State budget staff warns constitutional risk for House rental assistance demonstration language

Assistant Commissioner Jennifer Hassimer of Minnesota Management and Budget told the conference committee she was concerned the House’s rental assistance demonstration provision may not meet Minnesota’s constitutional ownership requirements for state general‑obligation bonds.

Hassimer introduced herself as “Jennifer Hassimer, assistant commissioner for debt management at Minnesota Management and Budget,” and later warned: “The Minnesota constitution clearly limits the use of state bonds to capital projects owned by the state or by political subdivisions of the state. That ownership requirement is not just a formality or a check the box exercise. It's a constitutional obligation that protects the public's investment.”

What the House language would do

House staff and several proponents described a provision (house side of the side‑by‑side beginning on page R28) that would allow housing and redevelopment authorities or related entities to create public corporations that could access state general‑obligation bonding and federal rental assistance demonstration programs. MMB said that for some HUD programs — in particular the Section 18 pathway referenced by MMB — ownership transfers to third parties can include entities that are not political subdivisions under Minnesota law, creating uncertainty over whether those projects could be financed with state bonds.

MMB’s recommendation and risk

Hassimer said the department appreciates the conversations with advocates and legislators but urged caution. “Given the uncertainty in implementing it, it risks slowing down the administration of this important funding source,” she said, and “we urge the conference committee not to adopt this language.” She described the department’s role as steward of state finances and its duty to ensure bonds comply with constitutional and statutory requirements.

Stakeholder reaction

Minnesota NARO (housing and redevelopment authorities) and other local HRA advocates testified in favor of language that would allow public corporations tied to HRAs to participate in rehabilitation and preservation financing. NARO’s legislative chair, Melissa Taphorn, told the committee the proposed language narrows eligibility to public corporations “fully owned, operated, and funded by the original housing authority” and that HRAs have been working with MMB and Minnesota Housing to identify workable pathways.

Next steps

Committee staff and members did not record a final decision on the provision during the hearing. MMB recommended the committee consider legal risks against the expected benefits and continue technical discussions to identify a pathway that will withstand constitutional scrutiny.

Speakers in this article are listed in the speakers section below.