CRC Overview of Proposal on Natural Resources Trust Fund

The following was published by the non-partisan Citizens Research Council of Michigan on October 1, 2020. You can view the original article here: https://crcmich.org/publications/statewide-ballot-proposal-20-1-michigan-natural-resources-trust-fund

Statewide Ballot Proposal 20-1: Michigan Natural Resources Trust Fund

Proposal 1 is a fairly technical and complicated proposed amendment to the Michigan Constitution to change the disposition and allowable uses of future revenue generated from oil and gas bonuses, rentals, and royalties from state-owned land.

If Proposal 1 is Rejected, the Michigan State Parks Endowment Fund (MSPEF) would continue to receive oil and gas bonuses, rentals, and royalties revenue annually until its principal balance reaches $800 million. This is not expected to occur for another three decades. After this time, all future oil and gas revenue would be distributed to the state General Fund; lawmakers have the most discretion making appropriation decisions involving the General Fund. Annual interest and earnings of the Michigan Natural Resources Trust Fund (MNRTF) and the MSPEF would continue to be available for expenditure subject to legislative appropriation.

If Proposal 1 is Adopted, after the MSPEF principal balance reaches its $800 million ceiling, all future oil and gas revenue would be deposited in the MNRTF instead of the state General Fund. The MNRTF’s current $500 million cap would be eliminated to allow future revenue to flow to this fund in perpetuity. The legislature would be allowed to appropriate up to 50 percent of the oil and gas revenue annually for MNRTF projects and the remainder of the revenue would be credited to the principal balance of the trust fund, thereby providing an ongoing revenue stream to allow the corpus of the fund to grow in perpetuity.

Major Issues to Consider Proposal 1 is a question on the use and sufficiency of oil and gas revenues for various conservation, environmental, and recreational purposes. The MNRTF and MSPEF were created as permanent funds in the Michigan Constitution to dedicate annual oil and gas revenue from state-owned land until each fund reaches specific principal amounts. These amounts represent the corpus of each fund and are not allowed to be spent, but interest earnings may be spent according to constitutional provisions. The MNRTF balance reached its $500 million limit in 2011 and the MSPEF is projected to hit its $800 million ceiling sometime in the early 2050s. After that time, all future oil and gas revenue would be deposited in the state General Fund. Proposal 1 asks voters to eliminate the MNRTF cap and designate all future revenue to the MNRTF to allow the corpus of the fund to grow in perpetuity and provide additional resources for natural resource, conservation, and recreation projects.

You can view the full memorandum from the Citizens Research Council of Michigan here.