A deeply partisan battle over the Iron Range’s economic development agency erupted at the State Capitol on Wednesday as legislators debated a proposal that would bring sweeping changes to the organization.

The proposal by Rep. Tom Hackbarth, R-Cedar, would overhaul the structure of the Iron Range Resources and Rehabilitation Board (IRRRB), stripping power from influential DFL Range legislators while also giving the entire Legislature more oversight of the agency’s spending.

“To better serve the people on the Iron Range, the IRRRB has to have better oversight,” Hackbarth said in an interview.

Iron Range legislators launched a vigorous defense, calling the measure a politically motivated attack on northeastern Minnesota.

The legislation comes on the heels of a blistering report from the Office of the Legislative Auditor that said the IRRRB showed inadequate oversight of its millions of dollars in loans and grants. The report also questioned the agency’s management of Giants Ridge, a public golf and ski resort in Biwabik.

The proposal comes at a politically charged moment for the Iron Range, which has struggled through a crippling mining recession that’s left thousands out of work. House Republicans recently won a tax cut for businesses across the state in exchange for extending Iron Range unemployment benefits.

Now the House GOP could use the new IRRRB bill as a negotiating wedge with Senate Majority Leader Tom Bakk, DFL-Cook, the Range’s most influential legislator.

Iron Range lawmakers reacted strongly.

“It’s outrageous,” said Rep. Tom Anzelc, DFL-Balsam Township. “[Hackbarth] is taking advantage of a legislative auditor’s report for pure political gain.”

The Range has long been a reliable bastion for the DFL in the struggle for control of the Legislature.

The Hackbarth bill would require all spending by the IRRRB commissioner to be approved by the Legislature. It would eliminate the board, currently made up entirely of Iron Range legislators, and replace it with a legislative-citizen commission that would not have spending power. The legislative-citizen commission is modeled after the way Legacy Amendment tax money is doled out for environmental, clean water and arts initiatives.

Dueling proposals

Hackbarth said eliminating the board as it now exists is a response to the audit, which said the current board structure — a group of lawmakers overseeing an executive branch agency — is subject to constitutional challenge for violating the separation of powers clause in the state’s founding legal document.

Iron Range legislators drafted their own proposal this week that they say will fix the constitutional question raised by the audit. By requiring the governor’s approval for all IRRRB spending, their bill would solve the constitutional issue without eliminating the board, they said.

The Eveleth-based agency was created in 1941 to diversify the Range’s economy beyond mining. Most of its money comes from production taxes on taconite paid by mining companies in lieu of property taxes, and most of the money spent goes out by formulas to school districts, cities, counties and other local government bodies.

The IRRRB has an annual budget of about $40 million to make various loans, investments and grants. But it actually spends much more than that in most years, the audit found, because the agency also pulls from several special statutory funds. Last year, the agency spent $85.8 million.

Property tax analogy

Iron Range legislators said the money is akin to local property taxes that should not be subject to legislative meddling.

“I can’t think of an example of the Legislature scrutinizing Hennepin County property tax spending,” said Rep. Jason Metsa, DFL-Virginia.

Doing so would open up the IRRRB to the political dynamics of the Legislature and threaten money for Iron Range school districts and other local government entities, Metsa said.

Mark Phillips, the commissioner of the IRRRB, said the agency has already taken steps to adopt the recommendations of the audit and to improve oversight of the grants and loans given to companies to move to the Range or expand operations there. Range legislators and Phillips, who became commissioner last year, bristled at insinuations during the legislative hearing that money was mishandled, saying audits showed appropriate conduct by agency officials even if not all of the investments panned out.

Recipients have included Delta Air Lines, Delta Dental and Blue Cross Blue Shield.

Iron Range legislators said Hackbarth did not talk to them or any local elected officials before drafting his bill.

Rep. Rob Ecklund, DFL-International Falls, said he doubts Hackbarth’s intentions.

“He says he’s looking out for the Range and looking out for the residents,” Ecklund said. “He did not consult one elected official on down to township supervisor for input on this. He’s taking it upon himself to introduce a bill for political purposes. And I find that offensive.”