State facing uncertainty with federal infrastructure funding

Construction on the Robert Street Bridge on Jan. 9, 2025, in St. Paul. Under the Biden administration, the federal government promised more than $25 million in funding for the project, but local leaders aren’t sure if the Trump administration will disburse the money. Photo by Ellen Schmidt/Minnesota Reformer.

A long-awaited highway reconstruction project in Bemidji is in limbo after the White House froze the main funding source — an $18 million federal grant awarded by the Biden administration.

With no timeline for when the funds might be unlocked — or whether they will be released at all — Bemidji officials have spent the last couple of weeks trying to decide how to move forward in the face of uncertainty. If they spend too much time waiting for the federal money, the $5 million in state funding for the project will expire, the Bemidji Pioneer reported. 

The Highway 167 reconstruction project is one example of how President Donald Trump’s attempts to freeze federal funding are creating uncertainty for Minnesota infrastructure projects. 

The status of federal infrastructure funding was the focus of a Tuesday Senate Capitol Investment committee hearing. 

Infrastructure projects are often funded by federal, state and local money. During the Biden administration, Congress passed two bills — the Infrastructure Investment and Jobs Act and the Inflation Reduction Act — which together authorized nearly $2 trillion in spending, largely on infrastructure and clean energy projects. 

Those two bills, plus the CHIPS Act, which authorized around $280 billion in incentives for semiconductor manufacturers, account for around $12.3 billion in funding for Minnesota projects, according to Minnesota Management and Budget. 

State officials are still waiting for information from the White House on whether federal agencies will fulfill their promises to fund a number of Minnesota projects, but they didn’t outline exactly how much money is still outstanding.

The State Competitiveness Fund was established in 2023 to help Minnesota-based projects secure funding from the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. 

The state has set aside money for a number of projects through the fund, but is still awaiting decisions from the federal government before moving the projects forward, said Leah Corey, federal funding implementation director at MMB.

At the hearing, state officials also highlighted the importance of the tax exemption for municipal bond income, which lowers interest rates on infrastructure projects and other bond-funded state activities, like affordable housing development. 

Republicans in Congress are considering taxing municipal bond income to fund an extension of the 2017 tax cuts that mostly benefitted the wealthy.

MMB estimates that eliminating the tax exemption could raise interest rates on the bonds used to pay for Minnesota projects by 1.5% or more.