CHICAGO — Minnesota Gov. Tim Pawlenty on Friday unveiled an $815 million capital budget that relies on $685 million of general fund-supported bonding amid calls from some lawmakers for $1 billion in capital spending to bolster the economy.
“This bonding bill is financially responsible and addresses important state needs such as flood mitigation, public safety, higher education, and transportation infrastructure,” Pawlenty said. “This proposal is affordable and appropriate.”
The bonding bill sets the stage for one of the final battles between the outgoing Republican governor, who is not seeking re-election this year, and the Democratic-controlled Legislature. The leadership believes a larger package is needed to create more jobs.
The package relies on $685 million of general fund-supported borrowing. Another $130 million would come from user fee-supported debt, trunk highway GO bonding, university debt, and cash.
About 30% of funding, or $246 million, would support projects proposed by the University of Minnesota schools and the Minnesota State Colleges and Universities system. About $80 million would fund a five-story physics and nanotechnology building at the University of Minnesota.
The proposal provides $159 million for transportation-related projects, including $75 million for local bridge projects, covering the state’s portion of funding to replace 960 bridges. Another $20 million would fund local road projects.
About 53% of the funding would go towards statewide programs, 18% would toward projects in the seven-county Twin Cities region around Minneapolis and St. Paul, and the remainder would go toward statewide projects.
Public safety and corrections projects would receive $127 million; flood mitigation, natural resources, and environmental projects would receive $114 million; and economic development projects would receive $90 million. Veterans- and military-related projects would receive $33 million.
Other general projects would receive $47 million, including $15 million for the Minnesota Zoo’s capital program.
Minnesota has $4.65 billion of outstanding GOs that are rated Aa1 by Moody’s Investors Service and AAA by Fitch Ratings and Standard & Poor’s, though Fitch assigns a negative outlook. The state has roughly $2.3 billion of bonds that have been authorized but not yet issued, mostly from prior bonding bills.
The Legislature operates on a biennial budget, approving an operating budget in odd-numbered years and then taking up a capital budget — traditionally referred to as the bonding bill — in even-year sessions.
A small capital budget is often passed in the odd years as well.
Last year, lawmakers sent the governor a $300 million mini-capital bill, though he trimmed it by $86 million, saying the state couldn’t afford any more.
The 2008 bonding bill approved by the Legislature totaled more than $900 million, but Pawlenty cut it by $200 million.
The capital budget will join a looming budget deficit facing lawmakers as they open a new session Feb. 4. Pawlenty and lawmakers butted heads over the operating budget last year.
The governor used his unallotment powers to slash $2.7 billion from the operating budget sent to him by the Legislature.
The state’s annual November forecast projected a $1.2 billion deficit in the current budget and a state judge late last year ruled a small piece of the governor’s cuts unconstitutional, setting the stage for a struggle over how to keep the state’s $57 billion fiscal 2010-11 budget in the black.
Pawlenty has appealed the ruling. Though the ruling only affects a small number of cuts, it opens the door to additional challenges on the $2.7 billion he trimmed from the budget.
