Facing an almost-certain veto, the leadership of the Minnesota House and Senate have elected to withhold submitting their approved proposal for capital bonding to pursue off-line negotiations over its provisions. Valued at approximately $1 billion, the House-Senate package would fund transportation improvements, new buildings for colleges and universities around the state and a number of “regional” facilities, such as convention center projects in Mankato, Rochester and St. Cloud. Notably, although the House version of the legislation included $89 million for expanded facilities to treat sex offenders, a provision demanded by Governor Pawlenty, the final version recommended by the conference committee did not include such funding, essentially assuring a confrontation over the bill.

In threatening to veto the bill, Governor Pawlenty noted the absence of his primary funding requests for expanded sex offender treatment facilities and new security facilities for the Oak Park Heights penitentiary, but also that it’s overall size exceeded his budgeted number of $725 million.

Projects included in the capital spending bill, for now, include:

  • $100 million for University of Minnesota buildings and projects;
  • $180 million for natural resource, soil and water and pollution prevention projects; and
  • $168 million for transportation and transit projects.

Legislators have touted this bill as part of their strategy to stimulate new construction and jobs for an economy that is struggling to regain its feet. While Minnesota’s unemployment rate, at 7.4 percent, is somewhat lower than the national rate of 9.7 percent, some regions of the state are experiencing much higher unemployment rates. In addition, the unemployment rate masks those working at positions taken simply to be employed and excludes entirely those who have given up on finding employment in this economy. New unemployment numbers should be released this week.

While it is possible that House and Senate negotiators will be able to find common ground with the governor on a final bonding package, it seems more likely that Governor Pawlenty will link his approval to an overall package that ties spending for new bonding projects with reductions in spending to address current and projected budget deficits.

Governor Pawlenty has demonstrated that he is not afraid to veto politically-popular legislation to enforce his spending objectives, even going so far as to unilaterally make billion dollar spending reductions last year through a process known as unallotment. His use of the unallotment power is being challenged in court, with an appeal pending before the Minnesota Supreme Court. The partisan tone of that dispute will undoubtedly color the negotiations over new spending initiatives, including those required for financing a bonding bill. Whereas there once was hope a final bonding bill would be approved early in the 2010 session, it now seems more likely that its approval will be deferred until near the end of session, which is scheduled to occur no later than May 17, 2010.