ST PAUL, Minn. — Minnesota lawmakers Sunday passed the biggest transportation bill since 2008, including $650 million that will be used to leverage $7.8 billion in federal dollars set aside for qualified projects in the state.

The measure includes tax increases that drew fire from Republicans, but Sen. Scott Dibble, who chairs the Senate transportation committee, reminded his colleagues that this part of the budget is separate from the rest of state government.

“There is no surplus in transportation in Minnesota. Sources and resources we rely on to support transportation are outside of the General Fund and they’re stagnate or in decline.”

The bill, if signed by Gov. Walz, will for the first time index the state gas tax to inflation in highway costs starting in January of 2024. Democrats say that will translate to 3 cents per gallon in January, and less than a penny per year after that.

The bill also imposes a three-quarter cent sales tax increase in the seven-county Twin Cities metro area dedicated to transit and roads. It also features 75-cent retail delivery fee on orders over $100. All food, whether grocery items or dishes made in restaurants, would be exempt from the new fee.

“We have not had a bill like this ever in Minnesota that is so comprehensive, so forward looking,” Rep. Frank Hornstein, the Minneapolis Democrat who leads the House Transportation Committee, told KARE.

One of the projects that will employ state funding to match a larger amount of federal infrastructure dollars is the Northern Lights Express passenger rail service from the Twin Cities to Duluth.

“We match every single dollar the federal government is going to give us for roads, bridges and transit with this bill.”

Republicans warned against investing state money in intercity rail projects rather than road work that can expand highway capacity and relieve congestion.

“If you want to get to Duluth and take more time than it takes to drive there, the train will actually do that for you!” Rep. Kurt Daudt, a Crown Republican and former House Speaker, told his colleagues.

Republicans acknowledge transportation is supposed to pay for itself, and that most of the state’s general fund surplus isn’t available for under current law for roads and bridges. But they argue that the Democrat majority could change that if they made it a priority.

They asserted there’s no reason to raise any taxes when the state began the session with a record $17 billion budget surplus. They often point out the actual size of the surplus is larger, if one removes estimated inflation.

“We’ve got the nearly $19 billion surplus, so Minnesotans were really looking to have some of that money returned to them. You would never expect to have tax increases, right?” Sen. Mark Johnson of East Grand Forks, the Senate Minority Leader, told KARE.

Earlier in the day Sunday the Senate wrapped up work on the Omnibus Tax Bill, which has $3 billion in tax breaks and at least $1 billion in new taxes.

That includes an expansion of the number of Social Security recipients who are exempt from paying income taxes on their benefits. Couples who earn less than $100,000 and individuals who make less than $78,000 wouldn’t have to pay taxes on their Social Security checks.

The package includes rebate checks of $260 per person, or $520 per married couple, plus $260 for each child up to three children. So the maximum check would be $1,300 for a family of five.

But that’s means tested, too. It would only be available to couples earning less than $150,000 per year and single filers who make less than $75,000 per year.

The bill also includes new childcare credits, that start at $1,750 per child for households making $38,000 or less. It would gradually phase out to zero for families making $96,000 or more.

“Republicans would’ve given the money to everyone including millionaires, billionaires. We chose to give money back to childcare workers, nursing home workers, people who are raising children,” DFL House Speaker Melissa Hortman told KARE.

The revenue raisers in the bill would come mainly from larger companies with a corporate presence overseas and from higher income earners. That includes a new 1% tax on all net income from investments — annuities, royalties, interest, and other gains that don’t come from a business. It excludes gains from agricultural land sales.