Lawmakers press agencies on deferred maintenance, transportation funding gaps and higher‑ed needs; Moody’s says Minnesota credit remains AAA

A multi‑agency panel on Feb. 11 put a spotlight on deferred maintenance across state facilities and infrastructure, and members of the Senate Capital Investment Committee pressed officials about the absence of local road and bridge funding in the governor’s capital proposal.

Nancy Freeman, chief operating officer for Direct Care and Treatment at the Department of Human Services, testified that DCT owns about 185 buildings (over 3,000,000 square feet) with a replacement value just above $1 billion and a deferred maintenance backlog of roughly $183 million (as of Sept. 1). Her division requested $11.43 million in asset preservation; Freeman said the agency frequently uses operating dollars for emergency repairs and that dozens of group homes are in poor or crisis condition.

Alice Roberts Davis, vice president for university services at the University of Minnesota, said the university’s facility portfolio totals 30,000,000 square feet across five campuses and more than 900 buildings valued at about $15 billion. She told senators the university’s 10‑year facility renewal need is roughly $6 billion and that the governor’s HEAPR request seeks $200 million to help preserve facilities. Roberts Davis warned that continued underinvestment risks the university’s ability to recruit and retain students and faculty.

Josh Kannettu Hubinger, chief financial officer at the Minnesota Department of Transportation, outlined transportation funding items in the governor’s capital budget — $1.8 million in general obligation bonds for railroad crossing warning devices (enough for roughly four to five crossings) and $2.8 million (general obligation) for port development assistance. He and senators described much larger unmet needs: MnDOT estimates about $300 million would be required to address the worst‑condition railroad crossing warning systems and a multi‑hundred‑million‑dollar annual funding gap for roads and bridges when trunk highway, county and city needs are combined. Multiple senators expressed dismay that the governor’s proposal did not include allocations for the Local Road Improvement Program (LRIP) or local bridge replacement.

Senators pressed MnDOT on the interaction between trunk highway bonding, which the department repays from the trunk highway fund, and the state’s general obligation bonding capacity. Several members warned that reduced local road and bridge funding can have longer‑term consequences — including contractor attrition and higher future costs once projects return to the market.

Moody’s Investor Service joined the hearing by videoconference. Dan Kowalski, assistant vice president for Moody's U.S. public finance group, said Minnesota retains a AAA rating, upgraded in 2022, on the strength of audited fund balances, timely budgets and relatively low combined leverage (debt plus pension and OPEB liabilities). Kowalski said deferred maintenance is a supplemental consideration for ratings but not a primary methodology factor; he said Minnesota’s level of depreciated capital assets has grown faster than many states over the past decade, which is a credit consideration but did not alone change Minnesota’s rating.

No formal votes or bond authorizations were taken during the hearing; witnesses offered to provide additional requested details to the committee.