ST. PAUL (AP) State officials told a Senate committee Nov. 22 that higher prices for labor and raw materials pushed construction costs up 11 percent in 2004, which will make it far more costly to complete projects lawmakers hoped to fund last year.

The report from Department of Finance officials came as Democrats mulled Gov. Tim Pawlenty’s offer of a special session to approve a slate of public-works projects in December, weeks before the Legislature is due to convene its 2005 session.

Lee Mehrkens, a top finance department official, told the Senate Capital Investment Committee that the 11 percent inflation in construction costs is considerably higher than the 3 percent annual increase usually seen. He attributed it to escalating demand for steel, oil and labor for projects.

Mehrkens didn’t have precise information on which projects will cost how much more. Some environmental projects and renovations of existing buildings aren’t subject to the same type of inflationary pressures, he said.

There’s no guarantee that passing a bonding bill in December –– or even January or February –– would save the state money or jump-start projects. Minnesota doesn’t traditionally sell its bonds until the summer or fall months because lawmakers typically don’t finalize the budget until late spring. Investors assess the budget decisions to determine the attractiveness of the state’s bonds.

The bonding bill is a list of construction projects the state wants to borrow money for. It takes 60 percent majorities in the House and Senate to approve the debt.

Senate Majority Leader Dean Johnson and some of his DFL colleagues showed little enthusiasm for an early return to St. Paul. Pawlenty’s suggestion that only about $430 million of consensus projects be included in the discussions is the primary stumbling block.

The Senate debated an $890 million package in 2004, and DFLers, who lead the chamber, are expected to push one around that size in 2005. Pawlenty, a Republican, and the GOP-controlled House had smaller lists of proposals in 2004. The sides couldn’t bridge the gap so nothing passed.

Pawlenty said rising interest rates and fast-approaching deadlines for hitting the spring construction cycle make quick action on a compromise package important.

“If you can’t get it together by early December it’s not worth doing,” he said of a special session. He said he won’t call a special session without prior agreement.

“We’d want to make sure we have some understanding so it doesn’t become a sideshow,” Pawlenty said. “If we call them back we want to get something done.”

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