A one-billion dollar public works construction bill, otherwise known as the bonding bill, cleared the Minnesota Senate Tuesday. If it becomes law it would be felt on college campuses, in prison yards and places like the polar bear exhibit at the Como Park Zoo.
The author of the bill, Capital Investments Committee chairman Keith Langseth of Glyndon, told colleagues the timing couldn't be better.
"The best time to build is during a recession," the veteran DFL lawmaker argued, "We have many contractors that are now very hungry."
The bill passed easily by a 51-7 tally, but some Republicans argue the bill is too large in its current form. Edina Senator Geoff Michel said it's time to put the bill "on a diet" and shrink it by 10 percent.
The 3 percent rule
The Senate's package contains $965 million in general obligation bonds, which will repaid with interest over a 20-year period with money from the General Fund. That fund comes from income and sales taxes, as opposed to the trunk highway fund which relies on sources such as license tab fees, fuel taxes and highway bonds.
Just as there's a limit to how much of your family's income you want to sink into paying off a car loan or mortgage, the state of Minnesota has a rule of thumb when it comes to how much money to dedicate to paying off that bonded debt. In January Governor Pawlenty said those payments have traditionally accounted for only three percent of the state's operating budget.
Langseth argues that his bill hits that target mark of three percent in annual debt spending.
"The governor had $825 million dollars and said this is a compromise," Senator Langseth told reporters, "That isn't a compromise. That's his position. And I disagree with his position that it has to be that small to stay under three percent."
Langseth's bill sets aside $134 million for projects at the University of Minnesota campuses, plus $200 million for the Minnesota State Colleges and Universities system. Most of those items are upkeep and maintenance on existing buildings.
The Central Corridor light rail and transit project would be in line to receive $70 million from the Senate's version, and $16 million is earmarked for expansion of the Faribault state prison.
The Como Park Zoo's is in line to capture at least $10 million of the money raised by those bonds. It would finance expansion of the polar bear enclosure and a renovation of the gorilla habitat.
There's also an allotment of $4 million for the Historic Fort Snelling, for renovations of the visitor center and other parts of the site.
The legal kind of debt
Issuing and selling bonds is the only way the state of Minnesota can legally incur debt, because the state budget must be balanced at the end two-year fiscal cycle, as opposed to the federal government which continues to accumulate a national debt. The word "bonding" means other things to the general public, so these measures are often referred to as "jobs" bills or public works bills in the press.
It's commonly an opportunity to earmark statewide funding for local projects, but to avoid the pork barrel label, the backers of those projects will try to prove they benefit the state or at least a large region. The City of Saint Paul, for example, argues that the Como Park Zoo is a statewide asset because 84% of the 2.7 million annual visitors come from outside the city limits.
The House is working on its own version of the bond bill, and after it passes in that chamber a conference committee will work out the differences.
(Copyright 2008 by KARE. All Rights Reserved.)