A Smart Bonding Proposal for Minnesota
Minnesota Governor Mark Dayton announced his proposed bonding package. He’s asking Minnesota’s legislators to invest $775 million in our state, creating 21,500 jobs while rebuilding crumbling state infrastructure. It’s a good deal for Minnesota.
Communities borrow money to invest in themselves. Traditionally, capital investment projects create, enhance or rebuild physical infrastructure like roads, bridges and public buildings. These investments grow the community, facilitate commerce and reflect the communities’ priorities.
The State of Minnesota issues public bonds, essentially IOU notes, to raise the money required for capital improvements. The bond is a financial instrument with—in most cases—a 30-year repayment schedule backed by public revenue. Bonds pay a relatively low rate of return on investment because they’re safe and non-controversial compared with investing in the stock market. Investors value bonds’ steady repayment rate and low risk.
Bonds are low risk because communities only invest in public infrastructure and follow strict bonding guidelines that keep communities from over-borrowing.
Because bonding bills are political decisions as much as policy choices, bonding-funded capital improvements tend to be uncontroversial. Traditionally, political consensus is created by doing the greatest good for the most people.
Following Governor Dayton’s announcement, Minnesota’s conservative policy leaders wasted little time attacking Dayton’s proposal. Senate Majority Leader Dave Senjem objected to both Dayton’s number and objective. Senjem stated that he and his conservative colleagues fundamentally disagree on Dayton’s overall philosophy.
Since Senjem supports $400 million in state bonding-funded projects, presumably the objection is, at least in part, that public investments would occur in areas that elected policymakers opposed to conservative ideology. That’s not a philosophical objection; it’s a political and policy objection.
Under public bonding guidelines, Minnesota has up to $2 billion in bonding capacity. Minnesota doesn’t need to use all of that but it must seek the greatest good for the most people. Conservative governing philosophy, on the other hand, seeks to direct the most public investment into the fewest, wealthiest hands.
The Dayton proposal reflects sound, reasonable capital investment judgement. It will move Minnesota forward by bolstering Minnesota’s physical, public infrastructure with the additional, significant economic benefit of stimulating Minnesota’s construction economy. I suggest bumping that bonding figure higher. We’ll never be able to borrow money at such low interest rates ever again.