Predictably, DFL Gov. Mark Dayton Tuesday proposed a plump $1.5 billion package of public-works projects — and just as predictably, Republican legislators declared it too big and indicated that they would pare it down, perhaps by as much as half.
But — tellingly — the Republican chairs of the House and Senate capital investment committees did not say which of Dayton’s proposed projects they consider unworthy, or point to categories in which they believed Dayton was too generous.
That’s likely because even at $1.5 billion — $500 million more than the largest of recent bonding bills — Dayton’s list is hard to criticize. It’s largely devoid of shiny new buildings and long on meat-and-potatoes basics — repairing aging buildings, modernizing water-treatment facilities, shoring up weak bridges.
It offers smart responses to two worsening threats to Minnesota’s prosperity — shortages of skilled workers and affordable housing. A goodly share of the $542 million Dayton would direct to facilities improvements at University of Minnesota and Minnesota State campuses would increase their capacity to enroll students, particularly in high-demand fields such as health sciences and applied technology. Dayton’s $100 million in housing infrastructure bonds would be awarded on a competitive basis to both for-profit and nonprofit developers whose projects would add to or preserve the supply of housing for low-income Minnesotans.
Dayton’s package also seeks to shore up Minnesota’s built heritage — a conservative move in the best sense of the term. It includes repairs at Glensheen in Duluth, the Stone Arch Bridge in Minneapolis and Pillsbury Hall at the University of Minnesota, plus a long-planned new visitor’s center in the old cavalry barracks at modern Minnesota’s birthplace, Fort Snelling, in time for its 2020 bicentennial.
All of those things are worth doing — especially while interest rates for Minnesota bonds remain low. Minnesota’s most recent bond issue several months ago scored interest rates ranging from 1.9 percent to 2.7 percent. State finance officials expect rates to go slightly higher in 2018, but they are confident that Wall Street’s positive assessment of Minnesota’s creditworthiness will be unchanged.
That’s in part because even a $1.5 billion bonding bill would not strain the state’s debt capacity, which as measured by several guidelines would allow for as much as a $3.5 billion debt increase this year. Since debt service is spread over 20 years for state bonds — and some bonds are not issued until several years after they were authorized — the first-year (fiscal 2019) impact of Dayton’s proposal would be modest: just $12 million more than projected in the latest state budget forecast, which assumed enactment of an $800 million bill this year. In the 2020-21 state biennium, Dayton’s package would exceed the forecast by only $89 million. That’s an affordable price to pay — particularly in the face of a total estimate for deferred maintenance on state-owned facilities that state officials say now exceeds $8 billion.
Legislators have been loath to authorize more than $1 billion in bonding in a two-year cycle for reasons that appear to have more to do with politics than prudent management. Republicans are keen to avoid appearing to be big spenders. They approved a catch-up $1 billion bill in 2017 because no bonding bill passed in 2016; some in the Legislature’s GOP majorities want a much smaller bill this year.
Minnesotans should know this: The state’s first $1 billion bonding bill was enacted 20 years ago and signed into law by a Republican governor with a reputation for frugality, Arne Carlson. According to the Bureau of Labor Statistics’ inflation calculator, $1 billion in 1998 had the same purchasing power that $1.525 billion has today. Today’s stewards of Minnesota assets should show that they are as responsible as their predecessors were 20 years ago, and discard the outdated and arbitrary $1 billion bonding bill cap.