DFL leaders in the Minnesota legislators have reportedly agreed on a public works bill costing nearly $1 billion, which they hope will spur job creation and repair the state’s infrastructure.
But, the Fargo Forum reports, Gov. Tim Pawlenty has said he wants to limit such a bill to about $725 million.
A while back, I wrote that the cost of a $1 billion bonding bill wouldn’t be all that much, when considered in the context of our annual budget. Now I’ve got some (rough) numbers. Here’s a quick estimate of the difference between the DFL’s proposal and the Governor’s.
First, a quick note on the assumptions I’m making here (skip this paragraph if you don’t care). According to Minnesota Management and Budget’s Capital Investment Guidelines, 40% of bonding debt or less should be due over 5 years, and 70% or less should be due over 10 years. I’ve used Bloomberg’s rates for tax-exempt, triple-A rated municipal bonds to compare the costs of a $725 million bonding bill with a $975 million bill (my approximation of “nearly” $1 billion). The results:
| Bonding Amount | Annual Payment | |
| Pawlenty | $725 million | $100 million / year |
| DFL | $975 million | $135 million / year |
Is the extra $35 million in costs worth the extra money? I’ll wait to see what the difference is between the two sides’ proposed bonding bills. There’s no point in spending more money just to spend it; it’s only worth supporting if everything it funds will provide good jobs and address major infrastructure needs of the state. One thing seems clear to me, though: a $1 billion bonding bill would not be a budget-buster.
You want the state to borrow MORE money???
Why, yes… Bonding is like the good old 30 year fixed interest home loan- it’s a great deal that allows the state to do things it could never do out of regular cash flow. Looking around the state we’ve got plenty of colleges and schools we built back in the 60s that need upgrades to improve energy efficency. Applying Obama’s and Matt Entenza’s green initiatives to these schools would produce thousands of new jobs. Those workers would then be paying income, sales, etc. taxes back to the state… I wouldn’t be surprised if those tax revenues alone would cover the debt service on the bonds. Meanwhile our schools and colleges would save on energy costs, those savings could be funneled back into improving education.