About $44 million is expected to go to ethanol producers over the next three years, and the report said legislators should consider the program carefully as they look to fill a two-year, $4.6 billion budget deficit.
The state subsidy program, which has been in place since 1987, has paid $93 million toward biofuel production in the last five years. The companies that received the money have earned more than $600 million in profits during that period, according to the report.
The report also says the state should give tax breaks to ethanol plants only if they need it and are able to offer energy and environmental benefits. In the past, it said, the state has used incentives through its Job Opportunity Building Zone program for ethanol plants that might not have needed it.
In written response to the audit, Agriculture Commissioner Gene Hugoson said he disagrees with the recommendation to end the ethanol producer payment program. Hugoson said future subsidy programs will help build the bridge between corn-based ethanol and cellulosic ethanol.
He also said the ethanol industry has created jobs, including more than 4,300 in 2007.
"The Minnesota ethanol program has had a profoundly positive impact on the state's economy," Hugoson wrote.