The Minnesota Legislature convened on Monday for its fifth special session since May. While the last couple special sessions have been one-day affairs, this time legislators are sticking around for additional days to pursue a deal to finally pass a bonding bill. In a pre-session press conference, Speaker of the House Melissa Hortman (DFL-Brooklyn Park) said she would like to pass the bill by Wednesday.
The primary reason there is more hope in this special session is a shift in strategy by House Minority Leader Kurt Daudt (R-Crown) and growing frustration with the lack of a bonding bill within his House GOP caucus. Since May, Rep. Daudt has effectively held the bonding bill hostage by refusing to allow his caucus to vote for a bonding bill unless Gov. Walz relinquishes the peacetime emergency declaration that has been in place since March. The emergency declaration and executive orders issued pursuant to it are the foundation on which Gov. Walz has constructed many aspects of the state’s response to COVID-19, including the state’s testing program and access to federal support dollars.
Meanwhile, House Republicans who want to pass the bonding bill have been privately communicating frustration with Rep. Daudt’s approach for weeks, leading Speaker Hortman to say yesterday that she anticipates at least six Republicans will vote in favor of the bill when it reaches the floor this week regardless of what Rep. Daudt says. Leaders in the GOP-led Senate have consistently said they would bring the bill up for a vote once the House sends it over and believe it will receive bipartisan support. The next Senate floor session is scheduled for Thursday.
When the special session began on Monday, both the House and Senate held hearings to walk through near-final versions of a $1.37 billion bonding bill. The Senate went first, and after going through the bill, key senators expressed support for the package but also appeared unclear on what their colleagues in the House might do. The House bill, HF 1, had its hearing on Monday night in the Ways & Means committee, where a bill walk-through was followed by a messy, disorganized round of questions during which key House members had few answers about process, timing, or even who the decision makers were on portions of the bonding bill.
Legislative leaders are expected to continue to work on final aspects of the bonding bill today. As they do, please contact your representatives to urge them to finally get it done.
CGMC priorities in the bonding bill
The proposed $1.37 billion bonding bill contains funding for several CGMC priorities, as well as funding for projects in many of our individual member cities. See spreadsheet of projects included in the bill.
Here is how our top bonding priorities fare in the bill:
The proposed bill contains a record-setting amount of funding, more than $269 million, for clean water projects through the Public Facilities Authority (PFA). That amount includes $125 million for PFA grant and loan programs that help communities pay for wastewater and drinking water projects. In addition, the bill contains more than $144 million for local projects, including funding for CGMC members Austin, Bemidji, Foley, Melrose and Two Harbors.
The bill is a mixed bag on child care. CGMC and the Greater Minnesota Partnership (GMNP) advocated for a new program that would provide access to capital for local units of government to build, purchase, or rehabilitate spaces that could be leased to child care providers, supported by $20 million in general obligation bonds. Both the House DFL and GOP caucuses were very supportive of this proposal, but the Senate GOP majority was never able to connect how this type of capital investment project would fit into their position of a strong bonding bill focused on traditional infrastructure projects. So the compromise included in the proposed bonding bill includes the creation of the child care capital investment program, but without any funding for it.
We have seen this tactic used before. When the CGMC first proposed the Greater Minnesota Business Development Public Infrastructure (BDPI) program back in the early 2000s, it was originally established as an unfunded program. If this bonding bill is enacted, it will lay a strong groundwork, built on an actual program, for us to go forward and argue for funding in the future.
The Greater Minnesota Business Development Public Infrastructure (BDPI) Grant Program is included in the bill at $8.2 million. This is a rather disappointing number, as the fund is almost completely empty and this program could play a role in helping Greater Minnesota develop its way out of the current economic situation. However, any injection of funding into the program at this point would be welcome to avoid delays in vital projects around the state.
Even before COVID-19, the CGMC was requesting $20 million for the BDPI program. In the bonding bills passed in 2017 and 2018, the program received a combined $17 million, plus general fund appropriations. Because of the popularity and effectiveness of the program, all those funds were quickly expended, helping to create and retain hundreds of jobs in the process.
The current version of the bonding bill would direct more than $600 million to roads, bridges, and other transportation infrastructure. This is split between $327 million in general obligation bonds to grant programs and projects under the Minnesota Department of Transportation and $300 million in Trunk Highway bonds that will go to long-needed investments and help keep pace with construction needs during COVID-19.
Significant CGMC priorities that receive funding in the bill are the Local Road Improvement Program, which would receive $70 million to dole out in grants on a competitive basis. The Local Bridge Replacement Program would receive $30 million. A number of individual cities would also see vital transportation projects funded as named grants in the bill, or benefit from trunk highway bond-funded programs like rail grade separations.
One of the largest proposals in the bonding bill is $100 million, or more than 7% of the entire bill, for investment in housing. The bill calls for this investment to be dedicated to the Minnesota Housing Finance’s Housing Infrastructure Bonds (HIB) program. These funds are available for loans for multi-family developments that meet one of three specific purposes:
- Permanent supportive housing for individuals and families experiencing homelessness;
- Affordable housing for seniors 55 and older or people with behavioral health needs; or
- Preservation of federally subsidized rental housing.
Bonding bill includes tax policy and supplemental budget provisions
In addition to $1.37 million in bonding, HF 1 contains tax policy, general fund spending offsets, and a supplemental budget. However, bill authors and champions were unable to describe key aspects of the bill during discussion at the House Ways and Means Committee on Monday night, leaving Republican legislators confused and frustrated. Committee members were told to wait until the floor debate on Wednesday to get key questions about the bill answered.
HF 1 includes full section 179 expensing and retroactive section 179 deductions for like-kind property, which would cost the state $90 million in the 2020-2021 biennium and $117 million in 2022-2023. One-time spending in the bill includes $30 million for equity appropriations/capital improvement projects, mostly located in the metro area, and a supplemental budget of $31 million. Most of the supplemental budget items are directed at state agencies who have dealt with significant costs related to civil unrest. The supplemental budget requests from state agencies significantly declined from the last iteration of the bonding bill.
Paying for the bill is another key component and will be important during the floor debate. DFL legislators championed the cost offsets included in the bill; however, these “offsets” are revenue to the state whether or not a bonding bill passes. Cost “offsets” included savings from an FMAP Medicaid reimbursement to the state of $28 million and savings from the recent bond refinance of $41.6 million in 2021 and $5.7 million in 2022. The bill also includes a $100 million transfer of funds from a special revenue account to pay for the bill.