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Minnesota is getting $179 million from the stimulus bill for ‘capital projects.’ Nobody is quite sure how the state can spend the money. Or who’s gonna get to decide.

Getting cash directly from the feds to spend on state construction projects is rare. So rare that many of the legislators and state officials who deal with the issue have little idea how they can use the money. 

House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer display the "American Rescue Plan" following passage of President Joe Biden's $1.9 trillion coronavirus disease relief bill.
House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer display the "American Rescue Plan" following passage of President Joe Biden's $1.9 trillion coronavirus disease relief bill.
REUTERS/Erin Scott

The American Rescue Plan passed by the U.S. Congress and signed by President Joe Biden last week will send billions of dollars to the state of Minnesota.

But the $1.9 trillion law contains something unusual, at least among the three major COVID-19 relief laws passed over the last year: a $10 billion appropriation to the states for construction projects. Called the “Coronavirus Capital Projects Fund,” it will send $179 million to Minnesota. 

Construction projects are usually funded by the sale of state bonds, repaid with interest over 20 years. They are approved in what is called the bonding bill, which requires a 60 percent vote of the Minnesota House and Senate, a total that essentially gives the minority caucus in each chamber a veto.

While common for transportation projects, getting cash directly from the federal government to spend on state construction projects is rare. So rare that many of the legislators and state officials who deal with bonding knew little about it.

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“We’re kind of in the dark,” said Sen. Sandra Pappas of St. Paul, the ranking DFLer on the Senate Capital Investment Committee. 

State Sen. Sandy Pappas
State Sen. Sandy Pappas
What is known is that the money was added when the stimulus bill moved from the U.S. House to the U.S. Senate. Initially, it was going to be a deduction from the House plan to distribute $350 billion to states, local governments and tribal nations. But U.S. Senate Majority Leader Chuck Schumer of New York insisted that it be additional funds.

Because it’s from the federal government, the money doesn’t have to go through the regular capital budgeting process in St. Paul, though it can if lawmakers agree. And committees in the House and Senate have been reviewing projects that could end up in a bonding bill at the end of the session. Gov. Tim Walz has requested a $518 million bonding bill for 2021. The Legislature passed a $1.9 billion bonding bill in October.

So the $179 million isn’t nearly as much as last year’s bill, but is in the ballpark of the pending Walz plan.

Capital project confusion

Yet Pappas said lawmakers aren’t sure what they can spend it on, when the state will receive it, whether it can reimburse the state for projects funded in the October bonding bill, such as the new $30 million Emergency Operations Center.

Would projects have to be related to the pandemic — or could they simply be shovel-ready projects that could quickly create construction jobs and boost the economy of the state? 

Committee staff members are waiting for detailed guidance from the U.S. Treasury. 

The bill itself doesn’t provide much guidance. The money, it states, is “to carry out critical capital projects directly enabling work, education, and health monitoring, including remote options, in response to the public health emergency with respect to the Coronavirus Disease (COVID–19).”

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The chair of the Senate committee, Sen. Tom Bakk, an independent from Cook, declined to comment on the money, and his House counterpart, Rep. Fue Lee, DFL-Minneapolis, expressed similar reservations as Pappas. 

“Once we’ve received more guidance from the U.S. Treasury, we can begin the process of reviewing eligible projects and delivering on the needs of Minnesotans,” Lee said through a spokesperson.

States are familiar with federal grants for highways and transit, but those usually flow through the Department of Transportation and regional transit agencies like Metro Transit. Often they are for specific projects. 

Pappas said she couldn’t recall getting cash from the Congress that lets the state decide how to spend it, and isn’t certain whether the Legislature or Gov. Walz would make the decision.

Gov. Tim Walz
REUTERS/Lucas Jackson
Gov. Tim Walz
Current state law says federal funds that come to the state outside of legislative sessions can be directed by governors, as long as it is presented to an entity called the Legislative Advisory Council. But that group can’t block an expenditure, only comment on it. The rules are different while the Legislature is in session, but still do not give lawmakers a clear role.

A spokesperson for Minnesota Management and Budget said the state will wait until it receives more information before presenting any spending plans. That could take up to 60 days and put it toward the end of the regular legislative session or beyond it, leaving the Legislature out of the conversation.

If federal money does arrive during session and before the third budgetary deadline set by the House and Senate, the governor can submit spending plans as part of his budget. The Legislature can review those plans and any member of the LAC can put dollars on hold. But that only blocks spending until the hold is withdrawn, a bill passes spending the money differently or the regular session adjourns.

Money is only a small portion of the funds coming to Minnesota

The Coronavirus Capital Projects money is a relatively small amount compared to much larger state shares of other ARP distributions. It isn’t even the only infrastructure grant under the American Rescue Plan that could be sending dollars to Minnesota: The bill also sets aside $500 million to help build Veterans Homes, which Minnesota veterans advocates have been trying to get built in Preston, Bemidji and Montevideo.

Overall — based on a calculation by the Federal Funds Information for States — Minnesota governments and programs will benefit from $7.95 billion from the new law. 

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That total doesn’t include money for rental assistance, mortgage assistance and utility payments for state residents who have not been able to keep up on payments due to the recession. Minnesota will receive at least $152 million for rental assistance and $50 million for mortgage assistance, with additional money coming via a formula based on each state’s “high-need grantees,” based on the number of low-income rental households, rent costs and unemployment rates during the recession.

The $7.95 billion also does not include the state’s share of money to help with vaccinations and increased COVID-19 testing.

The direct cash will total $2.57 billion to the state government and $2.12 billion for local governments. That compares to roughly $1 billion for each from the CARES Act last spring. 

The bill also will send $1.32 billion to the state’s public schools, $38 million to the state’s private schools that enroll significant numbers of low-income students and $552 million to colleges and universities. Transit agencies in Minnesota will share in $348 million.

In addition, FFIS calculates the $1,400 stimulus payments to Minnesotans will total $6.3 billion, much of which will end up benefiting the state’s economy.