Both Republicans and Democrats promised infrastructure funding would be their top priority, but many legislators now say they are unsure if a bonding bill can secure enough votes.
“I honestly don’t know,” Speaker of the House Austin Knudsen, R-Culbertson, said.
Legislators have less than three weeks to craft a compromise.
Because bonds are a form of debt, an infrastructure package must secure a two-thirds vote from both the House and Senate while also being supported by Gov. Steve Bullock. Senate Bill 367 would issue $98 million in new debt to fund a variety of projects. It passed the Senate 34-16 and now sits in the House Appropriations Committee, which expects to review possible amendments and vote on it Monday.
If SB 367 does not pass, it would be the third consecutive session that state leaders failed to reach consensus on a bonding bill to pay for infrastructure projects not covered by existing programs despite many cities, counties and schools urging them to do so.
Montana has not approved a bonding bill since 2005. In 2009, the federal American Recovery and Reinvestment Act flooded the state with money for projects during the recession. A popular bill in 2013 focused largely on the needs of Eastern Montana towns under pressure from the Bakken oil drilling boom but was vetoed by Bullock to leave the state’s informal rainy day fund at the level he insisted. In 2015, the bonding bill underwent numerous transformations in the Senate and then the House, dying by one vote on the final day.
It's a challenge to reach an agreement on how much debt is a responsible level of debt, if any, said Sen. Eric Moore, the Miles City Republican carrying SB 367.
“We have people from east and west, rural and urban, north and south," Moore said. "There are some folks who won’t vote for 25 cents of debt. That’s probably 15 percent of the House. That leaves a very narrow window (to get enough votes). Then people have to agree on what projects you’re going to do, where you’re going to build them, and you always get the selfish impact of ‘My county didn’t get enough.’”
On Friday, Moore asked the House Appropriations Committee to look at the big picture.
“There are things in this bill I don’t like,” he said, arguing that compromise is not supposed to leave everyone completely satisfied. “Do we want to govern, or do we want to defend our voting record?”
Other ways to pay for projects
Leaders from both parties and chambers are quick to point out that the bonding bill is not the only mechanism for funding infrastructure projects. They are on track to approve more than $210 million in cash for regular programs such as Long Range Building and Treasure State Endowment, most of which are funded by interest from the Coal Severance Tax Trust Fund and require some level of local match. Those bills — HB 5, 6, 7, 8 and 11 — pass almost every session with near unanimous support. And, as they have historically done with little debate, legislators will leverage a federal match program to ultimately pay for hundreds of millions of dollars in highway projects over the next two years.
But those programs do not have enough money to pay for all the infrastructure projects that qualify and that communities say they need.
About one-third of local governments who apply for those programs fall in the bottom third of the ranking list and will not be funded without the passage of a bonding bill. Other towns say the rules to qualify for those loans or grants are so strict they don’t apply even though they need help.
“A lot of very small rural communities could max mill, max bond, max fee and a town of 400 people is never going to raise enough money to dig up an antiquated sewer system that’s not working anymore and rebuild it. It’s not going to happen,” Moore said.
The program that once offered grants for a handful of major maintenance projects at public schools lost its funding source. Without a bonding bill, districts will again receive no immediate relief despite a massive backlog.
Although the Long Range Building Program can pay for major renovations at state colleges and universities, the list of projects is so long that those campuses have frequently sought to be included in bonding bills. Legislators say in those urban communities the priorities are different from rural towns.
“Roads, sewers, water, bridges: Those are already being paid for with municipal taxes. What these communities need is more help with schools,” House Minority Leader Jenny Eck, D-Helena, said.
Sometimes representatives from those cities can band together to defend funding for local projects that other legislators might not support. For instance, the 27 representatives and senators from the greater Billings area signed a letter in February pledging to find $5 million to complete funding for a major renovation of the Yellowstone Allied Health and Science Building at Montana State University Billings. That project is now included in the bonding bill, although it is unclear what other projects in the proposal might cause a legislator from that group to vote against it.
Debt in Montana
Bonding bill supporters, or at least those willing to consider it, say now is the right time to issue new general obligation bonds.
Montana holds less debt per-resident than nearly every other state in the country. Currently, just 0.46 percent of annual general fund spending goes toward debt payments for bonds. If SB 367 passes in its current form, that would increase to 0.52 percent. That is equivalent to a $21.67 mortgage payment each month for a Montanan who makes $50,000 a year.
In recent years, the state has paid off several bonds approved by previous generations. Even with the additional debt in SB 367, the state’s payments would be less than the five-year average and start to drop again in 2021 as additional older bonds are paid off.
Bond supporters also note that interest rates are near a 20-year low while the cost of construction has skyrocketed. Materials such as cement have seen their prices grow twice as fast as other goods since 2003, according to a 2015 report by the U.S. Congressional Budget Office.
“The cost of money is less than the cost of construction inflation,” said Senate Minority Leader Jon Sesso, the Butte Democrat who has long served on the Senate Finance and Claims Committee. “We’re going to have to build all these projects, particularly some of the ones at the local level, sooner or later. We might as well get going on them now.”
But even with the favorable financial climate for bonding, some Republicans say they oppose bonding on principle, including Senate President Scott Sales of Bozeman and House Appropriations Vice Chair Randy Brodehl of Kalispell.
“This is my fourth session, and I’m more solid on that than I’ve ever been. Basically it puts people in debt for 20 years. My grandkids, who don’t get to vote on this, are now stuck with this,” Brodehl said. He said the state does have an obligation to pay for some of these projects but prefers cash, in part because he thinks the state does not do an adequate job of routine maintenance on buildings. “We wind up trying to fix it piecemeal here. It doesn’t work.”
What should be in the bill?
There are not enough of those absolute no votes to kill the bonding bill. The decision ultimately falls to legislators who have concerns about the types of projects included in the bill. The university campus buildings are a major sticking point for legislators who don’t consider them to be “essential” infrastructure or question why private donors do not step up to help.
Also, some tentative supporters in the House now say they might oppose new infrastructure debt because of frustrations with some proposed tax increases. A bill to increase the fuel tax by 8 cents per gallon to plug a hole in the highway budget passed the House and now is being considered by the Senate. Two bills suggest adding at least 50 cents to the hotel bed tax to pay for an expansion of the Montana Historical Society Museum. It was removed from the bonding bill because of stiff opposition from some Republicans.
Gov. Steve Bullock noted that SB 367’s $98 million in bonding is less than half the size of the $192 million package he suggested, but that he would be willing to consider it in the spirit of compromise. He said an earlier House proposal for $33 million was not what Montanans expect.
Bullock declined to say what details legislators must include in a bonding bill to avoid his veto pen even though he has started meeting with House GOP leaders to discuss bonding.
“I want to see something get done,” he said. “I haven’t drawn the line in the sand.”
In a House caucus meeting on Thursday, Knudsen told Republicans that the negotiations were “serious” and “earnest” but “early,” calling the $78 million proposal “too big.”
House Appropriations Chair Nancy Ballance, R-Hamilton, said with so many moving pieces it is difficult to gauge support for a bonding bill until members actually have to vote.
“For whatever reason, it’s always left until the end, and then they get faced with a tough decision: going home with nothing or going home with more than they wanted to pay for. We never seem to have the middle of the road that we can all agree on,” she said. “When you’re faced with an all-or-nothing bill, a lot of times people are saying, ‘Then it’s nothing.’”