Minnesota lawmakers consider major bonding bill

Bloomberg News

Minnesota lawmakers hope to pass a major bonding bill this session as they face $5 billion of requests from local governments and state agencies. 

The effort comes on the heels of a $700 million bond package last year.

But lawmakers say they're working through a backlog of road, bridge and water projects that need addressing after Minnesota legislators skipped a bonding bill in 2024.

In 2023, the state enacted a $2.6 billion capital budget authorizing $1.5 billion of bonds.

"I am hoping and aiming for a bill of about $1.2 billion," said state Sen. Sandra Pappas, DFL-St. Paul, who chairs the Senate's capital investment committee. The Democratic-Farmer-Labor party has a one vote edge in the state Senate, with the House split 67-67.

Pappas said the $5 billion of requests includes some from the state's colleges and universities.

"The need is really great for water and water filtration systems, because of forever chemicals, and rebuilding of sewers, because of aging infrastructure," she said. "We also have a lot of road issues because of our climate."

Local governments may want new parks, community centers or fire stations, but "we tend not to do those projects so much because we're really looking at these water and sewer needs," Pappas said. At the same time, she added, "I have to respect what my members want to do for their districts."

The administration of Gov. Tim Walz, a DFL member, recently adjusted the state forecast that assumes an estimated amount lawmakers can borrow, said Sen. Karin Housley, R-Stillwater, ranking minority member on the Capital Investment Committee. 

"It's really up to what we can agree on, but we have to find a way to pay for it within this forecast," she said. "I do think it is super important that we bond responsibly and not saddle the taxpayer with irresponsible debt — either because it's too much, or the projects really aren't a priority."

Housley said infrastructure projects, particularly roads and bridges, are top of list right now, as well as wastewater treatment facilities.  

"We had a long, long list of projects that didn't get funded last year, and so these will be a higher priority this year," she said. 

"There's always a concern about passing a responsible bonding bill," Housley added, and lawmakers have to secure a three-fifths majority to pass a bonding bill, so there has to be broad agreement on its contours, she said. 

"We need bipartisan support," Pappas said. "So my job is to work with my Republican colleagues and make sure that we have a balanced bill that serves Democratic districts, Republican districts; rural, suburban, urban districts; meets the governor's needs. … We worked together last year. We worked together in 2023; we had a little bit of a blip in '24."

She noted that deferred maintenance costs are a mounting concern. "We're just not able to keep up with all the needs that we have for our buildings — like regular new roofs, new windows, new HVAC systems, sewer and water — and that's a real problem for buildings that we own as a state," she said. "Then that's in competition with what local communities are telling us, that they need help." 

When many of the state's water and sewer systems were built in the 1970s, the federal government paid about 95% of the costs, she said. Today, "we're getting very little help from the federal government." 

The discussions over a new bonding bill come at a time when Minnesota is in the Trump administration's crosshairs over what the administration says is a Medicaid fraud crisis in the state. Vice President JD Vance last week announced a freeze of $259.5 million in Medicaid funding to Minnesota.

There is debate within Minnesota about the scale of the fraud problem and its impact on the state.

Minnesota's Office of the Legislative Auditor said in a 2019 report the fraud likely did go beyond the $6 million that prosecutors had been able to prove, but found no evidence of fraud above $100 million in Minnesota's child care assistance programs.

In December, a group of 98 mayors sent a letter to the legislature and the governor raising concerns about "fraud, unchecked spending and inconsistent fiscal management in St. Paul" that they say are impacting their cities.

The letter notes that "many Minnesota cities are confronting significant property tax levy pressures."

It adds, "Preliminary statewide data, on average, for 2026 shows cities may raise levies by up to 8.7%, with counties up to 8.1%. These increases… stem directly from state policies, mandates, and cost shifts that leave cities with no choice but to pass these burdens onto homeowners and businesses."

The resignations of 14 federal prosecutors from the U.S. Attorney's office in Minnesota raise further concerns about the state's ability to combat fraud, said Crosslake Mayor Jackson Purfeerst, who sent the letter.

The Associated Press reported that the resignations followed rising frustrations over the handling of the federal government's killings of Renee Good and Alex Pretti, with federal authorities blocking local investigations into the deaths. The feds also reportedly pressured the office to open a criminal investigation into Good's widow.

As lawmakers turn to the bonding bill, Purfeerst said, "I think they really need to fix some underlying problems first." He's seeing issues with local emergency medical services, where "they're not able to fund themselves anymore," he said.

"It would be nice to see some dollars dumped into EMS," he said. Property tax reform also "needs to be right front and center," Purfeerst said.

"When taxes are on the rise, and you're taking more money from Minnesotans… people are bailing out of the state, right and left," he said. 

From July 2024 to July 2025, Minnesota saw a 0.57% increase in population, according to the National Conference of State Legislatures. That's compared to a 0.75% increase in North Dakota and a 0.86% increase in South Dakota. Wisconsin saw a 0.26% increase and Iowa a 0.25% increase over the same period. 

California, New Mexico, West Virginia and Vermont were the only states to see negative population growth last year, according to Census data.

Housley said state lawmakers are back on track after the failure of the 2024 infrastructure bill, and "the bonding bills the last two out of three years, we've kind of come to a consensus that truly critical needs… have really become a priority of the bonding bill, and the Democrats and the Republicans have had quite a bit of consensus on that. No more of the specialty projects in the districts." 

She said lawmakers toured the state the last two summers and fall, looking into critical projects, and "there is not enough money in the state to cover just all of those projects." 

Pappas said "there was an informal discussion" last year in which it was decided that "we had a smaller bill last year, but that this year we would do a larger bill." 

Because of the much more limited help from the federal government, she said, local governments are having to kick in more funding for local infrastructure projects; the state is not going to contribute more than 50%, Pappas said. 

"So that means everybody's water and sewer bill goes up, and it can be very difficult for some of these small communities and poor communities to afford these high water bills," she said. 

It will not be an easy task to pick and choose projects from $5 billion of requests, but Pappas said she's confident in lawmakers' ability to work together.

"It all depends on how the session goes, and where it goes, and what is actually in the bill — and that there are no last-minute surprises," Housley said. 

The state's bonds are rated triple-A across the board.