CHICAGO – Minnesota Gov. Mark Dayton offered up on Wednesday a $1.5 billion bond-financed capital package billed as a job creator.
The proposal is slightly bigger than the failed infrastructure package he proposed last year. The state typically passes a capital budget, known as the bonding bill, in the legislature's even years that follow passage of a biennial budget in odd years.
Last year, the bonding bill along with tax relief and a transportation funding bill got stuck in political gridlock due to divided state leadership. Dayton is a member of the state's Democratic-Farmer-Labor Party which also controlled the Senate while the House was held by the GOP.
As lawmakers returned to work this week, the Senate is now also in Republican hands following the results of November's election.
Trying to jumpstart support for the bonding bill, Dayton promoted it as an investment that would spur the creation of nearly 23,000 jobs by providing funding support for 240 projects including ones he called critical to the state's infrastructure.
"This bill will help deliver clean, reliable water to Minnesota communities, ensure our higher education institutions have the facilities they need to train our workforce, and build community projects across our state," Dayton said in a statement.
The administration called the package affordable given that current revenue projections give the state $3 billion in bonding capacity for 2017 to 2018 and the state stands to benefit from its high-grade ratings including one AAA.
About 30 % of projects in line for funding are located in the Twin Cities area with the remainder located throughout the state. The funds would also leverage more than $600 million in private, local, and federal investment, Dayton said.
About $167 million would to improve water infrastructure. Upgrades to veterans' facilities, local roads and bridges, ports, corrections facilities, rail lines, agriculture research and farmer support would also receive funding. Higher education would receive $135 million for basic infrastructure with $67 million for a new health science education facility at the University of Minnesota Medical School and Health Sciences. The Minnesota Security Hospital in St. Peter would receive $70 million for renovations.
As lawmakers return to work they face passage of a budget -- as well as work on those issues left on the table last year -- against a backdrop of a $1.4 billion surplus based on the state's annual November revenue forecast. The forecast will be updated next month and the budget will based on those projections.
The state will close out the biennium on June 30 with a $678 million balance after making a $334 million transfer into its budget reserves as required under law. The rainy day fund deposit brings the state's reserve to $1.9 billion. Under statute, the state must transfer the first 33% of a surplus to its reserves until it reaches a $2 billion target.
The pending surplus is due in part to money left on the table during the previous legislative session as agreements fell through on the bonding bill and tax relief.
Democratic-Farmer-Labor Party members have suggested the surplus should go to help reduce health insurance costs for state residents and greater spending on education and transportation, while Republicans favor tax cuts and want to overhaul health care spending.
Minnesota won back one of its triple-A ratings last summer as Fitch Ratings raised its rating to AAA from AA-plus. Moody's Investors Service affirmed the state's Aa1 rating and stable outlook and S&P Global Ratings affirmed its AA-plus and positive rating.
The upgrade was due to positive credit developments and the application of Fitch's revised criteria for U.S. state and local governments released in April.
The upgrade came five years after Fitch stripped the state of its top marks for dipping too much into reserves and relying on other one-time time fiscal maneuvers to balance its books amid divided political leadership. Fitch suggested a return to past practices could again hurt the state's credit. The state has $6.5 billion of outstanding GOs and $1 billion of general fund appropriation bonds.
Municipal Market Data said in its closing commentary Wednesday that it saw a state 10-year GO maturity trade at a 2 basis point spread to the MMD top-rated benchmark compared to recent distribution of 4 basis points.