Instructions for State Agencies with Capital Budget Requests
Minnesota Management and Budget (MMB) issues instructions for capital budget requests in the spring of odd-numbered calendar years on this webpage. The capital budget process follows a timeline set in statute for state agencies and political subdivisions, including local units of government, and begins in odd-numbered calendar years with the collection of requests for the upcoming even-numbered year legislative session.
State agency preliminary capital budget requests are due in the early summer of odd-numbered years. MMB publishes and submits this information to the Legislature by July 15 of each odd-numbered year.
State agency final capital budget requests are due in the fall of odd-numbered years. MMB publishes and submits all information to the Legislature with the Governor’s capital budget recommendations by January 15 of the following even-numbered year, alternating years with the biennial operating budget, which is presented to the Legislature in odd-numbered years.
Capital budget requests are submitted through the web-based Capital Budget System (CBS). Please use the State Administrative Portal to access CBS. Visit the CBS website for user guides and training videos.
For questions about the capital budget instructions and process, please contact Maddy Kennedy, Capital Budget Coordinator, madeleine.kennedy@state.mn.us.
Policies, instructions, and procedures for implementing approved capital projects and grant agreements are issued jointly by the Debt Management Division, the Budget Division, and the Accounting Division - to ensure the requirements of all applicable statutes and general obligation (G.O.) bonding requirements are met. State agencies can find applicable instructions here:
All requests must be entered into the Capital Budget System (CBS) with adequate information to allow for meaningful consideration of the project by the Governor and Legislature. CBS is a web-based application, and all users must be authorized by MMB. CBS opens for project submissions in early May of odd-numbered years. MMB publishes state agency preliminary requests, final requests, and the Governor’s capital budget recommendations using data entered in CBS.
All of the information we need to publish the capital budget documents is collected in various fields in CBS. You will need to submit the following information:
Requests by amount, in priority order (if more than one request)
Brief summary of each project request
Detailed description of the project
Rationale for why the project is needed
Timeline for project
Other relevant background information
All funding sources (past and requested)
Detailed listing of costs
Answers to applicable statutory requirements
Strategic planning summary
Agency profile
The information you provide will be compiled, published on MMB's website, and provided to the Governor and Legislature for consideration, and is used to publish the Governor’s recommended capital budget.
The Capital Budget Instructions document provides a comprehensive list of agencies involved in the capital budget process. Please refer to this document for the full listing. Below are examples of agencies you may collaborate with.
If you are submitting a capital budget request, you will work with Minnesota Management and Budget, which:
Reviews proposals for completeness and bondability
Collects and disseminates information and provides instructions and form
Calculates the cost of proposed bonding packages
Forecasts debt service costs of future bonding bills based on a ten-year average of bond authorizations
Assists with implementation issues after enactment
If you are submitting a capital budget request that impacts a state building, seeks funding for asset preservation, or seeks funding for predesign, you will work with the Department of Administration, which:
Coordinates facility condition assessments (useful in asset preservation)
Oversees capital improvements to state-owned buildings
Facilitates compliance with sustainable building guidelines for state-owned buildings
Reviews predesign before design begins
If you are submitting a project with significant energy efficiency potential, which may be eligible for the Guaranteed Energy Savings Program, you will work with the Department of Administration and the Department of Commerce:
Capital projects are expected to employ sustainable building guidelines and high-performance building practices (M.S. 16B.325). Projects should be:
Energy, cost, and resource efficient
Healthy, durable, and adaptable
Agencies should identify and quantify energy savings opportunities in asset preservation lists
Executive Order 11-12 seeks to advance statewide goals of reduced building energy use, and to capture economic and environmental benefits of energy conservation work in state buildings through:
Guaranteed Energy Savings Program (M.S. 16C.144)
State Energy Improvement Financing Program (M.S. 16B.322)
If you are submitting a request for construction, remodeling/renovation, or relocation, you will work with MN.IT:
Consolidated agencies consult with MNIT CBTOs, MNIT teams, and enterprise services staff to ensure that appropriate technology and information security capabilities are in place to support in-office work, full-time telework, and hybrid telework.
Non-consolidated agencies who consume MNIT services are encouraged to consult with MNIT enterprise services staff ahead of any significant change to office locations and their mix of in-office and remote work, to ensure that appropriate technology and information security capabilities are in place to support such changes.
The Minnesota Constitution defines how GO bond proceeds can be used. Article XI, Section 5, of the Minnesota Constitution contains the authority for incurring public debt (G.O. bonds). Subdivision (a) authorizes debt “to acquire and to better public lands and buildings and other public improvements of a capital nature, and to provide money to be appropriated or loaned to any agency or political subdivision of the state for such purposes.”
In other words…
The project must be for a public purpose
The project must be publicly owned
The purpose of the bonds must be clearly set forth in the law
Project activities must constitute capital expenditures
What do these standards mean?
Public Purpose –
Must achieve public goal or benefit
Dominant benefit may not be to private entity
Public entity is responsible for implementation of the public purpose
Publicly Owned –
A public entity must own the property
No grants may be made to private entities, including nonprofits or tribal governments
If not publicly owned outright, “ownership” must be in fee or a lease or easement for at least 125% of the property’s useful life
Clearly Defined In Law –
If the project is enacted in a capital investment bill:
The law must identify specific project or refer to a statute establishing a specific governmental program (which may fund multiple projects)
The appropriation must specify all desired project activities
If certain activities are not specified in the appropriation, funds may not be spent on them even if they are capital expenditures
Capital Expenditures –
See the following question for more information on this standard.
The basic test for capital expenditures requires that the project be long lived (10 years or more) and that expenditures be for a fixed asset (land, building, capital equipment or other improvement to land).
The constitution requires GO bond proceeds to be spent on activities such as “acquisition”, “betterment”, and “improvements”.
Examples of eligible activities include:
Purchase of land, buildings, easements
Predesign and design
Construction (including environmental testing and site preparation)
Major renovation, roof reconstruction and replacement, major window replacement (if add to value or life of building)
Fixtures, furnishings and equipment, only if installed
Upon initial construction, or
During major renovation to make the facility usable for the first time by the state agency or grant recipient
Staff costs for project management if pursuant to a plan approved by MMB
Art – up to 1% of appropriation for building construction or alteration (M.S. §16B.35)
While this list is not exhaustive, the following examples are ineligible for GO bond proceeds:
Options to purchase land or buildings
Fixtures, furnishings and equipment that don’t fit into categories above
General studies to evaluate the need for a capital project
Educational, promotional or informational costs incurred for a project not yet sited
Computer and financial modeling for a project not yet sited
Master planning
All relocation and moving costs
Operating and maintenance costs
Betterments to leaseholds with less than a 10-year term
There are restrictions on the use of GO bond financed property. “Private use” is any direct or indirect use by a nongovernmental person or entity. Bond-financed facilities used for private business threatens the tax-exempt status of the state’s bonds. If you anticipate private use in your proposed facility project, please involve MMB at the earliest opportunity by contacting budget.finance.mmb@state.mn.us to discuss options for avoiding private use pitfalls. The following are some examples of private use:
Cell phone towers, solar panels, electric charging stations
In these cases, a use agreement may be necessary. A use agreement is a lease, management or other contract between the public owner of bond financed property and another party operating or using it.
State Agency Asset Preservation: §16B.307, DNR: §84.946, HEAPR: §135A.046
CAPRA: §16A.632 (for unanticipated emergencies)
Asset preservation appropriations:
Cannot be used to buy land or buy or construct buildings, additions, or major new improvements
May only be used for capital costs on a currently owned capital asset
May include up to 10% for design costs for eligible projects in anticipation of future asset preservation projects
Requires property to be subject to M.S. §16A.695 and Commissioner’s Order
Projects considered most needed and appropriate under §16B.307 include:
Life safety hazard removal like building code violations or structural defects
Hazardous substance removal or containment
Major projects would include roofs, windows, tuck-pointing, mechanical or electrical systems, utility infrastructure, tunnels, site renovations necessary to support building use, and structural components needed to preserve the exterior and interior of existing buildings
If your agency administers a grant for a local project, a grant agreement must be in place before bond proceeds can be spent. Grant agreements are not required if an appropriation is made to an agency for its own capital needs. MMB has prepared generic forms for state agencies to use.
Forms are slightly different depending on the funding source:
GO bond funds disbursed under an agency program
Other GO bond-funded projects
General fund (cash)
The grantee must have independent statutory authority to operate the project (for example, via charter or statute). M.S. §16A.695 and Commissioner’s Order do not create new authorizations, and bonding legislation alone does not normally provide authority to operate the project or program.
Grant recipients must demonstrate to the granting agency that they have an ability and plan to fund the program intended for the facility.
If operated by a public entity:
Entity must submit to granting agency a budget item or resolution supporting operation
If operated by a private party:
Granting agency must approve initial program implementation plan
Annually, granting agency must review program evaluation report and budget
All financing must be in place to complete the project before the grant will be made available (M.S. §16A.502). The grant must clarify what the “project” is; e.g., if just predesign, funding for construction is not needed.
MMB’s Capital Grants Manual lists acceptable documentation for different funding sources.
Agencies should plan to have funds encumbered within 4 years of the appropriation. The Commissioner of MMB issues a cancellation report on January 1 of each year in accordance with M.S. §16A.642.
The cancellation report lists all bond financed and general fund capital appropriations enacted at least 4 years previously with unspent and unencumbered balances
The 1/1/2027 report will show amounts from the 2022 bonding bill and earlier
Such balances are cancelled as of July 1 of the year of the report
M.S. 16B.323: Solar Energy in State Buildings. Up to 5% of appropriation to be used on solar energy system- any new building that receiving bond funds, includes additions and major interior configuration or energy system.
M.S. 16B.326: Heating and Cooling Systems. Written plan w/liredesign to consider providing Geothermal & Solar Energy Heating & Cooling Systems on new or replacement HVAC systems
M.S. 16B.335, subd. 1: Notification to Legislature. Notification to select House & Senate members prior to final plans. Legislative response is needed prior to preparing final construction documents.
M.S. 16B.335, subd. 3: Predesign submittal. Predesign packages must be submitted to the Dept. of Administration for approval. Statute exempts certain projects from this requirement.
M.S. 177.42-44: Prevailing Wage. Contractor must pay prevailing wages and hours of labor.
M.S. 16A.695: State Bond Financed Property Requirements. Various requirements related to leases and management contracts, sale of property, program funding, ground leases, and grant agreements.
M.S. 16C.285: Responsible Contractor. Minimum requirements for contractors in order to receive contracts for projects.
M.S. 16A.502: Non-state Commitments. If an appropriation is less than the total project cost, a sufficient contribution/match from non-state sources is required.
M.S. 16A.86: State Share of Local Projects. State appropriation cannot exceed half the total project cost. Certain types of jurisdictions and projects are exempt.
M.S. 363A.36: Certificates of Compliance for Public Contracts. Affirmative action plan certificate of compliance required for state agency contracts exceeding $100,000 and political subdivision contracts exceeding $250,000 that use state GO bonds.
M.S. 363A.44: Equal Pay Certificate. Equal pay certificate of compliance required for state agency contracts exceeding $500,000 and political subdivision contracts exceeding $1,000,000 that use state GO bonds.
Capital investment bills: Requirement to use U.S.-made steel (only if included in enacted legislation)
