Attorney General Tim Fox announced today that Montana has joined nine other western states protesting the sequestration of state funds under the Mineral Leasing Act (MLA).
In a bi-partisan letter to President Barack Obama, U.S. Department of the Interior Secretary Sally Jewell, U.S. Department of Agriculture Secretary Tom Vilsack, and Office of Management and Budget Director Sylvia Mathews Burwell, members of the Conference of Western Attorneys General strongly objected to the loss of revenue, which is statutorily guaranteed to the states.
The Interior Department’s Office of Natural Resources Revenue notified states in March that it would withhold payments from March through July, and possibly August and September, saying the move was required by the 5.1% across-the-board sequestration cuts. More than half of the states receive mineral royalties, with western states relying heavily on this revenue because of the disproportionate amount of federal land with valuable minerals located in western states.
The MLA entitles states to 48% of all revenue collected by the federal government for mineral activity on federal lands within state boundaries. Montana stands to lose nearly $2.4 million in revenue per year based on FY 2012 figures. “The federal government can’t simply seize Montana’s money to cover its budget shortfalls and out-of-control spending,” said Attorney General Fox. “Washington needs to balance the federal budget by cutting spending, not by taking money from the states that produce our mineral wealth and without regard for the principles of federalism.”
One-quarter of those funds were to be paid to the counties in which they were raised; three-quarters of the revenue would go to the State’s general fund. “Counties typically rely on MLA-generated dollars to help meet their infrastructure needs,” said Harold Blattie, Executive Director of the Montana Association of Counties. “The funds being sequestered represent over $600,000 that counties use to fund essential services like roads, bridges, building improvements, equipment and vehicles. This is money Montana counties can ill-afford to lose.”
The ten Attorneys General point out that MLA payments are not subject to sequester for a number of reasons: First, while mineral royalty payments make a stop in the federal treasury before being returned to the states, that does not convert the royalties into federal money or give the federal government any discretion to decide whether or how much money to return to the states under the MLA.
Second, because the only payments going to the states under the MLA come directly from mineral development in those states, it is an entirely self-sustaining revenue source. Thus, it is not possible that such payments could be subject to sequestration.
Finally, if payments under the MLA can be deemed an appropriation or expenditure, the Attorneys General argue that the Office of Management and Budget should exempt them from sequestration like many other programs important to economic recovery.