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Legislative News and Views - Rep. Bud Nornes (R)

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Bonding 101

Friday, February 12, 2010
To the editor: We expect the Capital Investment bill (AKA the bonding bill) to reach the House floor Monday. This bill has become a hot topic of conversation among legislators in St. Paul and citizens throughout Minnesota. I have received a number of questions regarding this legislation and wanted to provide an overview of the whys, whats and hows. The bonding bill is designed to fund projects pertaining to our state infrastructure. These must be publicly owned and are usually brick-and-mortar properties of statewide significance. This includes everything from upgrading city sewer systems to working on roads and bridges and constructing new classrooms at public universities. We usually receive hundreds of requests and it is up to the Legislature and the governor to prioritize the projects and decide which ones make the cut. There are Capital Investment Committees which travel across the state to take a closer look at many of the proposals. Just like with a credit card, we have debt limits and, in today's economy we have had more borrowing restrictions. Minnesota currently has a sparkling credit rating so we get rather good interest rates on our borrowing. But, if we borrow too much, the state’s credit rating could be damaged, resulting in higher interest rates. Our bonding bills traditionally are drafted in even-numbered years, the second half of our two-year budget cycles. The Legislature sets the budget in odd-numbered years and then makes the bonding bill one of its top priorities in the even-numbered years. A two-thirds vote is required by each legislative body for a bonding bill to reach the governor’s desk. The governor can approve or deny the bill in its entirety, or he can make selective cuts called line-item vetoes. Those line-item vetoes allow the governor to reduce the total amount of borrowing while approving the remaining projects. The state sells general obligation bonds into the marketplace and the proceeds from the sale of the bonds are used to pay the cost of construction. We’ve only skimmed the surface of how the bonding bill works, but I hope this information is useful to you. I suggest logging on to a Web site run by Minnesota Management and Budget, the state agency which handles bonding: http://www.mmb.state.mn.us/bonds-home/118-118. Sincerely, Rep. Bud Nornes
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