Minnesota scrambles to match federal construction funds after Capitol impasse

A legislative stalemate -- and the fading chances for a special session -- have Minnesota transportation officials scrambling to figure out how to come up with required matching money to unlock federal construction funds.

Minnesota stands to get $7.3 billion from the 2021 federal infrastructure law. Many of the projects require a state matching contribution. State lawmakers identified $280 million in required matches for road and bridge projects, but they adjourned in May without passing it.

A key Senate Republican says there's a workaround that makes the situation less urgent, while DFL Gov. Tim Walz, legislative Democrats, and transportation advocates have called for a swift deal and a special session.

"Do not jeopardize an infrastructure bill by your inability here at the state level to get along with each other," said Dan Olson, the business manager of Labors International Union of North America Local 1091, which represents thousands of construction workers.

Minnesota is in line for $315 million immediately and could receive an estimated $468 million of additional money from the federal infrastructure law before the start of the 2023 state legislative session, said Jake Loesch, a spokesman for the Minnesota Department of Transportation.

Lawmakers broadly agree that the state wants the federal money, but major disagreements remain over how to fund the state match. Republicans favor dedicating the state's sales tax on auto parts to the cause, while Democrats do not.

Senate Transportation Chairman Scott Newman said MnDOT's commissioner could shift money between projects to come up with the match. Lawmakers could then approve the additional required money in the 2023 session, he said.

"I think everybody would be more comfortable if we would just appropriate the funds and be done with it," Newman, R-Hutchinson, said in an interview. "But it is not Armageddon if we don’t do it this summer."

Others doubt that shifting money around is a practical solution. Loesch, the MnDOT spokesman, said it would create a funding gap next year and demonstrate a lack of commitment to the federal government.

Margaret Anderson Kelliher, a former state transportation commissioner who is now Minneapolis's public works commissioner, framed it as a trust issue.

"There are projects in the queue that are going to be delayed or canceled," Anderson Kelliher told reporters last week. "It could be one large project in the state. It could be 12 projects across the state to share the pain. It may not be fatal but it sure is not good practice."

There are other issues, too. The 2021 federal infrastructure law gives state transportation officials discretion over how some of the road and bridge money gets spent. Left unresolved is how much oversight lawmakers should have.

Newman said that was a "significant difference of opinion" between the Senate, which favors more legislative involvement, and the House.

House Transportation Chairman Frank Hornstein said he shared the construction industry's urgency about getting a deal and agreeing to a special session. Other states could get ahead of Minnesota in the queue if the state doesn't come up with matching funds, he said.

"This is a historic amount of money that we can be accessing from the federal government," said Hornstein, DFL-Minneapolis, in an interview. "Not since the New Deal in the 1930s have we had an opportunity like this."