By Mark Fischenich
MANKATO — A bike trail between St. Peter and Mankato? Designs for a new health sciences building at Minnesota State University? A multi-million-dollar contribution for the upgrade of a railroad up in Sibley County?
Ask lawmakers about the prospects for funding in the 2010 legislative session for those and virtually any other project around the region and the state, and the answer is usually a version of the one Sen. Kathy Sheran gave this week.
“It depends on the size of the bonding bill,” said Sheran, a member of the Senate bonding committee that was touring southern and western Minnesota.
That’s the bill passed by the Minnesota Legislature in even-numbered years that borrows money through bond sales to finance construction projects ranging from prison buildings to college classrooms to park improvements. And there’s more uncertainty than usual about how much borrowing the state will do in the 2010 session.
Part of the ambiguity comes from Republican Gov. Tim Pawlenty’s status as a lame-duck governor and the rocky relationship he has with the Democratic Legislature.
“I don’t predict what the actions of the governor are going to be,” said Sheran, DFL-Mankato.
At times, such as with transportation funding and with covering part of the general fund revenue shortfall, Pawlenty has shown an affinity for borrowing. On the bonding bill, by contrast, he’s proposed smaller bills than those put forth by the House and Senate and has vetoed millions of dollars of individual bonding projects — including several sponsored by Sheran.
The two-term governor isn’t seeking a third and appears to be seriously exploring a run for president. Sen. Keith Langseth, who serves as chairman of the Senate Capital Investment Committee, wonders if Pawlenty’s presidential ambitions will affect the bonding bill.
Specifically, the Glyndon DFLer suspects that Pawlenty may wish to score points as a fiscal conservative with Republican activists by taking a hard-line approach on construction spending in 2010.
“Unfortunately, he’s that much closer to the presidential election and that’s what he’s going for,” Langseth said during a stop in Mankato. “... I just wish he’d put Minnesota first.”
Langseth said the Legislature has traditionally approved about $1 billion in construction borrowing in the even-numbered years reserved for that task. He expects the Senate plan in 2010 will be about $900 million.
“This is the time to bond and build,” said Langseth, citing the low interest rates on bonds of just over 4 percent and the low bids contractors are submitting because of the slow-down in the construction economy. “Those contractors are so hungry. They don’t want to make money in down times, they just want to keep their crews together.”
Sen. Dennis Frederickson, a New Ulm Republican who also serves on the bonding committee, said Pawlenty’s decision will be based on a desire to preserve Minnesota’s top bond rating.
“How much debt the state can handle and maintain its triple-A bond rating,” Frederickson said, summarizing the major factor in setting the size of the bonding bill. “We have a good reputation with the bond rating houses.”
The state has a long-standing policy of restricting the bill’s size by keeping debt payments to 3 percent of general fund revenue. But with tax revenue falling because of the severe recession, that standard — which isn’t an iron-clad requirement — might not be applicable in 2010.
“There’s no reason we couldn’t (exceed it) as long as we have a plan for managing our debt service,” Frederickson said.
Pawlenty spokesman Alex Carey said the governor hasn’t decided the size of the bonding bill he will propose or if the 3 percent standard is applicable in 2010.
“They obviously want to keep the total bill as low as possible,” Carey said. “... We don’t want to max out the credit card.”
The governor and lawmakers will know in November what the state’s bonding capacity is under the traditional standard.
“As part of the November economic forecast, we also issue a debt capacity forecast,” said Curt Yoakum, a spokesman for the department of management and budget. “... It’s been a topsy-turvy year economically with revenues, so I wouldn’t even be able to predict that number at this point.”
Langseth suggested looking at a different number than the 3-percent-of-revenue standard. Minnesota is 42nd in the nation in per capita state debt, clear evidence that the state has been very conservative about borrowing, he said.
“I like being low, but we don’t need to be 42nd,” Langseth said.
Even a $900 million bill would leave far more projects unfunded than funded, he added, predicting that there will be well over $3 billion in requests.
