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State Representative Andrew Falk
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-4228
For more information contact: Sandy Connolly 651-296-8877
NEWS COLUMN
Ask a legislator – What’s a bonding bill?
One of the issues I get asked about frequently when I’m in the district talking to constituents is just what exactly is a bonding bill (otherwise known as a Capital Investment bill) and why is it important for our state? A bonding bill is when the state passes and appropriates money for projects that have a long-term (at least twenty years) benefit to the state. A simple way to think of it is that borrowing money for construction and capital expenditures is similar to taking out a mortgage for a house. Our state is making a long-term investment in hard assets. With thoughtful deliberation, the House and Senate identify projects that: improve education and education access, address statewide transportation needs, increase public safety, enhance and protect our environment, and promote economic development. Additionally, during times of economic recession and high unemployment, projects that put people back to work by being either “shovel or paintbrush" ready are given top priority.
Substantial bonding bills, in the range of $700,000,000 to $1 billion, are typically passed in even-numbered years (otherwise known as a bonding session). It is common for smaller bonding bills to be passed in odd numbered years (otherwise known as a budgeting session) typically to address critical unmet needs from the year before. It is estimated that a $1 billion bonding bill will create somewhere between 10,000 and 20,000 jobs for Minnesotans. By putting people back to work, we are not only helping to alleviate unemployment, we are turning money over in our communities, thereby increasing our state’s tax base and at the same time boosting our local economies.
With over a billion-dollar budget deficit, many constituents wonder why our state would spend money on a bonding bill? That is a legitimate question. There are times when in order to be fiscally responsible, the state needs to spend money wisely. As a rule of thumb, our state will not bond for more than three percent of our general fund proceeds. Right now, bonding projects that enhance the long-term outlook for our state are fiscally prudent investments and will help set our economy on the path to recovery. Currently, the economic climate for bonding is very attractive. Our state has been able to place bonds in the capital markets at fixed interest rates of between 3% and 3.5%. Moreover, many of the projects our state has explored funding have come in substantially underbid (often as much as 20% - 35% lower than expected). Finally, if bonding is such a useful tool, why don’t we just use the billion dollars we borrow to close the budget gap? Doing that is called “supplanting” money and is unconstitutional.
In every way, a bonding bill helps us dig out of the budget hole we are in. When session starts on February 4th, I expect one of the first bills we will pass and send to the Governor will be a targeted and comprehensive bonding bill. I encourage him to move quickly to sign this legislation into law, and put thousands of Minnesotans to work in the upcoming spring construction season. Once again, it is my utmost privilege to work on your behalf at the State Capital during this upcoming legislative session. Please feel free to call me if you have any questions. I can be reached at 651-296-4228 or by email at rep.andrew.falk@house.mn. I look forward to hearing from you.
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