Nearly $2 billion bonding bill heads for House Floor, but prospects for passage uncertain

One of 2020’s top legislative priorities for lawmakers on both sides of the aisle has once again reached the House Floor as the House Ways and Means Committee on Tuesday passed a $1.8 billion bonding bill that also includes many of this year’s most significant tax provisions.

But whether that bill has enough votes to pass the full body remains an open question despite a potential agreement between House DFLers and Senate Republicans that had been negotiated before the start of the Legislature’s second special session, which began Monday.

Sponsored by Rep. Mary Murphy (DFL-Hermantown), SSHF3, as modified by a delete-all amendment, would fund hundreds of public construction projects around Minnesota, provide tax relief for small businesses and farmers, and provide a much-needed boost to the state’s economy, according to supporters.

“We have a great opportunity, and they don’t always come together like this, to get some great investments done for our economy and for creating jobs … but also to do a number of things in our tax policy that we’ve tried to do for years,” said Rep. Paul Marquart (DFL-Dilworth), chair of the House Taxes Committee.

The bill was approved on an 18-10 party-line vote. It has no Senate companion, but at a Monday press conference Senate Majority Leader Paul Gazelka (R-East Gull Lake) said the bonding and tax package had largely been agreed upon in negotiations that had continued after the first special session ended last month.

However, several Republicans said SSHF3 does not have enough support to pass the full House, where a three-fifths majority is needed for a bonding bill to succeed, meaning at least six Republicans would have to join the 75-member DFL majority.

Rep. Greg Davids (R-Preston), a former tax committee chair, called SSHF3 a “garbage bill” as it adds many other provisions that do not apply to bonding and said he didn’t want to belabor debate on the bill because, “It isn’t going anywhere, you don’t have the votes to pass it.”

Bonding breakdown

Included in the $1.8 billion bonding bill are $1.35 billion in general obligation bonds and $300 million in trunk highway bonds. Of that latter amount, $110 million would be used for rail grade separation projects; $84 million would go to construction of state highways; $58 million would be targeted to the MnDOT facilities capital improvement program; $25 million would fund a new project development account meant to ready projects that aren’t currently in the state road construction plan; and $23 million would be used for flood mitigation.

There are also $147.4 million in appropriation bonds included in the bill, with $100 million to be used for housing infrastructure to buy and build multifamily rental housing for households at or below 50% of median income in the area; $30 million to fund Pollution Control Agency efforts to clean landfills in Esko, Duluth, Perham and Minneapolis; $15 million for public television infrastructure; and $2 million for electric vehicle charging infrastructure.

Those housing infrastructure bonds were the subject of some debate during the meeting as an amendment offered by Rep. Mohamud Noor (DFL-Mpls) was adopted that Republicans said could jeopardize the bill’s chances in the Senate even if it does pass the House.

It would add home ownership to the list of uses for housing infrastructure bonds. Noor said this would address inequities by helping more people of color own homes, thereby building wealth and strengthening schools and communities.

But Rep. Steve Drazkowski (R-Mazeppa) said the amendment would create a situation where taxpayers could be buying homes for people. And, although he was the only member to vote against it, other members said they would like to explore the amendment’s impact more closely before a floor vote on the bill.

[MORE: A full list of appropriations and projects.]

Major appropriations in the bonding articles of SSHF3 include:

• $323.2 million – Department of Transportation
• $254.4 million – Public Facilities Authority
• $150.2 million – Department of Employment and Economic Development
• $96.4 million – Department of Natural Resources
• $87.9 million – Metropolitan Council
• $82.01 million – Minnesota State
• $75.4 million – University of Minnesota
• $50.4 million – Department of Public Safety
• $44.5 million – Department of Corrections
• $27.4 million – Department of Human Services
• $27.1 million – Pollution Control Agency
• $24.5 million – Department of Military Affairs
• $24 million – Board of Water and Soil Resources
• $22.9 million – Department of Education
• $20.8 million – Department of Health/Department of Agriculture
• $16 million – Housing Finance Authority
• $13 million – Minnesota Zoo
• $8.5 million – Department of Veterans Affairs
• $6.8 million – Minnesota State Academies
• $5.9 million – Amateur Sports Commission
• $5.8 million – Department of Administration
• $3.1 million – Historical Society
• $750,000 – Perpich Center for Arts Education

Tax provisions

Most of the tax provisions in the bill were included in an omnibus tax bill sponsored by Marquart that was given an informational hearing by the taxes committee on May 8.

In the area of individual income and corporate franchise taxes, the bill would:

• retroactively allow full section 179 expensing on like-kind exchanges for tax years 2018 and 2019;
• establish a subtraction for volunteer driver reimbursements;
• make the student loan credit refundable; and
• exclude student loans discharged due to death or disability in 2018 from state taxes.

The bill also contains such property tax provisions as:

• revision of the amount of a school district’s referendum equalization levy;
• exempting certain tribal-owned land;
• creating a classification for short-term rental property; and
• providing 2019 local government aid penalty forgiveness for the cities of Sargeant and Roosevelt.

There are also changes to sales and use taxes, including:

• fixing a sales tax exemption for sales made by student-run organizations needed because of a school accounting change;
• providing a number of refundable sales tax exemptions for construction of public safety facilities in specific cities; and
• providing flexibility to the Minnesota State High School League in how to use up to $500,000 of revenues equivalent to forgone sales tax revenues from state tournaments for school years 2019-20 and 2020-21.

The bill also adds the availability of loans to the workforce and affordable homeownership development program, and makes changes to:

• the combined net receipts tax;
• the amount of increase in tax revenue that must be reported by the Office of Management and Budget; and
• allowable lawful gambling expenditures and Gambling Control Board requirements.

The bill would also make retroactive to tax years 2018 and 2019:

• penalties for tax preparers;
• exceptions to certain tax rules;
• repayment of erroneous refunds; and
• penalties for failure to report to the state changes or corrections to a federal return, or an incorrect determination of federal adjusted gross income.

Additionally, $100 million would be transferred from the state’s premium security account to the General Fund. The account was created to provide reinsurance payments to health insurers to help cover the cost of high claims in the individual market.

Nonpartisan House fiscal staff estimates that tax provisions in the bill will reduce the General Fund by $99.2 million in fiscal years 2020-2021 and $186.2 million in the following biennium. Marquart said $90 million of the fiscal 2021 total is a result of fully conforming to federal law on Section 179 expensing.

“We have an excellent chance right now to really give our economy a boost in these fragile economic times and also a way to benefit the quality of life in every corner of our state,” Marquart said. “And we need that right now.”

House Public Information Services’ Rob Hubbard contributed to this story.