Bill would prohibit state agencies from financing partisan politics

State agencies would be prohibited from making grants and loans to political entities under a proposal in the Legislature.

The bill introduced Wednesday by Rep. Dale Lueck, R-Aitkin, also would require applicants for state loans or grants to certify that "a majority" of their revenue does not come from political committees, funds, campaign groups or parties.

The bill takes aim at gaps in Minnesota law governing the use of public money for partisan political activities. The issue gained attention after a Star Tribune investigation into loans the Iron Range Resources and Rehabilitation Board (IRRRB) made to a telemarketing company to open a call center in Eveleth.

The company's core business was Democratic fundraising and campaigns. State and federal groups such as Dollars for Democrats, Obama for America and the Minnesota DFL paid telemarketer Meyer Associates more than $60 million over the past decade, the Feb. 28 story showed.

Rarely do such campaign companies work with more than one party; Meyer did not work with Republicans.

The IRRRB, an economic development agency run by Iron Range lawmakers, said its loans were strictly about jobs, not politics. They were approved by the IRRRB's governor-appointed commissioner at the time, Republican Sandy Layman, as well as Gov. Tim Pawlenty.

Minnesota Legislative Auditor Jim Nobles, who is examining the loans, said last week that state law is "surprisingly sketchy" on the topic of spending public dollars on partisan political activity. His findings could trigger a full audit of the IRRRB or a special review focused on the call center.

Schultz said he wants the law broadened to apply to anyone dispersing state money, such as local governments.

Schultz said he doubts the bill will get far in the DFL-controlled Senate "unless the Dems feel thoroughly embarrassed by this."

Senate Majority Leader Tom Bakk, DFL-Cook and a longtime IRRRB board member, said he thinks the bill would create a troubling precedent of restricting the jobs an economic development authority can go after.

"Rural communities are starving for employment," Bakk said.

Campaign finance records show Bakk paid Meyer $9,963 in 2010 for phone work in his campaign for governor, four years after the IRRRB helped the company open its Eveleth call center. Bakk said Wednesday that he can't recall hiring Meyer. But the work didn't involve fundraising, he said, because he did all that himself.

The IRRRB quickly wrote off the $250,000, the largest loan amount it's written off in the past decade, according to loan data supplied by the IRRRB. It quickly sold the collateral — the equipment in the Eveleth call center — for $50,000 to a national Democratic campaign company with strong ties to Meyer called New Partners Consulting. New Partners reopened the Eveleth call center, rehiring many former Meyer employees.

The IRRRB doles out millions of dollars in grants and loans each year on the Range, fueled by a production tax on taconite that mining companies pay in lieu of property taxes. The economic development agency is unusual in having a board consisting of lawmakers from the heavily DFL Iron Range region it serves.

The agency's setup and control over public money has long galled the state's Republicans and prompted clashes over the ownership of the IRRRB's large and growing pot of money.

The IRRRB's key trust fund now holds more than $130 million. In December the agency took steps to carve out $100 million and stash it in a private nonprofit corporation to prevent other lawmakers from taking it for other uses.