-balancing bill.

However, there are widespread cuts. AURI is cut by $200,000 and the Minnesota Board of Animal Health by $228,000. The reductions take effect immediately and savings will need to be realized now until June 20, 2011, when the fiscal year ends.

Ethanol producer payments were cut by $4.4 million, Martin said, so instead of $12 million going out to ethanol producers, $7.6 million will go out beginning on July 1. Agency services were cut $1.3 million, he said.

The cuts include a $300,000 reduction to plant protection, the unit that inspects agricultural products to facilitate commerce, Martin said. The proposed cut to this division was $1.3 million. If that occurred, every shipment leaving the state would have to be inspected because USDA APHIS would impose quarantine on products leaving the state, he said. The state has to maintain a level of work to meet federal regulations, he said.

The dairy and food inspection division is cut $260,000. This is the unit that inspects grocery stores, processing plants and dairy farms. The cut will delay the implementation of electronic inspection, Martin said.

Pesticide and fertilizer management is cut $82,000. This will be accomplished by reducing water monitoring, Martin said.

Laboratory spending is cut $75,000. It hasn't been determined how this cut will be made.

Ag marketing and development is cut $129,000 and administrative and grants is reduced by $262,000, Martin said.

Dairy development is reduced by $72,000. That's the latest in a string of cuts to the program, said Bob Lefebvre, executive director of the Minnesota Milk Producers Association.

"I think it's safe to say that the dairy program has certainly taken it's share of cuts over the past two years," Lefebvre said.

Before last year, the program was funded at $1 million. Last year, $250,000 was cut and the governor unalloted some more.

The cuts mean fewer farmers will be able to work with the groups to make changes to their operations to improve profitability, correct environmental deficiencies, or bring in another generation.

The bill did include language directing the Minnesota Department of Agriculture to convene stakeholders to come up with recommendations on a dairy teaching and research facility. The goal is to have a proposal ready for the 2012 bonding bill.

Also included in the legislation is a Green Acres deadline extension. The deadline is moved from May 1 to Aug. 16, giving property owners more time to decide what to do with their 2b land.

Two parts of the ag department budget weren't cut – milk that goes to the food shelves and county fair money.

It's the 100th anniversary of county fairs, Juhnke said, and legislators didn't want to cut the money that helps fund them.