CHICAGO - The Minnesota Legislature was poised yesterday to approve a $925 million general obligation-supported capital budget, a level that Gov. Tim Pawlenty called irresponsible because it would put the state over a self-imposed cap on debt service.
The governor contends the state can afford to issue no more $825 million to support the state's two-year capital budget, known as the bonding bill, when debt service on other borrowing proposals are counted.
Those other proposals include $60 million of GO borrowing in the $6.6 billion transportation bill approved earlier this year by lawmakers and another $233 million of GO borrowing slated for the University of Minnesota's bioscience initiative.
Pawlenty initially proposed a $1 billion bonding bill earlier this year, but scaled it back and limited borrowing to $825 million after the state's annual February economic forecast resulted in a downward revision of revenue estimates.
The governor wants the state to keep borrowing within the limit that caps debt service at 3% of general fund revenues abided by since 1979. State officials have cited the strict cap as one of the state's fiscal strengths that has helped it retain its triple-A ratings from two rating agencies.
"This bill is fiscally irresponsible and has misguided priorities," the Republican governor said in statement. "As one example, DFLers fund a number of local projects, including numerous recreation centers, but refuse to build a new nursing facility at the Minneapolis Veterans Home. We'll be carefully reviewing it and considering our options over the coming days."
The state's Democratic Party is known as the Democrat-Farmer-Labor Party or DFL for short.
Pawlenty could veto the bill or portions of it. Lawmakers could attempt an override or seek a compromise with regard to the bill's size or the revenue streams it relies on for funding. The governor has three days from the time he receives the bill to act on it.
A three-fifths majority vote is needed simply to approve the bill because it involves new bonding authorization. While lawmakers and the governor disagree on the overall size of the bill and on some projects that are to receive funding, all agree that a large plan is needed this year to help stimulate the state's struggling economy.
The largest beneficiary of the legislative bonding package would be state colleges and universities, which would receive more than $400 million in funding. The growing economic slump prompted the state to revise its revenue estimates for the current biennium downward, leaving a $935 million deficit in the budget.
To finance the current and past bonding bills, officials anticipate issuing two GO series later this summer and in late fall, both in the $300 million range. Some additional issuance could come in the later sale if the state begins tapping a $1.8 billion bonding authorization in the $6.6 billion transportation package approved earlier this year.
Minnesota's $4 billion of GOs are rated AAA by Fitch Ratings and Standard & Poor's and Aa1 with a positive outlook by Moody's Investors Service.