CHICAGO, Jan 16 (Reuters) - Minnesota Governor Mark Dayton on Tuesday proposed $1.54 billion of capital projects funded largely through the sale of highly rated general obligation bonds, although the state’s ratings have come under a cloud due to a fight over the legislature’s budget.
The Democratic governor’s plan allocates $542 million for state universities and $998 million for state buildings, affordable housing, clean water, and other projects.
“Now is the time to make substantial investments in our state’s future,” Dayton said in a statement, adding that his proposal ensures Minnesota has the infrastructure it needs to grow and compete in the modern economy.
The plan received immediate pushback in the Republican-controlled legislature, which has been battling Dayton over his veto last year of funding for the House and Senate.
State Representative Dean Urdahl, the Republican head of the House Capital Investment Committee, faulted both the size and scope of the governor’s proposal.
“It will be an uphill battle to secure legislative support for a proposal that spends $600 million more than we have planned for in the budget forecast,” Urdahl said in a statement.
The state’s latest budget forecast, which projected a $188 million deficit in the current two-year budget, assumed bonding authorization this year of $800 million.
Democratic-Farmer-Labor Party House Leader Melissa Hortman said the state should act quickly to approve the bonds to take advantage of current interest rates.
“Inflation and Federal Reserve rate increases are on the horizon, so we will get more for Minnesotans by acting now,” she said in a statement.
Dayton’s office said the state has the bonding capacity and high credit ratings to support the plan.
Minnesota’s GO bonds are rated AAA by Fitch Ratings, Aa1 by Moody’s Investors Service and AA-plus by S&P Global Ratings.
Credit rating agencies have raised concerns over debt service payments on about $80 million of debt issued in 2014 to fund a Senate office facility. The money for those payments was included in the nearly $130 million in legislative funding Dayton vetoed from the fiscal 2018-19 budget in May in an effort to pressure lawmakers to revise tax measures that he said will harm the state’s financial stability.
Following a Minnesota Supreme Court decision upholding the veto’s constitutionality, lawmakers were expected to take up an appropriation when they return to session next month.
Fitch said in December that a failure to resolve the funding impasse “would suggest a level of political dysfunction that is inconsistent” with Minnesota’s AAA rating.
Reporting by Karen Pierog; Editing by Matthew Lewis