Minnesota lawmakers likely to spend $100 million on broadband. How far will that go?

Minnesota lawmakers are planning to spend $100 million to help subsidize infrastructure for high-speed internet, an amount that would be the largest ever one-time state boost in broadband funding but has still drawn a mixed response from developers and local officials who say rural areas are being left behind.

Top DFL leaders announced the $100 million plan on Tuesday at the Capitol as part of an agreement on budget “targets” that will guide spending by legislative committees. Democrats have majorities in the House and Senate and control the governor’s office.

Minnesota is waiting for a much larger influx of federal cash to help connect many parts of the state to high speed internet. But even though nearly $1 billion is on its way, a state task force has estimated Minnesota still needs about $426 million to reach its broadband goals.

Many broadband advocates saw this year — when lawmakers have a colossal $17.5 billion surplus — as perhaps their best shot to secure a large chunk of funding. But with a host of competing priorities, DFL leaders struck a deal for less than what Gov. Tim Walz and some legislators had originally asked for.

That is likely to be a common story among advocates on many issues at the Legislature this year, as interest groups compete for a rare opportunity  to win massive amounts of cash.

“I’m not going to lie to you, I’m a little disappointed,” said Brent Christensen, President and CEO of the Minnesota Telecom Alliance, which represents more than 70 companies.

Where Minnesota stands on funding broadband

Minnesota’s current goal for high-speed internet is universal access to wireline service with download speeds of at least 100 Megabits per second and upload speeds of 20 Megabits per second by 2026.

About 88% of households and businesses in the state had access to that level of broadband in October, according to estimates released in a report by the Governor’s Task Force on Broadband. In rural areas, about only 62% have what the state deems to be adequate broadband, an issue that became even more of a problem during the COVID-19 pandemic when many more people were forced to work at home and kids attended school online.

The gap in broadband coverage is because of money. Developers say some areas are too sparse, or the terrain is too difficult, to make building infrastructure worth the cost. That’s why the state and federal government subsidize construction of infrastructure — like digging routes to deploy fiber-optic cable — to entice internet providers into rural areas.

State officials estimate it would cost $2.76 billion to serve the 291,000 households and businesses that lack the infrastructure for fast service. It’s an eye-popping price tag, but most of the money would not come from the Minnesota Legislature.

State grants typically require a 50% match from broadband developers or others involved in the project, like city and county governments, meaning the state government is only responsible for half the cost.

The federal government has also pitched in a great deal to help Minnesota cover the remaining $1.38 billion of that $2.76 billion. The task force estimated Minnesota could get $968 million from the feds, most of it coming from the infrastructure bill that passed Congress in 2021.

That leaves a roughly $426 million price tag for Minnesota to reach its goals, an estimate that includes administrative costs and is based on a 50% match program. The price tag is still speculative, said Bree Maki, director of Minnesota’s Office of Broadband Development at the Department of Employment and Economic Development. That’s because factors like construction costs can be a moving target.

A large budget request

Still, that $426 million estimate is why Walz and some legislators proposed $276 million in state spending on broadband this year. While $276 million may not be enough to finally reach Minnesota’s 2026 goals, the money would far outpace any one-time infusion of state cash into the “Border-to-Border” grant program since it began in 2014.

Last year, for instance, legislators approved $25 million in state funds for use in the 2023 fiscal year and another $25 million in the current biennium. (Lawmakers did also direct another $160 million in federal money to broadband infrastructure.)

This year, DFL lawmakers also planned to reserve some money for a program meant to help the hardest-to-reach areas. The initiative coaxes developers by offering a higher 75% match. The Legislature passed a “low density” pilot program in 2022, which ended up receiving more applicants than the $30 million would sustain if every project had met standards for approval.

Steve Giorgi, executive director of the Range Association of Municipalities and Schools, told the House Agriculture Finance and Policy Committee during a March 7 hearing that it’s “increasingly difficult and challenging” to undertake projects in the region because of bedrock. 

Giorgi also said Paul Bunyan Communications is hoping to build fiber outside Chisholm, where the density in the town of Angora is 3.31 homes per mile and the cost for each “passing” — when fiber is run to a home or business — would cost more than $15,500.

“There’s no way this project could be done if not for the low-density pilot program,” Giorgi told lawmakers. “We’re hoping they get awarded a grant.”

Even in the Twin Cities metro area there are internet issues. DFL Sen. Judy Seeberger, the prime sponsor on a $276 million bill, said she didn’t have broadband when moving into her Afton home in 2011. Comcast told her it would cost $76,000 to connect her house.

“I said that’s a little bit too high,” Seeberger said in a hearing Monday in the Senate’s Agriculture, Broadband, and Rural Development Committee.

One day later, Walz, House Speaker Melissa Hortman and Senate President Bobby Joe Champion announced they had reached an agreement that included $100 million in broadband spending in the next two-year budget.

Some Republican lawmakers question whether broadband spending is worth the state money and wonder if satellite services like Starlink or other emerging technology will make the expensive fiber subsidies pointless. But the broadband grants generally have broad bipartisan support and strong backing from many Republicans. Both Seeberger and Pursell’s bills have GOP cosponsors, including Sen. Torrey Westrom, R-Alexandria, who is the top Republican on the Senate’s broadband and rural development committee.

Democrats have also fought in the past over whether the metro-centric party has invested enough in a service that mainly helps people in rural areas.

Reaction to the budget deal

Some broadband advocates praised the $100 million budget target. Nathan Zacharias, a technology policy analyst for the Association of Minnesota Counties, said it was a “strong statement” from lawmakers that broadband is still a key priority in a session where DFLers have lots of programs they hope to fund.

With federal money coming, he said $100 million would be a “really healthy safety net” and bridge the gap until that federal cash arrives in 2024 or 2025. Some have worried that simply waiting for money from the feds would cause Minnesota to miss a construction season like it did in 2021.

Christensen said he is grateful for any cash and is mainly concerned with money going to areas with no broadband options. But he also $100 million might not be enough to meet demands in the regular grant program and still have money left over for the low-density initiative that he said is important. “We really thought the governor’s proposal was going to get traction,” he said of the more expensive bill.

Barbara Droher Kline, a broadband consultant for Le Sueur County, said her area is ready to build and said the $100 million figure was “very discouraging.” The rest of the county is “all low density,” she said, and the longer the projects wait the more they cost over time.

“We’ve got lakes, we have gravel pits, we have rocks,” Droher Kline said. “We have rock that one of our providers broke a bit in and had to dynamite it out.”

Pursell said the $100 million deal was the result of negotiations by top leaders, not based on some measure of broadband need. “It’s a nice round number,” she said about how they landed on the target.

But she, and Maki from DEED, said the cash would still be historic. “We know that $100 million, although a lot of money, is not going to get the job done,” Pursell said. “But certainly because of the uncertainty about when we might get federal funds we cannot afford to lose another construction season.”